Press Release
VIS Assign Preliminary Ratings to Mahmood Textile Mills Limited’s Proposed Short Term Sukuk
Karachi, July 02, 2025: VIS Credit Rating Company Limited (‘VIS’) has assigned preliminary rating of A1 (plim) (A One Preliminary) to Mahmood Textile Mills Limited’s (“MEHT” or “the Company”) proposed short term Sukuk of Rs. 3billon. The short-term rating of A1 indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors.
MEHT plans to issue a secured, privately placed Short-Term Sukuk of up to PKR 3.0 billion, inclusive of a green shoe option of PKR 1.0 billion. The proceeds will be utilized to fund working capital requirements. The tenor of the instrument will be up to six months from the date of issuance. The principal will be repaid in a single bullet payment at maturity, along with profit. The profit rate is pegged to the six-month KIBOR plus 70 basis points, fixed one working day prior to issue date and applicable for the entire tenor. Profit will be calculated on an actual/365-366-day basis. The Sukuk will be secured by a ranking charge over the Company’s current assets, with a 25% margin and a Debt Payment Account (DPA).
MEHT is the flagship entity of the Mahmood Group, with a longstanding presence in the textile export sector. Over time, MEHT has progressively evolved into a fully vertically integrated operation. The Company has undertaken capital expenditures in the last few years to establish a modern apparel manufacturing unit featuring advanced production technologies and substantial automation.
The rating of the proposed short-term Sukuk captures the strength of the security structure, primarily from the DPA mechanism maintained under lien of the investment agent and is to be funded 20 days prior to maturity, with the full issue amount ensured to be available in the DPA at least five working days before maturity. Rating also draws comfort from maintenance of sufficient cushion, equivalent to the size of the issue, in short term always funded lines during the tenor of the instrument.
The rating also considers MEHT’s adequate financial risk profile. Profitability remains moderate, with margins affected by input costs, exchange rate movements, and utility tariffs. The capital structure remains leveraged due to prior expansion, though further long-term debt accumulation is expected to slow in line with scheduled repayments. Liquidity is supported by sufficient working capital facilities, and coverage metrics, With recent easing in benchmark rates, coverage indicators are projected to improve going forward. Moreover, MTML is actively investing in renewable energy projects to improve its energy efficiency.
The textile sector remains exposed to moderate to high business risks stemming from economic cyclicality, global competition, and structural inefficiencies. Volatile cotton output, import dependence, rising input costs, and policy-driven energy and tax reforms continue to constrain margins. However, recent policy rate cuts are expected to ease some financial pressure through lower borrowing costs.
For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Corporate Rating
https://docs.vis.com.pk/docs /CorporateMethodology.pdf
Instrument Rating
https://backupsqlvis.s3.us-west-2.amazonaws.com/Methodologies-2025/IRM-Apr-25.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf