The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Assigns Initial Entity Ratings to Mumtaz Feed Mills (Pvt.) Limited

Rating Type Entity
(27-May-19 )
Action Initial
Long Term BB
Short Term A3
Outlook -
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 developing business profile in the Poultry Feed Industry. The Company entered the feed manufacturing business in 2017 and is engaged in sales of Broiler and Layer Feed in the Central and Southern region of the country. The Company has a relatively small top-line and lower margins in comparison to it's peers. Utilization rates have been improving but remain on the lower side. The Company remains exposed to inherent risks in the feed industry emanating from raw material price changes and disease risk for its buyers. The Company's working capital remains in check on account of procuring raw materials on cash and prudent debtor management. The Company enjoys synergies, in this regard as it procures raw material (mainly soya meal) from associated concern. Mumtaz Feed Mill's financial profile is characterized by an aggressively leveraged capital structure. Comfort can be drawn from Sponsors support in the form of Director's loan. The leveraging may rise in future in line with expanding operations.
The ratings are dependent on the management's ability to gain market share, improving margins, and in-turn, profitability. Maintaining strict working capital discipline and ensuing borrowings remains critical. Any significant deterioration in margins and/or coverage's will have an impact on the ratings.

About the Entity
Mumtaz Feed Mills operates as a private limited company with majority shareholding vested with Mr. Aamir Ali Khan (35%) and Mr. Malik Nasir (35%). Remaining shareholding is held by Dr. Muhammad Aslam (10%) and Mr. Muhammad Umer (20%). The Company was incorporated in 2016, and initiated its operations in 2017 with it's primary business activity being manufacture and sale of broiler and layer feed. Mr. Aamir Ali Khan, the CEO, holds more than two decades of relevant experience with past experiences pertaining to supply of poultry feed production and remains instrumental for all 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.