Press Release
VIS finalizes Rating of Short Term Sukuk (STS) of Mahmood Textile Mills Limited
Karachi, September 29, 2025: VIS Credit Rating Company Limited (VIS) has finalized short term rating of ‘A1’ (A one) assigned to Mahmood Textile Mills Limited’s (‘the Company’, ‘MTML’) Short-term Sukuk (‘STS’ or ‘the instrument’). Short term rating of ‘A1’ reflects strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Previous rating action was announced on July 02, 2025.
MTML is the flagship entity of the Mahmood Group, with a longstanding presence in the textile export sector. Over time, MTML 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 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. The rating also considers MTML’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.
MTML issued 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 is up to six months from the date of issuance. The issuance date was July 7th, 2025 and maturity date will fall on January 7th, 2026. 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 is calculated on an actual/365-366-day basis. The STS is secured by a ranking charge over the Company’s current assets, with a 25% margin and a Debt Payment Account (DPA). The rating of the STS 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 seven 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.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf
Instrument Rating Methodology
https://docs.vis.com.pk/Methodologies-2025/IRM-Apr-25.pdf