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

The rating of Masood Textile Mills Limited (“MTM or “the Company”) reflects its established business profile in the value-added textile sector. The Company is a vertically integrated textile manufacturer, utilizing state-of-the-art production facilities and stringent quality control standards that align with international customer requirements. Its operations cover the complete textile value-chain, including spinning, knitting, yarn and fabric dyeing, laundry, printing, embroidery and apparel manufacturing. MTM’s competitive advantage is anchored in precision-driven production, design innovation, and the capacity to deliver high-quality garments across a broad range of product categories. Business stability is reinforced by MTM’s established, diversified portfolio of reputable and financially strong global brands. These include leading global retailers such as JCPenney, Quicksilver, Hugo Boss, Zara, Marks & Spencer, PVH, Footlocker, among others. The Company regained traction as its previously disrupted supply chain normalized, which eased cost pressures, accompanied by a gradual reduction in the policy rate, resulting in a profit after tax (PAT) of PKR 131mln during FY25. The Company’s financial risk profile is assessed as adequate, though marked by a stretched working capital cycle. The Company is also characterized by a highly leveraged capital structure, primarily driven by its substantial working capital requirements that are predominantly financed through short-term borrowings.
During Sep'25, the Company made a sukuk profit payment of PKR 64.9mln, bringing the total markup payouts till date to PKR 293.7mln. The first principal payment of PKR 117.6mln was also made during the same month, marking the total interest plus principal payments of PKR 411.3mln. The next quarterly profit payments along with the quarterly principal redemption payment is scheduled for the end of Dec'25.
The efficient management of finance costs while fueling growth through STB remains critical. The rating of the instrument captures 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 (“MTM” or “the Issuer” or “the Company”) 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 (“FED”), 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.