The Pakistan Credit Rating Agency Limited
Press Release


Silwat 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 Maintains Entity Ratings of Hi-Tech Edible Oils (Pvt.) Limited

Rating Type Entity
(29-Aug-19 )
(27-Mar-19 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Negative Negative
Rating Watch - -

Pakistan is a leading consumer of edible oils and the industry is heavily reliant on imports. Additionally, low domestic oil seed production caused by a distortion in support price mechanism for wheat and sugar cane has attracted farmers away from oil seed, further increasing dependence on imports. Annual demand, which stands at over ~4MMT is tilted towards vegetable ghee ~80%. Production is met through a combination of imported oils and imported oil seed for extraction by solvent extraction units. Pakistan’s edible oil industry produced ~1.7 MMT of ghee and edible oil in FY18 following a stable growth pattern of ~3%. High dependence on imports and devaluation of Pakistani rupee have impacted industry players.

The ratings reflect the Company’s association with Hi-Tech Group, one of the major players in Pakistan’s poultry and allied industry. Expansion in domestic market, inter alia, enhanced production capacity and stable utilization levels led the topline to grow. However, high dependence on imported raw materials and rupee depreciation made the Company susceptible to price fluctuations. Inability to timely pass on the increased cost of production and high finance cost eroded the Company's profitability. This stressed the Company's coverages in 9MFY19. However, a decrease in inventory levels and its associated financing requirements has provided a breather to the Company’s financial profile.
The ratings are dependent on the Company's ability to prudently manage liquidity and debt structure. Improvement in margins and ensuing coverages while, ensuring working capital discipline, remains critical for the ratings. Any further deterioration in Company's profits, subsequently coverages will adversely impact the Company's ratings.

About the Entity
Hi-Tech Edible Oils (Pvt.) Limited, is a venture of Hi-Tech Group; well-known player of Pakistan’s poultry industry. Hi-Tech Edible oil was incorporated in 2002 and commenced operations in 2006 as Private Limited Company. Hi-Tech Edible Oils (Pvt.) Limited is primarily engaged in the process of seed filtering and crushing, selling edible oil and meal.

The overall control of the group companies’ vests with four founding members with equal shareholding. All the members are having executive roles in group companies. Dr. Anwar Mehmood Randhawa is the chairman of all group companies. He is Doctor of Veterinary Medicine. He possess experience of ¬44 years in Poultry and Integrated businesses. Dr. Muhammad Arshad is the CEO of the Group and also the director on the board. He is also a Doctor of Veterinary Medicine by profession and got his degree from University of Agriculture, Faisalabad (Pakistan) in 1976. He is assisted by a team of 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.