Press Release

VIS Reaffirms Instrument Rating of Sukuk Issue of Masood Textile Mills Limited

Karachi, December 14, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed instrument rating at ‘A’ (Single A) of secured and privately placed Sukuk Issue of Rs. 2.5b (inclusive of green shoe option of Rs. 1.0b) of Masood Textile Mills Limited (MTML). There are total 14 equal quarterly principal repayments, 5 of which have already been made, with the final instalment due in Dec’24. Long-term rating of ‘A’ signifies good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. Entity ratings of MTML are placed at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on September 8, 2021.

Ratings continue to reflect moderate risk profile, which is supported by presence in the export-oriented value-added textile segment, nearly four-decade operating track record, vertically integrated production unit and presence of Chinese ownership resulting in provision of synergistic benefits in terms of technical expertise. Ratings reaffirmation is supported by healthy order book for the next 6 months along with on boarding of renowned high-fashion brands and retailers to client base. In light of this, management anticipates overall capacity utilization to remain stable in FY23, despite a global slowdown in demand. Reaffirmation is also subject to caveats of materialization of management projections for turnover, margins and gearing improvement and maintenance of DSCR.

Annual capex mainly pertained to addition of new machinery in the knitting segment, resulting in ~13% capacity increase during the year while total project cost was financed through a mix of LTFF, sponsor contribution, and internal capital generation. As per management, decline in dyeing & finishing capacity is due to sale of idle/obsolete machinery.

While crossing the Rs. 54b mark in FY22, net sales increased by ~46% primarily due to an increase in average prices combined with rupee depreciation, while single-digit volumetric growth in knitted apparel/garments. Direct exports generated ~87% of revenue on a two-year average, while proportion of knitted apparel/finished garments to fabric/yarn sales was around 90:10. Client concentration remains high, with the top five clients accounting for more than half of total sales. Gross margins noted a declining trend; however, akin to industry trend sizeable exchange gain over the review period supported the uptick in bottom line. However, in absence of exchange gains, net margins are thin and need improvement. Growth in profitability has improved liquidity profile and cash flow coverages; however, sustainability of the same needs to be observed going forward. Business risk profile takes into account industry wide growth in exports over the last year; however, recent floods across the country, rising interest rates, inflationary pressures, and higher electricity costs pose risks on the sector over the medium term. Ratings are constrained by current weak macroeconomic environment globally and locally. Hence, meeting projected growth targets and maintaining financial risk profile will be important for ratings.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 206) or the undersigned (Ext. 201) at 021-35311861-70 or email at

Javed Callea

Applicable Rating Criteria: Industrial Corporates (August 2021)

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