The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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PACRA Upgrades Entity Ratings of Mumtaz Feeds & Allied Industries (Pvt.) Limited

Rating Type Entity
(28-Oct-20 )
(12-Nov-19 )
Action Upgrade Upgrade
Long Term BBB- BB+
Short Term A2 A3
Outlook Stable Stable
Rating Watch - -

The global feed industry is valued at ~ $460bln, with poultry (~$166bln) constituting ~36% of the total industry. Pakistan has a capacity to produce ~8mln MT of feed annually, with ~150 registered feed mills and ~200 unregistered feed mills catering to it. The industry generates an estimated annual turnover of ~ PKR 200bln to PKR 250bln from local sales to poultry farms. Due to Covid-19, closure of restaurants/marriage halls and exports avenues led to a supply glut of poultry products in local market. Resultantly, prices of day old chick, eggs and chicken posted a dip. Subsequently, sale of feed and recovery from farms remained under pressure. Although feed producers had sufficient inventory, liquidity crunch significantly impacted the industry players. Lately, as business avenues became operational, demand for poultry products has improved. This has led to increased off-take for feed mills. Improved prices of feed and poultry products is likely to benefit the industry players, provided poultry products supply remains moderate. Also, SBP's measures and interest rate cut has provided the required respite.
The ratings reflect Mumtaz Feeds & Allied Industries (Pvt.) Limited's ('Mumtaz Feed' or 'the Company') developing business profile in the Poultry Feed Industry. The Company has recently entered in the feed business by manufacturing and selling Broiler and Layer Feed. The Company has a relatively small top-line and lower profitability when compared to its peers. Utilization level remains low, though, have improved on timeline basis. The Company remains exposed to inherent risks in the feed industry emanating from raw material price changes and disease risk in poultry farms. The Company's working capital remains in check on account of procuring raw materials on cash and prudent debtor management. The Company enjoys synergies as it procures raw material (mainly soybean meal) from associated concern. Mumtaz Feed has reduced it reliance on bank financing and intents to follow this practice, going forward. The main purpose is to utilize the banking channels for LCs etc. Financial support from Sponsors, in the form of loan, provides comfort to the ratings. The management has good understanding of the supply chain and leverage this understanding in procurement of raw materials. This enables them to produce good quality products while keeping the costs in check. Diversity is emerging in the shape of liquid form of feed. Coverages remain modest.
The ratings are dependent on the management's ability to gain market share, improve margins, and, in-turn, profitability. Maintaining strict working capital discipline and adequate leveraging remains critical. Any significant deterioration in margins and/or coverage's will have negative impact on the ratings.

About the Entity
Mumtaz Feeds & Allied Industries (Pvt.) Limited was incorporated as a Private Limited Company in 2016. Commercial operations began in 2017. The Company is primarily involved in manufacturing and sale of broiler and layer feed in sixteen variants. The installed annual production capacity is 109,500 MT (15 MT per hour).
Major shareholding of Mumtaz Feed resides with Mr. Aamir Ali Khan (35%), followed by Mr. Muhammad Umer (20%). Mr. Nasir Malik and his brother Mr. Yasir Malik owns an equal stake (17.5%) in the Company. The remaining stake vests with Dr. Muhammad Aslam (10%). Mr. Aamir Ali Khan, the CEO and Board's Chairman, holds more than two decades of relevant experience pertaining to poultry feed production which remains instrumental for the Company's 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.