The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Assigns Initial Entity Ratings to Hunza Sugar Mills (Pvt.) Limited

Rating Type Entity
(06-Sep-18 )
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

The ratings draw comfort from the Company's diverse revenue streams (Sugar, Ethanol, Bagasse and CO2) and sponsors strong acumen in the sector. Financial risk is high owing to highly leveraged capital structure due to seasonality typical of entities in the sugar sector and significant BMR activities carried out during the year. Low recovery rate and depressed sugar prices resulted in subpar performance in the sugar segment having a significant impact on the Companys’ bottomline. This coupled with high finance costs put the Companys’ coverages in a distressed situations for the period. Meanwhile, Sponsors commitment to provide financial support cushions the risk profile of the Company.

The ratings are dependent upon the Company’s ability to strengthen its margins, improve profitability and strengthening debt service coverages. Any further deterioration in margins and/or cashflows will impact the ratings.

About the Entity
Hunza Sugar Mills (Pvt.) Ltd (‘Hunza Sugar Mills’), is a part of Hunza Group of Industries which traces its roots back to 1988 with its flagship entity Hunza Ghee (Pvt.) Limited in the edible oils sector. Hunza Sugar Mills has a strong presence in the refined sugar industry along with its allied products ethanol and CO2. It is a family owned entity between the families of three brothers Mr. Idrees Chaudhury & Family (31%), Mr. Saeed Chaudhry & Family (32%) and Mr. Waheed Chaudhry & Family (37%). Mr. Idress Chaudry is the Chairman of the Hunza Group of Industries while Mr. Saeed Chaudhry is the CEO.

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.