The Pakistan Credit Rating Agency Limited
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Silwat Malik

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PACRA Maintains Entity Ratings of Hi-Tech Feeds (Pvt.) Limited

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

Among the largest agro based segments in Pakistan, poultry holds a prominent place. Poultry feed manufacturing formally started in Pakistan in early 1960’s as home mixtures as well as in commercial feed mills. Today, there are around ~ 350 feed mills, with annual production capacity of around 8 MMT. Increase in income levels and expanding population, pushes demand for poultry; however, higher conversion ratio has stagnated volumetric growth . This remains a competitive business where volumes and margins are function of timeliness and cost of procuring raw material along with favorable supply chain dynamics of various feed mills.

The ratings reflect Hi-Tech Feeds (Pvt.) Limited association is with an established poultry group, Hi-Tech Group. The Company is part of Group’s integrated poultry chain – oil/meal, feed and poultry and enjoys a moderate market share with good Feed Conversion Ratio. Turnover witnessed an incline due to improved efficiency of poultry feed, despite higher competition as many small players have entered the market. However, business margins and profitability remain on the lower side; and are dependent on timely purchase of key raw materials leading to higher working capital requirement. Leveraging is characterized as high, consisting of short-term borrowings only, to fund the inventory and provide financial support to Group's own companies. This could exert pressure on the financial profile of the Company in the rising interest rate scenario, going forward, Moreover, coverages remain stressed.
The ratings are dependent on the management's ability to build profitable volumes while improving its margins. Financial discipline remains crucial. Envisaged improvement in business and financial profile along with strengthening of governance framework would be beneficial. Any further deterioration in margins and/or coverages will have negative impact on ratings.

About the Entity
Hi-Tech Feeds (Pvt.) Limited is a prominent venture of Hi-Tech Group, which has diversified vertically across the poultry supply chain. The Company was incorporated in 1985 and is primarily engaged in manufacturing and selling poultry feed variants for birds of different types and age groups. The Company has two feed manufacturing facilities situated in Lahore and Sahiwal, with a production capacity of 100 MT per hour and 90 MT per hour, respectively. The quality of feed produced is ranked best among competitors.

Hi-Tech Feeds' is equally (25%) owned by Dr. Muhammad Arshad, Dr. Abdul Qayyum, Dr. Muhammad Asim Khan and Dr. Anwar Mahmood Randhawa. All four Directors hold a veterinary degree and are very well equipped with the relevant industry's knowledge. Dr. Muhammad Arshad laid the foundation of the Group and leads it and the Company as its CEO. He is assisted by a team of experienced professionals.

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.