PACRA Assigns Preliminary Ratings to Masood Spinning Mills Limited | PPSTS | PKR 3.0bln | TBI

Masood Spinning Mills Limited (“MSML” or “the Company”) is a recognized player in the competitive textile sector, operating under the umbrella of the Mahmood Group. MSML is engaged in the manufacturing and sale of multiple yarn categories. Over the years, the Company strengthened its market presence through sustained operations and diversification of its product portfolio. Lately, the Company has ventured into a new socks segment offering a broad range of products, including fashion wear, medicated, sports-wear and formal wear. This move is aimed at capitalizing on the rising demand for value-added products in the international market. The operational efficiency from this new unit has been fully realized.
In 1QFY26, the Company secured a topline of PKR 8.1bln (1QFY25: PKR 6.7bln). This growth was primarily driven by the management’s deliberate efforts, following a change in the Company’s overall strategy. The management shifted its focus from a volume-driven growth model to a more sustainable approach, emphasizing core profitability. Consequently, the Company’s sales mix tilted towards the domestic market to benefit from the favorable local demand. Additionally, the Company held its footprint in the international domain through the top-quality socks segment. The margins remained largely intact due to optimization of the overall cost structure through investment in cost-efficient energy alternatives. As of today, a 13.5 megawatt solar project is fully operational. However, the impact of taxation has moderated the net profitability, with PAT reaching PKR 94mln (1QFY25: PKR 52mln).
The Company has sizable working capital facilities available from financial institutions, for which room is available, as per management’s representation. The intended sukuk issuance is being undertaken with the dual aim of diversifying and strengthening the Company's working capital funding base. The cash flows and coverages remain within a manageable range. The management is cognizant of the existing debt levels and has articulated defined strategies to gradually deleverage the Company’s balance sheet in the future.
The preliminary ratings of the instrument derive their strength from the security structure, primarily anchored by the DPA (Debt Payment Account) mechanism placed under the lien of the Investment Agent. The DPA will commence funding 21 days before maturity and will continue through weekly contributions, ensuring that the entire issue amount is available in the DPA, two days before the maturity date. Both principal and profit will be repaid through a bullet payment. The underlying instrument is secured by a ranking charge over the Company’s current assets with a 25% margin, supplemented by additional covenants. The Company is required to maintain a sufficient cushion in current assets throughout the Sukuk tenor, while ensuring that Sukuk-equivalent bank limits remain unutilized during the Sukuk tenor.

About the Entity
MSML is a public limited Company. The Group sponsors cumulatively own the majority shareholding through individuals and associated companies. Overall control of the board is vested with six BODs.

About the Instrument
MSML intends to issue a Rated, Secured, Privately Placed, Short-Term Sukuk of PKR 3,000mln (inclusive of a green shoe option of PKR 1,500mln). The purpose of the instrument is to finance the working capital requirements of the Company. It carries a markup rate of 3MK/6MK+50bps* with a tenor of six months. The Sukuk includes a call option feature, allowing the issuer to partially or fully redeem it with a seven-day prior notice. Once the call option is exercised, it will be irrevocable.