The Pakistan Credit Rating Agency Limited
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Ayesha Malik

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PACRA Assigns Initial Entity Ratings to Islamabad Farms

Rating Type Entity
Action Initial
Long Term BBB-
Short Term A3
Outlook Stable
Rating Watch -

Poultry is one of the largest agro based segment in Pakistan, accounting both domestic & commercial poultry. With an investment of almost PKR 700bln in FY19, industry has posted an annual growth of ~ 12%. Pakistan is sufficient in poultry meat and egg production. However, per capita protein consumption remains low when compared to the world's average.

The ratings reflect Islamabad Farms developing position in poultry industry and sponsors strong acumen across the integrated supply chain. Islamabad Farms revenue showed concentration towards day old chicks and posted a dip. Procuring feed in bulk from Group’s own company benefited the margins and remain in line with industry players. Profitability remain modest. Islamabad Farms remains exposed to price volatility and contingent health risk associated to its product. Financial risk profile of Islamabad Farms is characterized by moderate leverage and adequate coverage ratios. Loan mix is skewed towards short term borrowings to fulfill the working capital requirements.
The ratings are dependent on the management's ability to prudently manage the working capital requirements. Improving margins,in turn, building profitable volumes remain critical for the ratings. Effective changes in governance framework would be beneficial for the ratings. Significant deterioration in coverages and/or margins will have negative impact on the ratings.

About the Entity
Islamabad Farms was established in 1981 as an Association of Persons (AoP). Islamabad Farms operates 18 breeder farms to maintain parent flocks of different breeds and 4 hatcheries for day old chicks. Its registered office is located in Satellite Town, Rawalpindi. While, the farms and hatcheries are scattered across the country.

Islamabad Farms major ownership resides with Dr. Muhammad Aslam (50%), followed by Dr. Azhar Mehmood (25%). Remaining shareholding vests equally with Mr. Muhammad Masood (12.5%) and Mr. Mamoon-ur-Rasheed (12.5%). Sponsors dominates the Board comprising four members. Board’s Chairman and Islamabad Farms CEO, Dr. Muhammad Aslam, plays a pivotal role in making strategic decisions.

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.