PACRA Assigns Ratings to Masood Spinning Mills Limited Amid Strategic Expansion

Lahore: The Pakistan Credit Rating Agency Limited (PACRA) has assigned initial ratings to Masood Spinning Mills Limited (MSML), recognizing the company’s positioning in Pakistan’s spinning industry. The ratings are bolstered by MSML’s affiliation with the Mahmood Group, a prominent sponsor entity. MSML’s core operations involve the manufacturing and sale of yarn and socks.

In an effort to strengthen its market position, MSML recently expanded into the socks segment, equipping its facilities with advanced knitting machinery aimed at maintaining high-quality standards to meet the demands of international clients. Management anticipates that this move will significantly contribute to the company’s revenue in the upcoming quarters.

Despite a decrease in topline revenue to PKR 23.5 billion in the first nine months of fiscal year 2025, down from PKR 28.0 billion during the same period the previous year, MSML’s profitability increased to PKR 190 million, thanks in part to investments in renewable energy sources like an 11 megawatt solar project. This strategic shift in product composition aims to capitalize on the rising demand for coarse yarn.

The shift from a final tax regime to a normal tax regime has increased the company’s tax burden, reflecting an industry-wide trend. However, the company maintains considerable borrowing capacity with robust working capital lines from multiple financial institutions. While the spinning side’s working capital cycle remains adequate, it is more efficient in the socks division.

MSML’s financial risk profile is deemed adequate, though the company faces a slightly stretched working capital cycle. Effective cash flow management and improved coverage ratios are critical moving forward. The planned sukuk issuance aims to diversify and strengthen MSML’s working capital funding base.

The rating of the instrument reflects the robustness of the security structure, primarily through a Debt Payment Account (DPA) mechanism secured under the investment agent’s lien. The DPA will be funded 60 days before maturity, ensuring full issue amount availability, with principal and profit payments executed as a bullet payment. The instrument is secured by a ranking charge over MSML’s current assets with a 25% margin.