PACRA Maintains Entity Ratings to Meskay & Femtee Trading Company (Pvt) Limited

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% to GDP. Local consumption includes ~95% (18.3mln MT) of basmati rice and ~5% (0.9mln MT) of non-basmati. During FY22, annual rice production increased by ~10.7% (FY22: ~9.3mln MT, FY21: ~8.4mln MT). New higher-yielding hybrid rice varieties, improved agronomic practices, along with increased planting area by 3%, 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. Pakistan exported ~USD 2.5bln of rice in FY22 (FY21: ~USD 2bln). During FY23, due to floods, rice crop witnessed a decline of ~22% in annual production standing at 7.3mln tons (FY22: annual production: ~9.3mln tons). Thus, impacting the industry’s overall topline. However, rupee depreciation is providing some cushion. With an increase in the policy rate and resultantly, ERF, bottom line may marginalize. Industry's overall margins and cashflows may become stretched; thus, posing a developing outlook for the ongoing year.
The ratings reflect Meskay & Femtee Trading Company (Pvt.) Ltd.'s ('Meskay & Femtee' or 'the Company') prominent position in the rice exporter's market of the country with substantial business volumes. The Company enjoys a strong relative position with a diversified product base. The Company has an end-to-end production capability, where paddy is procured and processed till finished goods. The Company's financial performance has improved over the years supported by higher sales. This along with the rupee depreciation supported the topline. The Company strategizes on a diverse customer base across regions and therefore, has the comparative edge. Margins, and in turn profitability witnessed a slight dip due to higher cost of paddy along with shipping challenges to exporters. Most of the goods are exported against LC & contract cover or through mega groups. The Company’s financial risk profile is characterized by a moderate capital structure and coverage ratios while working capital management remains adequate. The ratings derive comfort from sponsors' acumen that reflects in the development of corporate culture through enhanced business practices.
The ratings are dependent upon the 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, with an increased emphasis on working capital management, remains imperative for ratings.

About the Entity
Meskay & Femtee was incorporated in 2006 as a Private Limited Company. The Company is primarily engaged in processing/manufacturing and export of grains (rice, corn, guar, and wheat) and all types of agricultural products, trading in agriculture machinery, and accessories, and providing agriculture farming services. Currently, the Company has increased its rice processing capacity to 80MT per hour from 65MT per hour. Meskay & Femtee mainly exports rice to Africa, America (North and South), Asia, and Europe. Major ownership of the Company resides with Mr. Shahid Tawawalla (~ 72%); followed by an equal holding between his father, Mr. Wahid F Tawawalla (~14%), and his wife, Mrs. Huma Darugar (~14%). Mr. Shahid heads the Company as the CEO and is supported by a team of experienced individuals.