PACRA Maintains the Entity Ratings of Meko Denim Mills (Pvt). Limited

The assigned positive outlook of Meko Denim Mills (Pvt). Limited (“MDML” or “the Company”) is underpinned by the Company’s strong performance. While the other industry players faced challenges, the Company demonstrated a notable growth in business from core operations, reflecting positively on the business risk profile. This is further reinforced by the emerging business profile of the sponsoring group. MDML is a family-owned business with an integrated presence across all aspects of the textile value chain. The Company’s product slate comprises coarse yarn, denim fabric, denim jeans, and knit products. Over the years, the Company has strengthened its market position through phased expansion, evolving into a fully integrated one-window solution. This approach has consistently supported consistent volumetric growth across all business segments.

In FY25, the Company achieved a topline of PKR 16.6 billion (FY24: PKR 17.0 billion). The slight decrease was the result of a strategic realignment, whereby coarse yarn, previously sold to external customers, is now fully utilized for in-house consumption. This initiative enhanced inter-segment price transferability, alongside creating resilience against product price volatility. The Company has concentrated its focus on international markets to capitalize on the rising demand for denim fabric and knitwear. Within the product mix, denim fabric holds a dominant position and remains the key value driver in MDML’s business valuation framework. The clientele comprises well-established and financially sound customers across both domestic and international markets. The gross profit margin reflected a notable improvement driven by the procurement of cotton at a favorable price alongside the realization of investments in multiple renewable energy alternatives.

The Company benefits from an 8-megawatt captive power generation boiler and a 4-megawatt solar project, optimizing its overall cost structure. As a result, net profitability improved modestly, with the bottom line rising to PKR 333 million in FY25 (FY24: PKR 324 million). The Company meets its working capital requirements through a combination of internal cash generation and short-term borrowings. MDML maintains a leveraged capital structure with an adequate working capital cycle. The financial risk profile of the Company improved in FY25, supported by a notable recovery in the coverage metrics.
The assigned ratings are contingent upon the Company’s continued operational stability and draw comfort from the sponsor’s profile. Sustained margins and consistent internal cash generation remain critical, while adherence to an optimal debt matrix is a key prerequisite for the assigned ratings.

About the Entity
Incorporated in 2021, Meko Denim Mills (Pvt). Limited operates as a comprehensive denim producer within the textile industry. Currently, the Company is engaged in spinning, weaving, processing, washing and stitching. The Company’s operations are supported by 44,000 spindles, 234 looms, 2000 rotors, and 600 stitching machines. The Company’s entire shareholding is held by the sponsoring family through individual shareholders. The Company’s majority stake of 75% is owned by Mr. Shoaib Majeed, comprising his direct shareholding of 50%, along with 20% held through his wife, Ms. Kiran Bano, and 5% held through his son, Mr. Ahmed Shoaib. The remaining 25% stake rests with Mr. Khalid Majeed.