PACRA Maintains the Entity Ratings of Liberty Mills Limited

The rating of Liberty Mills Limited (“the Company” or “LML”) emanates from the prominent profile of the Company in the textile industry of Pakistan. The Company is a family-owned, truly vertically integrated textile unit that operates under the umbrella of Liberty Group and is considered a flagship Company. LML product slate is vested in three business segments, which include Home Textile, Health Care Textiles & Apparel. Home Textile occupies the leading position in the Company’s portfolio valuation, followed by Health Care Textile and Apparel. Over the years, LML has achieved consistent and steady growth in business volumes, positively reflecting on its business profile. Despite challenging macroeconomic conditions, the Company achieved topline growth, recording PKR 63.1bln in 9MFY25 compared to PKR 53.9bln in 9MFY24. This growth was primarily driven by improved product pricing dynamics in USD terms and steady business volumes. The surge in energy tariffs over the years, combined with stability in the USD exchange rate, elevated finance costs and increased tax burden for export-oriented units following the transition from FTR to NTR, impacted the Company’s overall cost structure. Despite this pressure, LML’s margins remained highly competitive within the industry. The Company's focus on cost optimization through the implementation of renewable energy projects, including a 9MW wind turbine, a 3.56MW solar installation, and a 4MW battery storage system, benefited the business from core operations. The Company maintains a sizeable investment portfolio through strategic stakes in the power sector and mark-to-market equity investments in blue-chip companies, augmenting its liquidity profile through dividend income inflows and potential capital gains. The Company's strategic focus on a well-defined niche of quality-conscious institutional buyers has led to a concentrated customer base and long-standing relationships with high-profile clients, particularly driven by its significant exposure to the U.S. market. This also enables LML to effectively manage the impact of reciprocal US tariffs. In cognizance of region-wise concentration, the management is pursuing opportunities to expand into new potential markets in Europe. The financial risk profile of the Company is considered moderate, with a slightly stretched working capital cycle depicting the industry norm. The cash flows and coverages of the Company are considered adequate. The working capital requirements are mainly fueled through short-term borrowings. The Company has maintained a leveraged capital structure dominated by subsidized borrowing from SBP.
The ratings are dependent on the Company’s ability to sustain its product diversity and volumetric growth while maintaining margins and profitability matrix at an optimal level. The maintenance of the debt matrix and improvement in coverages coupled with continuity in generating cashflows from core business operations remain imperative for the assigned ratings.

About the Entity
Liberty Mills Limited (LML) is an unlisted, public limited concern incorporated in 1964. It is engaged in the business of manufacturing and processing textile fabrics and made-ups. It operates a spinning unit with 11,160 rotors/spindles with a production capacity of 1,700 bags per day and Air Jet & Sulzer weaving unit of 145 & 110 looms with a production capacity of 130,000 meters of fabric per day in the Nooriabad & Karachi locations. Liberty Group holds a ~90% stake in Liberty Power Tech Limited (a 200MW thermal IPP), including ~29% through Liberty Mills Limited.