PACRA Maintains Entity Ratings of Masood Fabrics Limited

The ratings of Masood Fabrics Limited (“MFL” or “the Company”) reflect its adequate positioning in the textile industry of Pakistan. The assigned ratings take comfort from the Company’s association with the Masood Roomi group which includes Masood Fabrics Limited, Roomi Fabrics Limited, Masood Apparels (Pvt.) Limited, Roomi Home (Pvt.) Limited, Masood Holdings (Pvt.) Limited, and Roomi Holdings (Pvt.) Limited. The board is dominated by the sponsoring family, who take on executive roles due to their considerable industry-specific expertise. The Company’s primary business is the manufacturing and sale of greige cloth and yarn. The Company expanded its product portfolio by introducing double yarn and technical fabric production in recent years, which has now started contributing to the business with higher contribution margins than existing product categories. During FY24, the Company generated a topline of PKR 24.9bln (FY23: PKR 25.3bln), dominated by export sales and their export destinations include Europe and the USA. The decline in revenue was primarily driven by the downward trend in international cotton prices, which led to a decrease in yarn prices. Additionally, a shift in the product mix toward high-density fabric production increased lead times and impacted sales volumes. The sales mix is dominated by the sales of greige fabric, followed by yarn. The stable and reputable customer base provides comfort to business sustainability. The profitability matrix remains under stress on account of the escalated cost of production and magnifying energy cost; However, in FY24, the non-operating income of PKR 1.5 bln, generated from strategic and non-strategic investments along with a revaluation gain on investment property, provided a financial cushion, supporting the company's margins. The Company has installed ~9MW of solar capacity to mitigate the energy cost risk. Additionally, the anticipated decline in the policy rate is expected to reduce the Company's financial costs. The Company's reliance on imported raw cotton requires bulk shipment to procure in a single consignment intensifies working capital requirements. The financial risk profile of the Company is considered adequate with a stretched working capital cycle. The working capital requirements are primarily met through short-term borrowings. The Company enjoys extensive short-term borrowing limits, inclusive of funded and non-funded facilities. The cashflows and coverages of the Company are considered adequate and need improvements. The Company operates under a highly leveraged capital structure. The textile exports of the country reached USD 16.7bln in FY24, a slight increase from USD 16.5bln in the previous year, reflecting a growth of 0.93% YoY. The highest contribution came from the composite and garments segment at USD 9.1bln, followed by the weaving segment at USD 6.5bln and the spinning segment at USD 1.0bln. The consistent decline in policy rates over the last two quarters, along with the anticipation of further reductions, is expected to provide a cushion in the financial metrics of the industry.
The ratings are dependent upon the Company’s ability to prudent working capital management. Improvement in coverages, sustainability of margin, and sufficient generation of cash flows from core operations while expanding business volumes remains vital. Adherence to the debt matrix at an optimal level is a prerequisite for assigned ratings.

About the Entity
Masood Fabrics Limited is a public unlisted Company incorporated in May, 1998. The Company operates with the production facility of 32,880 spindles and 260 looms respectively. Mr. Khawaja Jalaluddin Roomi, the Company’s CEO overseas the Company’s operations.