Masood Fabrics Limited

CREDIT RATING REPORT | Mar-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
28-Mar-25 A- A2 Stable Maintain -
29-Mar-24 A- A2 Stable Maintain -
30-Mar-23 A- A2 Stable Maintain -
30-Mar-22 A- A2 Stable Maintain -
26-Apr-21 A- A2 Stable Maintain YES
About the Entity

Masood Fabrics Limited is a public unlisted Company incorporated in May, 1998. The Company operates with the production facility of 32,880 spindles and 260 looms respectively. Mr. Khawaja Jalaluddin Roomi, the Company’s CEO overseas the Company’s operations.

Rating Rationale

The ratings of Masood Fabrics Limited (“MFL” or “the Company”) reflect its adequate positioning in the textile industry of Pakistan. The assigned ratings take comfort from the Company’s association with the Masood Roomi group which includes Masood Fabrics Limited, Roomi Fabrics Limited, Masood Apparels (Pvt.) Limited, Roomi Home (Pvt.) Limited, Masood Holdings (Pvt.) Limited, and Roomi Holdings (Pvt.) Limited. The board is dominated by the sponsoring family, who take on executive roles due to their considerable industry-specific expertise. The Company’s primary business is the manufacturing and sale of greige cloth and yarn. The Company expanded its product portfolio by introducing double yarn and technical fabric production in recent years, which has now started contributing to the business with higher contribution margins than existing product categories. During FY24, the Company generated a topline of PKR 24.9bln (FY23: PKR 25.3bln), dominated by export sales and their export destinations include Europe and the USA. The decline in revenue was primarily driven by the downward trend in international cotton prices, which led to a decrease in yarn prices. Additionally, a shift in the product mix toward high-density fabric production increased lead times and impacted sales volumes. The sales mix is dominated by the sales of greige fabric, followed by yarn. The stable and reputable customer base provides comfort to business sustainability. The profitability matrix remains under stress on account of the escalated cost of production and magnifying energy cost; However, in FY24, the non-operating income of PKR 1.5 bln, generated from strategic and non-strategic investments along with a revaluation gain on investment property, provided a financial cushion, supporting the company's margins. The Company has installed ~9MW of solar capacity to mitigate the energy cost risk. Additionally, the anticipated decline in the policy rate is expected to reduce the Company's financial costs. The Company's reliance on imported raw cotton requires bulk shipment to procure in a single consignment intensifies working capital requirements. The financial risk profile of the Company is considered adequate with a stretched working capital cycle. The working capital requirements are primarily met through short-term borrowings. The Company enjoys extensive short-term borrowing limits, inclusive of funded and non-funded facilities. The cashflows and coverages of the Company are considered adequate and need improvements. The Company operates under a highly leveraged capital structure. The textile exports of the country reached USD 16.7bln in FY24, a slight increase from USD 16.5bln in the previous year, reflecting a growth of 0.93% YoY. The highest contribution came from the composite and garments segment at USD 9.1bln, followed by the weaving segment at USD 6.5bln and the spinning segment at USD 1.0bln. The consistent decline in policy rates over the last two quarters, along with the anticipation of further reductions, is expected to provide a cushion in the financial metrics of the industry.

Key Rating Drivers

The ratings are dependent upon the Company’s ability to prudent working capital management. Improvement in coverages, sustainability of margin, and sufficient generation of cash flows from core operations while expanding business volumes remains vital. Adherence to the debt matrix at an optimal level is a prerequisite for assigned ratings.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Masood Fabrics Limited

rating analysis

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Profile
Legal Structure

Masood Fabrics Limited (‘Masood Fabrics’ or ‘The Company’) was incorporated in 1998, as a public unlisted limited company.



Background

The Company was a venture of the Mahmood Group, which was originally established in 1935. Starting with the tannery business, the group now has a presence in the complete cotton chain (growing to finished products), tanneries, real estate, and food. Masood Fabric is now part of the Masood-Roomi group, which was formed in Apr'21


Operations

The Company is primarily engaged in the manufacturing and sale of greige fabric and yarn with a current operating capacity of 32,880 spindles and 260 looms respectively.  It also has a significant investment portfolio and participates in the equity market. The Company generates 10.9 MW of combined power through captive generators and solar capacity. The registered head office of the Company is situated at 5 - Officers Colony, Multan.


Ownership
Ownership Structure

The ownership of the Company rests with the family of Mr. Khawaja Jalaluddin Roomi, including his wife, sons and sisters. The major shareholding of the Company is owned by Mr. Khawaja Jalaluddin Roomi which is 77.28%, while the remaining ~22.72% is distributed among family members. 


Stability

A clear and organized shareholding structure among family members, coupled with a well-established succession plan, reinforces the organization's stability and resilience.  However, the establishment of a family constitution will enhance the stability and ownership profile of the Company. 


Business Acumen

Mr. Khawaja Jalaluddin Roomi is a graduate with over 30 years of extensive experience. He has successfully led various government, semi-government, and public limited companies, developing strong expertise and business acumen. His vast knowledge and leadership capabilities equip him to effectively navigate and sustain any future challenges.


Financial Strength

Masood Fabric is a part of the Masood-Roomi Group of Companies. The sponsoring family has two other textile Companies; Roomi Fabric Limited, and Masood Apparels, and two holding Companies, Masood Holding and Roomi Holding. This indicates sponsors’ ability to provide support if the need arise.


Governance
Board Structure

The board consists of five members from the sponsoring family. Mr. Khawaja Jalaluddin Roomi holds the positions of Chairman and CEO, while Ms. Humaira Jalaluddin and Mr. Najam-ud-Din Roomi serve as board directors. The board lacks independent oversight and the inclusion of independent directors will augment the governance framework of the Company.


Members’ Profile

Mr. Khawaja Jalaluddin Roomi is the Chairperson of the Company. He previously served as the Chairman-Management Board at Nishtar Medical College, Chairman at Multan Dry Port Trust and is currently heading Jalaluddin Roomi Foundation. Mr. Najam ud Din Roomi is the director of Masood Roomi Group and serves as independent director in Arif Habib Corp Limited. The directors’ expertise in various stages of the textile value chain leads to a good skill mix. 


Board Effectiveness

The total number of meetings held during the year was four, which were attended by all of the members. High attendance bodes well for board effectiveness. No board committees are in place to assist the Board and its establishment will enhance the Company's governance profile 


Financial Transparency

Crowe Hussain Chaudhry & Co. Chartered Accountants, who are categorized in category ’A’ by the SBP and have a satisfactory QCR rating by ICAP, were the external auditors of the company. They have expressed an unqualified opinion on the company's financial statements for the year ending June 30, 2024.


Management
Organizational Structure

The organizational structure follows a hierarchical model, ensuring clear authority and accountability. The Chairman and Board of Directors provide strategic oversight, while the CEO manages overall operations, supported by the CFO, who oversees Taxation, HR & Admin, IT & ERP, and Finance. An independent Audit function ensures compliance and governance. Key business functions like Import, Purchase, Export, and Marketing are structured under HR & Admin and Finance, promoting operational efficiency. While this structure strengthens financial control, centralizing multiple functions under the CFO may slow decision-making. A more decentralized leadership approach could enhance agility and responsiveness.


Management Team

Mr. Khawaja Jalal-ud-Din Roomi, the company's CEO, is a graduate with over 30 years of extensive experience in leading government, semi-government, and public limited companies. He also serves on the board of Adamjee Insurance Company Limited. A team of professionals across various subdivisions, supports the top management to ensure efficient reporting and operations.


Effectiveness

Formal management meetings are conducted separately for each group company, chaired by Mr. Khawaja Jalal-ud-Din Roomi, with detailed minutes duly recorded. Currently, no management committees support the management team; however, their establishment would further strengthen the company's management framework.


MIS

Various MIS reports are generated and submitted to senior management to provide insights into monthly operations. These reports include Closing Stock and Finished Goods, Doubling Production, Cotton Reconciliation, Yield Analysis, and Raw Material & Work-in-Progress reports.


Control Environment

The Company deployed Oracle as an ERP solution in 2014. The group is currently operating Oracle R12, which has been customized by KPMG Taseer Hadi & Co. Chartered Accountants. The operational modules include (i) Payable, (ii) Receivable, (iii) Inventory, (iv) Procurement, (v) Order Management, (vi) General Ledger, (vii) Fixed Assets, and (viii) Cash Management. Internal systems and controls, while integrating the business functions of the company, help the management in decision-making by collecting information timely. The in-house internal audit department is reportable to the board of directors. 


Business Risk
Industry Dynamics

The textile exports of the country reached USD 16.7bln in FY24, a slight increase from USD 16.5bln in the previous year, reflecting a growth of 0.93% YoY. The highest contribution came from the composite and garments segment at USD 9.1bln, followed by the weaving segment at USD 6.5bln and the spinning segment at USD 1.0bln. During 6MFY25, the textile exports stood at USD 9.1bln. In FY25, the transition from the final tax regime to the normal tax regime is set to impact the profitability matrix of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The consistent decline in policy rates over the last two quarters, along with the anticipation of further reductions, is expected to provide a cushion in the financial metrics of the industry


Relative Position

The Company has an operating capacity of 32,880 spindles and 260 looms respectively. Considering the operating capacity, the relative position of the Company is considered adequate and the Company is a low to mid-tier player in the textile industry.


Revenues

The company generates a major portion of its revenue from local and export sales. During FY24, the company's topline recorded a marginal decline to stand at PKR 24.9bln (FY23: PKR 25.3bln) attributable to the adverse pricing dynamics and shortage of yarn demand. The sales mix tilted toward the export market as export sales (including indirect exports) recorded a decrease to PKR 21.4bln (FY23: PKR 22.4bln) comprising the sale of yarn and fabric. The company's local sales increased to PKR 3.7bln (FY23: PKR 3.4bln). The company operates in two key segments: spinning and weaving. While both contribute to the overall performance, weaving plays a more significant role in driving the Company’s topline. The top 4 export destinations for the Company, which account for almost 60% of total export sales in terms of volume, are China, the Netherlands, Italy, Germany, and the USA. During 6MFY25, the company’s revenue base remained stagnant to stand at PKR 12.7bln


Margins

During FY24, the gross margin reflected a decline at 15.7% (FY23: 19.9%) followed by a hike in production cost. Consequently, the operating margin witnessed a decline to 11.4% (FY23: 15.1%) The Company’s finance cost increased manifold to PKR 3.6bln (FY23: PKR 2.2bln). The net profit of the Company saw a sizeable decline to stand at PKR 158mln (FY23: PKR 1.4bln). Consequently, the net profit margin stood at 0.6% (FY23: 5.4%). The Company's non-operating income sizably increased and stood at PKR 1.5bln (FY23: PKR 845mln), supplementing the profitability. During 6MFY25, the company's gross profit margin and net profit margin stood at 17.1% and 1.5%, respectively. 


Sustainability

During FY24, the Company has executed CAPEX and installed ~9MW of solar capacity to mitigate the escalating energy cost risk. Moreover, the Company has executed BMR and added 240 spindles to its operating capacity. No further CAPEX is expected going forward, as the existing infrastructure and resources are deemed sufficient to support the company's operational and strategic objectives.


Financial Risk
Working capital

At end-Jun24, the company's net working capital days declined to 133 days (end-June 23: 140 days) owing to a decline in the inventory days recorded at 117 days (end-June 23: 132 days). The company's short-term trade leverage stood at 0.5% (end-Jun23: 0.5%) due to a decrease in trade assets recorded at PKR 11.9bln (end-Jun23: PKR 12.3bln). At end-Dec24, the net working capital days stood at 140 days (FY23: 140 days).


Coverages

At end-Jun24, the company's free cash flows from operations decreased to PKR 2.9bln (end-Jun23: PKR 3.6bln). The company's interest coverage ratio declined to 0.8x (end-Jun23: 1.6x) and debt coverage to 0.6x (FY23: 1.1x). At end-Dec 24, the company's interest coverage and debt coverage ratio each stood at 0.8x, with FCFO clocking at PKR 1.7bln.


Capitalization

At end-Jun24, the company has a highly leveraged capital structure. The company's leveraging inclined to 63.0% (end-Jun23: 62.3%). The company's equity base increased to PKR 10.1bln (end-Jun23: PKR 9.8bln). Total borrowings to stand at PKR 17.3bln (end-Jun23: PKR 16.1bln). At the end of Dec 24, the company's equity base stood at PKR 10.3bln. The company's leveraging clocked in at 62.9%
 
 

Mar-25

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Masood Fabrics Limited

financial summary

(PKR mln)

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Dec-24
6M		 Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 7,683 7,950 7,206 5,589
2. Investments 4,651 5,222 5,240 4,862
3. Related Party Exposure 3,446 3,406 3,181 3,143
4. Current Assets 14,954 13,617 13,648 14,583
a. Inventories 7,805 6,936 9,110 9,226
b. Trade Receivables 3,959 3,409 1,775 3,094
5. Total Assets 30,733 30,195 29,275 28,177
6. Current Liabilities 2,833 2,726 3,290 3,072
a. Trade Payables 1,307 1,199 1,819 1,896
7. Borrowings 17,547 17,303 16,176 16,659
8. Related Party Exposure 0 0 0 0
9. Non-Current Liabilities 0 0 0 0
10. Net Assets 10,353 10,167 9,808 8,447
11. Shareholders' Equity 10,353 10,167 9,808 8,447
B. INCOME STATEMENT
1. Sales 12,755 24,955 25,366 24,147
a. Cost of Good Sold (10,568) (21,038) (20,324) (18,534)
2. Gross Profit 2,187 3,917 5,042 5,612
a. Operating Expenses (580) (1,061) (1,215) (1,180)
3. Operating Profit 1,607 2,856 3,827 4,433
a. Non Operating Income or (Expense) 84 1,284 241 (657)
4. Profit or (Loss) before Interest and Tax 1,691 4,141 4,068 3,775
a. Total Finance Cost (1,290) (3,674) (2,330) (1,317)
b. Taxation (214) (309) (376) (334)
6. Net Income Or (Loss) 186 158 1,361 2,124
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 1,717 2,975 3,633 4,111
b. Net Cash from Operating Activities before Working Capital Changes 368 (657) 1,548 2,875
c. Changes in Working Capital (1,250) (624) 983 (4,040)
1. Net Cash provided by Operating Activities (882) (1,281) 2,531 (1,165)
2. Net Cash (Used in) or Available From Investing Activities 616 144 (1,917) (1,855)
3. Net Cash (Used in) or Available From Financing Activities 244 1,126 (483) 2,992
4. Net Cash generated or (Used) during the period (22) (11) 131 (28)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 2.2% -1.6% 5.0% 63.9%
b. Gross Profit Margin 17.1% 15.7% 19.9% 23.2%
c. Net Profit Margin 1.5% 0.6% 5.4% 8.8%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 3.7% 9.4% 18.2% 0.3%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 3.6% 1.6% 14.9% 28.8%
2. Working Capital Management
a. Gross Working Capital (Average Days) 158 155 167 164
b. Net Working Capital (Average Days) 140 133 140 138
c. Current Ratio (Current Assets / Current Liabilities) 5.3 5.0 4.1 4.7
3. Coverages
a. EBITDA / Finance Cost 1.5 0.9 1.8 3.5
b. FCFO / Finance Cost+CMLTB+Excess STB 0.9 0.6 1.1 1.9
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 7.6 -11.1 4.0 1.8
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 62.9% 63.0% 62.3% 66.4%
b. Interest or Markup Payable (Days) 79.6 62.0 93.2 97.0
c. Entity Average Borrowing Rate 14.4% 21.1% 13.2% 8.0%

Mar-25

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Masood Fabrics Limited

rating scale

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Mar-25

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Masood Fabrics Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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  3. Conduct of Business
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Mar-25

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