Press Release
VIS Assigns Preliminary Rating to Mehmood Textile Mills Limited’s Proposed Short-Term Sukuk 8 (STS-8)
Karachi, October 23, 2026: VIS Credit Rating Company Limited (VIS) has assigned preliminary rating of ‘A1 (plim)’ to Mehmood Textile Mills Limited’s (‘MTML' or ‘the Company’) proposed Short Term Sukuk 8 (STS-8). Short term rating of ‘A1’ reflects strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Rating to be finalized on review of executed documents.
MTML intends to issue a privately placed, secured Short-Term Sukuk 8 (STS-8) of PKR 4,000 million (inclusive of PKR 500 million green shoe option) with 6 months tenure, to finance working capital needs. The Sukuk will carry a single bullet repayment of principal at maturity. The profit rate is defined as 3M KIBOR + 1.50%, with the base rate set immediately preceding working day before the first Drawdown.
Assigned rating derives comfort from security structure in place with includes ranking charge with 25% margin on current assets, a Sukuk payment mechanism wherein the Company shall establishment and maintain a Sukuk Payment Account (SPA), under lien is established for repayment under lien with Investment Agent, to be built up in the last 30 days of instrument maturity with 25% to be fulfilled before 20 working days, 25% before 14 days working days and remaining 50% funding to be arranged 7 working days before maturity date. In addition to this, MTML shall, all times, until the Payment Obligations have been fully satisfied and discharged, ensure that the limits of the short-term funded finance facilities sanctioned from banks/financial institutions, remain unutilized by the Issuer up to the Sukuk Issue Amount and MTML shall provide evidence of such sanctioned limits mentioned above (to the Investment Agent in form and substance acceptable to the Investment Agent. As of August 2026, the Company maintains sufficient short-term liquidity headroom in unutilized working capital limits, which provides comfort to liquidity and debt repayment.
The assigned rating reflects the strong footprint of the Mahmood Group across the textile value chain and related businesses. The broader textile sector continues to face elevated pressures from global competition, energy cost escalation, and policy-related challenges. Assigned rating considers the Company’s largely stable financial profile, despite these pressures. Gross margins have historically averaged at 14%, absolute net profitability improved slightly in FY26 though net margins reduced due to lower operating margins and higher taxation. The Company is enhancing efficiency through energy initiatives, including solar capacity expected to mitigate utility cost pressures. Financial risk remains adequate, supported by better working capital management and sufficient cash flows. Although leverage is elevated, planned divestment of power assets by end of 2026, is expected to support deleveraging. The ratings are dependent upon materialization of the management targets for improved financial performance in FY27.
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/Methodologies-2026/Corporate-Rating-2026.pdf
Instrument Rating:
https://docs.vis.com.pk/Methodologies-2026/IRM-2026.pdf
VIS Issue/Issuer Rating Scale:
https://docs.vis.com.pk/docs/VISRatingScales.pdf