PACRA Maintains Entity Ratings of Hassan Ali Rice Export Company
Rice is among the five major crops of Pakistan and is the second main staple food, after wheat. Both basmati (long, thin and aromatic rice) and non-basmati (long grain white rice - IRRI 6 and IRRI 9) rice are cultivated in Punjab and Sindh, respectively. In Pakistan, ~85% of basmati rice is consumed locally and only 15% is exported. While, ~90% of non-basmati or IRRI rice is exported and only 10% is consumed locally. During FY20, rice production grew by ~3%, standing at ~7.4MT (FY19: ~7.2MT). Out of this, ~3 to 4MT of rice is exported to generate ~PKR 300bln of export revenue. During 2MFY21, rice exports deteriorated to ~PKR 41bln (2MFY20: ~ PKR 53bln) (2MFY21: ~ USD 248mln, 2MFY20: ~ USD 333mln) owing to higher prices at the mill-gate and shortage of exportable non-basmati rice in Jul-20 to Aug-20.
The ratings incorporate strength of the sponsors of Hassan Ali Rice Export Company ('Hassan Ali' or 'the business') as reflected in the business structure of the group (Hashwani Group of Companies) and it's overall governance principles. With a prominent presence in the market, Hassan Ali holds a stable position among the biggest rice exporters of the country, with customers spreading over multiple countries. During FY20, rice industry observed a subtle growth, wherein rupee devaluation slightly favored the rice exporters. However, post Covid-19, relatively lower quantum of rice exports plunged the revenues. While, gross margins remain stable supported by effective cost management. Bottomline, however, remained thin. There is no long term debt on the Hassan Ali's balance sheet. Working capital borrowings are aligned with the business cycle, whilst timely repayments remain crucial as coverages became thin. Hassan Ali is a sole proprietorship hence, room for improvement in its governance structure continues to be significant.
The ratings are dependent upon the business ability to improve its volumes, margins and, in turn, profitability. Meanwhile, rationalizing short-term borrowings to avoid asset liability mismatch and adherence to sound financial discipline including debt servicing capacity, remains imperative for ratings. Strengthening of governance structure will benefit the ratings.
Hassan Ali Rice Export Company is a sole proprietorship established on June 15th, 1994. The business is engaged in processing and trading of rice. Hassan Ali is one of the largest exporters of rice in the domestic landscape. Hassan Ali is one of the founding members of Rice Export Association (REAP). Mr. Abdullah Akbar Ali Hashwani heads the business’s operations along with his team.