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The Pakistan Credit Rating Agency Limited
Press Release

Date
02-May-18

Analyst
Silwat Malik
silwat.malik@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA assigns Initial Entity Ratings to Popular Sugar Mills Limited

Rating Type Entity
Current
(02-May-18)
Action Initial
Long Term BBB+
Short Term A2
Outlook Stable
Rating Watch -

The ratings reflect the adequate business profile of Popular Sugar drawing strength from it's Group, Popular Group of Industries, and strong business acumen of it's sponsors. Popular Group roots trace back to 1971 when (Late) Mr. Haji Roshan Din set-up a match unit. Over the years the Group has expanded into diversified businesses through organic growth and acquisition. Today, Popular Group is dominated by manufacturing business which includes fruit juices, sugar, match, packaging, cement and textile. It also includes a Modarba and Security Company.

Popular Sugar's ability to maintain reasonable margins despite volatility in the sugar industry gives comfort to the ratings. Lately, the company has increased it's production capacity which should augment growth. Trade terms established by the management compliment it's working capital cycle which is otherwise dominated by finished goods inventory.This is mainly financed through bank borrowings. The company's debt mix is dominated by short-term borrowings. This is due to a sizeable capital expenditure in recent years, wherein needed funds were directed from short-term borrowings. The company is cognizant of these factors and plans to obtain long-term finance to ease the improve the situation. Meanwhile, coverage remain stressed.

The ratings are dependent upon the company ability to demonstrate an upwards trajectory in it's turnover and maintaining reasonable margins. Strengthening the company's governance framework and exercising strict financial discipline, debt mix and coverages should bode well.

About the Entity
Popular Sugar Mills Limited (‘Popular Sugar’) is a public limited company. Popular Sugar acquired 100% shareholding of National Sugar Industries Limited in 2013. The Company operates a unit located at Jan Muhammad Wala, near Sargodha, having a crushing capacity of 8000 Tons per day. Its’ registered office is on 9th floor, Chappal Plaza, Hasrat Mohani Road, Karachi. It is engaged in manufacturing and sale of refined sugar and its by-products; molasses and bagasse. Popular sugar is a wholly owned company of the Popular Group of Industries (‘Popular Group’) with 87% shareholding through its corporates. Remaining 13% shareholding is held by individuals of Roshan and Malik family.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.