PACRA Maintains The Entity Ratings of Jhulay Lal Parboiled Rice Mill

Rice is among the five major crops of Pakistan and is the second main staple food, after wheat. The segment contributes about 3.5% in agriculture value addition and 0.7% in GDP. Local consumption includes ~95% of basmati rice and ~5% non-basmati. The major players in rice exports include Pakistan, India, Thailand, and Vietnam. Pakistan is in direct competition with India, while Thailand and Vietnamese rice are considered premium. During FY22, rice cropped area increased to ~3.4mln Hec (FY21: ~3.3mln Hec), reflecting an increase of ~3%. Rice production increased by ~6%, standing at ~8.9mln MT in FY22 (FY21: ~8.4mln MT). New higher-yielding hybrid rice varieties, improved agronomic practices and increased planting area, as farmers shift out of cotton, are factors driving the increased production. Around ~4mln MT of rice is consumed locally, while, the remaining is exported. During FY22, Pakistan exports increased to ~USD 2.5bln (FY21: ~USD 2bln). Going forward, 2022 floods are anticipated to cause ~12% loss to the forecasted rice production for FY23. However, rupee depreciation is expected to compensate the players for reduction in export volumes.
The ratings reflect Jhulay Lal's ('the business') prominent position in the rice export market with a sizable business volume. The business has expanded its capacity over the last few years and strengthened its profile. Jhulay Lal strategizes on adopting a topline centric approach mainly targeting the African region to explore growth avenues. Margins, and in turn profitability witnessed stable growth. The CEO has built expertise in international trade by virtue of his business in Hong Kong. The ratings derive comfort from the progress in financial performance as indicated in adequate margins over the periods. Sponsor's invested efforts are reflected in the development of a corporate culture through enhanced business practices & clarity on the succession to the next generations. Furthermore, positive outlook has been assigned to the entity based on the sound financial performance in the business. Sponsor's other ventures have also witnessed improved performance over the years providing comfort to the ratings.
The ratings are dependent upon sustenance of business volumes under the current challenging environment. As global economy undergoes distress, business sustainability emerges as the key challenge for the Exporters. Meanwhile, keeping up with a stable financial risk profile, particularly debt servicing capacity, is imperative.

About the Entity
Jhulay Lal Parboiled Rice Mills is a partnership firm run by Mr. Gurmukh Das and Mr. Ramesh Kumar. The two partners share an equal stake in the company. Mr. Gurmukh Das, is an experienced entrepreneur. He is an MBA in Marketing from SZABIST University. Mr. Das was formerly working in Faysal Bank before being involved in the Rice Business and now is the main face of Jhulay Lal. Syed Hassan & Co. Chartered Accountants are the auditor for Jhulay Lal.