PACRA Maintains Entity Ratings of SGM Sugar Mills Limited
The ratings reflect improving business performance of the Company and support of new sponsors. SGM Sugar has its mill located in Sindh with a crushing capacity of 8,000TCD. The Company has been acquired by 'United Group' of Essarani family. The family has long standing experience in agriculture sector and commodity trading including trading in fertilizer and coal, operating a sugar mill (Sindh Abadgar's Sugar Mills Limited) and ethanol distillery (United Ethanol Limited). Given the size of mill and steps taken by new management, a turnaround in operations is expected. The Company improved its margins and profitability during 9MMY19, though quantum and profits remain small. The financial risk profile is characterized by high leveraging and extended working capital cycle as the Company is holding significant stocks. The coverages improved and remain adequate. Sponsors' commitment to provide financial support provides comfort to the ratings.
The ratings are dependent upon optimizing capacity utilization and achieving operational efficiency envisaged by the management. Any further deterioration in margins and/or cashflows will negatively impact the ratings.
SGM Sugar Mills Limited, a public unlisted company, was incorporated in Pakistan on September 11, 2007. It is engaged in the manufacturing and sale of crystalline sugar and ensuing by-products. The Company operates a production plant located at Wallo Mahar, 17-KM, Jarwar Road, Ghotki, Sindh with a crushing capacity of 8,000 Tons per day. Its Head Office is located at 211, 2nd Floor, Progessive Plaza, Beaumont Road, Karachi.
Majority shareholding (66%) lies with the Essarani Family while remaining (34%) is held by the Mehar Family. Essarani Family has acquired its share in the Company during May' 18 from Dhabi Group and Etihad Group.
Post-acquisition, Mr. Deoo Mal Essarani has been appointed as the Chairman of the Company and his son, Mr. Asha Ram has been appointed as the CEO. However, key responsibility for managerial oversight and decision-making rests with Dr. Tara Chand Essarani who is a director on the board and is Mr. Asha Ram’s brother.