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% to GDP. Local consumption includes ~95% of basmati rice and ~5% non-basmati. During FY23, rice crop area decreased to ~3.2mln Hec (FY22: ~3.4mln Hec), reflecting a decrease of ~6%. Rice production decreased by ~17%, standing at ~7.4mln MT in FY23 (FY22: ~8.9mln MT). Floods during Aug-22 razed rice crops, causing an average crop loss of ~20-25%. New higher-yielding hybrid rice varieties, and improved agronomic practices are factors minimizing the production loss. Around ~4mln MT of rice is consumed locally, while, the remaining is exported. During FY23, Pakistan exports decreased to ~USD 2.1bln (FY22: ~USD 2.5bln). Thus, impacting the industry’s overall topline. However, rupee depreciation provided some cushion to the export players. Industry's overall margins and cashflows may become stretched. Industry poses a developing outlook for the ongoing year.
The ratings reflect Jhulay Lal's ('the business') prominent position in the rice export market with a sustainable business volume. During FY23, Jhulay faced a significant drop in its topline (FY23: 5,804mln, FY22: 11,882mln) due to the unavailability of crops caused by the floods, which impacted crop production and led to higher crop prices. Conversely, entities' margins witnessed significant improvement (GP margin, FY23: ~14.2%, FY22: ~7.8%), primarily attributed to the surge in international rice prices amplified by gain on exchange rates. Resultantly, the net profit remained consistent overall. At Jun'23, the company is moderately leveraged at ~47% (FY22: ~53%), debt mainly comprised of short-term borrowing for working capital management. Jhulay strategizes on adopting a topline-centric approach mainly targeting the African region to explore growth avenues. The business 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 generation. 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.