The Pakistan Credit Rating Agency Limited
Press Release


Ayesha Malik

Applicable Criteria

Related Research

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 Upgrades Entity Ratings of Mumtaz Feed Mills (Pvt.) Limited

Rating Type Entity
(12-Nov-19 )
(27-May-19 )
Action Upgrade Initial
Long Term BB+ BB
Short Term A3 A3
Outlook Stable -
Rating Watch - -

The global feed industry is valued at ~ $460bln, with poultry (~$166bln) constituting ~36% of the total industry. Pakistan produces ~8mln MT of feed annually with a total of ~150 registered feed mills, and ~200 unregistered feed mills catering to it.

The ratings reflect Mumtaz Feed Mills (Pvt.) Limited's (Mumtaz Feed) developing business profile in the Poultry Feed Industry. Two years ago, the Company entered the feed business by manufacturing and selling Broiler and Layer Feed. The Company has a relatively small top-line and lower margins when compared to its peers. Utilization level remains low, though, have improved on timeline basis. The Company remains exposed to inherent risks in the feed industry emanating from raw material price changes and disease risk in poultry farms. The Company's working capital remains in check on account of procuring raw materials on cash and prudent debtor management. The Company enjoys synergies as it procures raw material (mainly soybean meal) from associated concern. Mumtaz Feed financial profile is characterized by an aggressively leveraged capital structure. Financial support from Sponsors, in the form of loan, provides comfort to the ratings. The leveraging may rise in future in line with expanding operations. Going forward, additional debt and rising interest rate scenario may exert pressure on the Company's cashflows and coverage ratios. During the year, the Company changed its Auditor (SBP Panel 'B' auditor appointed) and strengthened its control mechanism.
The ratings are dependent on the management's ability to gain market share, improve margins, and, in-turn, profitability. Maintaining strict working capital discipline and maintaining adequate leveraging remain critical. Any significant deterioration in margins and/or coverage's will have negative impact on the ratings.

About the Entity
Mumtaz Feed and Allied Industries (Pvt.) Limited was incorporated as a Private Limited Company in 2016. Commercial operations began in 2017. The Company is primarily involved in manufacturing and sale of broiler and layer feed in sixteen variants. The installed annual production capacity is 109,500 MT (15 MT per hour).

Major shareholding of Mumtaz Feed resides with Mr. Aamir Ali Khan (35%), followed by Mr. Muhammad Umer (20%). Mr. Nasir Malik and his brother Mr. Yasir Malik owns an equal stake (~ 17.5%) in the Company. The remaining stake vests with Dr. Muhammad Aslam (10%). Mr. Aamir Ali Khan, the CEO and Board's Chairman, holds more than two decades of relevant experience pertaining to poultry feed production which remains instrumental for the Company's operations.

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.