The Pakistan Credit Rating Agency Limited (PACRA) has maintained the entity ratings of Mughal Iron & Steel Industries Limited (Mughal Steel), citing the company’s resilience despite ongoing challenges in the wider steel sector.
In FY25, easing inflation and lower policy rates supported a modest economic recovery and a slight uptick in construction demand. However, the steel industry’s rebound has been slower than other construction-linked sectors due to heavy reliance on imported raw materials, high energy costs, and regulatory hurdles. While these factors continue to weigh on margins, the decline in interest rates, from nearly 22pct in FY24 to around 11pct by June 2025, is expected to ease financing pressures and support sector-wide profitability.
Mughal Steel has strengthened its market share, benefiting from capacity constraints at rival mills. Despite rising costs and regulatory pressures, the company has remained resilient, supported by its extensive distribution network. The non-ferrous segment, which historically contributed over 20pct of revenues through exports, was scaled down in FY25 to refocus on domestic ferrous demand. As a result, revenues fell, and margins contracted. Net profitability also came under pressure from higher finance costs and taxation, though leverage improved to 48pct from 57.6pct a year earlier.
Looking ahead, profitability is expected to improve through two key initiatives: the commissioning of Mughal Energy, an alternative energy venture aimed at reducing operational costs, and lower finance costs as policy rates continue to ease. The company’s ratings remain dependent on sustaining its business profile, successful execution of efficiency projects, including Mughal Energy and the Balancing, Modernization, and Replacement (BMR) project to convert its facility into a dual-purpose rolling mill, and timely debt servicing.
Incorporated in 2010, Mughal Iron & Steel Industries Limited manufactures and sells steel and copper products, with a melting capacity of 590,000 tons, rerolling capacity of 630,000 tons, and non-ferrous recycling capacity of 90,000 tons.
