Masood Spinning Mills Limited (“MSML” or “the Company”) was incorporated in Pakistan on July 20, 2000, as a public limited company under the repealed Companies Ordinance, 1984 (now the Companies Act, 2017). The Company is a business venture of the Mahmood Group, which has expanded steadily since its inception in 1935 and has evolved into a prominent industrial group. The Company operates three production units: Unit 1 and Unit 2, located in Kabirwala, Khanewal District, near the Company’s head office in Multan, and Unit 3, situated in Phool Nagar, Kasur District. Collectively, these units have an installed capacity of 107,136 spindles and 322 knitting machines. In recent years, the Company invested in a socks manufacturing unit to diversify its product portfolio, which has been operating at maximum capacity utilization since January 2025. The Company’s total electricity requirement of approximately 14.6 megawatts is met through captive power generation. In addition, backup power is available through connections with LESCO and MEPCO to ensure uninterrupted operations.

The Company's major stake rests with the sponsors through individual holdings and associated companies. The sponsoring group maintains a clearly defined shareholding structure vested among the three brothers of the Khawaja family. Their mutual understanding and alignment on the operations of the group companies contribute to the overall stability of both the sponsoring group and the Company. However, the formal documentation of a succession plan would further enhance the clarity and stability of ownership. All three brothers bring extensive experience to the textile industry, each with over four decades of involvement in managing the group’s businesses. The third generation of sponsors is already actively engaged in the day-to-day operations of various group companies, supporting business continuity and future growth. The Company’s financial strength is underpinned by the strong financial backing of the sponsors. In addition to MSML, the Mahmood Group operates four other entities within the textile sector: (i) Multan Fabrics (Pvt.) Limited, (ii) MG Apparel, (iii) Cotton Ginning Factories, and (iv) Mahmood Textile Mills Limited. This diversified presence within the textile value chain demonstrates the sponsors’ strong capacity to support the Company, if required.

Overall control of the Board rests with six members from the sponsoring family. The inclusion of an independent director on the Company’s Board would further strengthen its governance framework. Mr. Khawaja Muhammad Ilyas, Chief Executive Officer, brings over four decades of experience in the textile industry and has held key positions in various local corporate bodies in Pakistan. The other directors possess expertise across multiple stages of the textile value chain, reflecting a well-balanced skill mix on the Board. In FY25, four BOD meetings were held with high attendance from the members. Meeting minutes are formally documented; however, there remains room for further improvement in this area. To support the Board in its oversight responsibilities, two sub-committees have been constituted: the Audit Committee and the Human Resource Committee. In line with high standards of transparency, M/s Shinewing Hameed Chaudhri & Co., Chartered Accountants, have been appointed as the Company’s external auditors. The firm is rated in Category “B” by the State Bank’s panel of auditors. The auditors have expressed an unqualified audit opinion on the financial statements for the year ended June 30, 2025

The Company operates primarily in two distinct divisions before delegating strategic decisions to a single overseeing body. At this highest level, the departments are as follows: (i) Audit, (ii) Taxation, (iii) HR and Administration, (iv) IT and ERP, (v) Export and Import, (vi) Purchase and Production, (vii) Corporate Affairs, (viii) Marketing, and (ix) Finance. The CEO, Mr. Khawaja Muhammad Ilyas, has over four decades of experience in the textile sector. He holds a directorship position on the board of various group companies. He is supported by a team of seasoned professionals. The management's responsibilities are clearly delineated. While the Company does not have formal management committees, it possesses a strong IT infrastructure and controls to support seamless operations. For comprehensive reporting, the Company has embraced digitalization and the principles of Industry 4.0 through the implementation of Oracle Fusion across all operational segments. The Company adheres to the latest quality assurance standards for the production and trade of yarn. On an operational level, samples of cotton and yarn are tested in the laboratories of each manufacturing unit.

The Company has provided us with the management financial statements for the year ended June 30th, 2026. As per the mangement numbers, the Company’s topline registered healthy year-on-year growth, increasing to PKR 37.4bln (FY25: PKR 31.2bln). This was primarily driven by management’s strategic shift towards a profit-centric business model. The Company has increasingly focused on enhancing sales of relatively better-margin products, rather than pursuing volume-led growth. Accordingly, local sales increased to PKR 27.0bln (FY25: PKR 22.6bln). Domestically, the Company primarily caters to several large and established players in the textile industry. Its key customers include Gul Ahmed Textile Mills Limited, Nishat Mills Limited, Feroze 1888 Mills Limited, Al Rahim Textile Industries Limited, Kohinoor Mills Limited, and Ayesha Spinning Mills Limited. The concentration among the top ten customers remained within a moderate range, indicating a manageable customer concentration risk. Export sales also witnessed a notable increase on a year-on-year basis, supported by adequate growth in the socks segment. Despite intense competition from regional players, the Company maintains a diversified export footprint, with key destinations including China, Bangladesh, Türkiye, Portugal, Germany, and other markets. This relatively diversified geographical presence mitigates the risk associated with concentration in any single export market. The Company’s gross profit margin moderated to 12.5% in FY26 (FY25: 14.0%), reflecting continued pressure on margins amid a competitive operating environment. However, the deliberate reduction in the debt book resulted in lower finance costs (FY26: PKR 2.6bln; FY25: PKR 2.9bln), providing a cushion to the bottom line. Consequently, despite a higher taxation expense, the Company’s net profit more than doubled to PKR 765mln (FY25: PKR 352mln), with the net profit margin improving to 2.0% (FY25: 1.1%).

The Company finances its working capital requirements through a combination of internally generated cash flows and short-term borrowings. During FY26, the net working capital cycle improved to 147 days (FY25: 159 days), primarily driven by optimization of the inventory cycle at 98 days (FY25: 120 days). Liquidity remains a key strength, supported by a strong current ratio of 7.9x (FY25: 6.1x) and stable free cash flows from operations of PKR 4.1bln (FY25: PKR 4.1bln). From a sustainability perspective, management continues to pursue a disciplined leverage management framework, underpinned by enhanced internal cash generation through improved profitability, monetization of assets through the liquidation of group companies, and efficient working capital management. These measures have started to yield tangible benefits, as reflected by the gradual reduction in leverage and strengthening of the Company’s liquidity profile. Additionally, the interest coverage ratio recorded a modest recovery at 1.9x (FY25: 1.7x) while the core operating coverage ratio remained unchanged at 0.9x. However, further improvement in these metrics remains important for strengthening the overall financial risk profile. The capital structure remains highly leveraged, with total leverage moderating to 75.0% (FY25: 78.4%), following a slight reduction in the total debt burden. Meanwhile, the equity base strengthened to PKR 7.3bln (FY25: PKR 6.5bln), supported by positive bottom-line earnings during the year. 

MSML intends to issue a Rated, Secured, Privately Placed, Short-Term Shariah-Compliant Sukuk of PKR 3,500mln (inclusive of a green shoe option of PKR 500mln). The purpose of the instrument is to finance the working capital requirements. It carries a markup rate of 1M Kibor + 150bps with a tenor of six months. The principal will be settled through a bullet payment at the time of maturity, while the markup profits will be paid on a monthly basis.

The instrument shall be secured by a first-ranking charge over all present and future current assets of the Company, including all inventory. The facility is further subject to an additional covenant, a cross-corporate guarantee by Mahmood Textile Mills Limited (MTML).

The Company will maintain a Sukuk Payment Account (SPA) with an Islamic commercial bank. Funding of the SPA will commence in the final month prior to maturity and will be made in four equal weekly installments (1/4 each). The Company will ensure that the full issue amount is deposited in the SPA two days before the maturity date.