PACRA Maintains Debt Instrument Rating of Masood Textile Mills Limited - PP Sukuk - PKR 2bln - Sep-24

The ratings of Masood Textile Mills Limited ('MTM' or 'the Company') underscore its prominent and well-entrenched business profile within Pakistan's value-added textile sector. The operations encompass Spinning, Knitting, Yarn and Fabric Dyeing, Laundry, Printing, Embroidery, and Apparel Manufacturing. The operations are underpinned by rigorous quality control standards calibrated to the exacting requirements of globally recognized international fashion and retail brands. Business stability is firmly reinforced by MTM's long-standing partnerships with a well-diversified clientele of financially robust international brands, with the garments segment constituting about 81.4% of total revenues. Such long-standing relationships with globally recognized brands distinguish the Company from its industry peers in terms of reliability and market positioning, providing comfort to the assigned ratings. MTM’s revenue for FY25 reflected a YoY growth of 1.0%, indicating stable growth in operational performance. The Company reported a PAT of PKR 131mln, primarily driven by a 22.8% reduction in finance costs amid monetary easing. As of 9MFY26, profitability further strengthened to PKR 603mln, reinforcing the Company’s improved earnings trajectory. The Company’s financial risk profile is considered stable, supported by optimal working capital management. Cash flows remain sufficient with moderate coverage. MTM's net working capital requirements are primarily met through short-term borrowings and internally generated cash flows. Masood Textile maintains a leveraged capital structure, mainly skewed towards short-term borrowings. During Dec’25 and Mar’26, the Company made sukuk profit payments of PKR 60.2mln and PKR 53.8mln, respectively, taking cumulative profit payments to PKR 407mln. Additionally, quarterly principal repayments of PKR 117mln were made during the same periods, bringing total principal repayments to PKR 352mln. The next quarterly profit and principal redemption payments are scheduled for end-Jun’26.
The efficient management of finance costs while fueling growth through STB remains critical. The ratings capture the strength of the security structure, primarily driven from the FPA mechanism.

About the Entity
Masood Textile Mills Limited is a public listed company incorporated in 1984. The Company’s board comprises of seven members, including the CEO - Mr. Shahid Nazir Ahmad, the Chairman of the board - Mr. Naseer Ahmad Shah, two independent directors, two nominee directors from Shanghai Challenge Textile Co. Limited, and one from NIT.

About the Instrument
Masood Textile Mills Limited issued a Rated, Privately Placed & Secured, Islamic Certificate ("Sukuk") of PKR 2,000mln in Sep-24 to finance the Company’s permanent working capital requirements. The Sukuk is secured by way of a first joint pari passu hypothecation charge over all present and future fixed assets (excluding land and building) of the Company present on the specified properties (excluding assets with specific charges in favor of a creditor) with a 25% margin. The Company has also established a finance payment account (“FPA”) with the Bank prior to facility effective date, which is held under exclusive lien in favor of the participating institutions. During each quarterly payout period, the Company shall deposit an amount equivalent to the 1/3rd of the outstanding installment amount, every month into the FPA account, such that the cumulative payout amount is available 10 days prior to the installment’s due date. The tenor of the instrument is five years, inclusive of a grace period of 9 months. The profits are paid quarterly in arrears on the outstanding balance of the issued amount at the rate of 3MK+1.75%. Principal repayment is being paid in 17 equal quarterly installments till the scheduled redemption of the instrument on Sep-29.