The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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PACRA Maintains Entity Ratings of Jhulay Lal Parboiled Rice Mill

Rating Type Entity
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

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. Rice production grew by ~3%, standing at ~7.4mln MT in FY20. Out of this, ~4.3mln MT is exported to generate ~PKR 320bln revenue. Exports constitute of ~82% non-basmati and ~18% basmati rice. Local consumption includes ~95% of basmati rice and ~5% non-basmati. Post Jul-20, IRRI exports remained stable due to stable demand from African regions - being a necessity grade rice. In 8MFY21, rice exports deteriorated to ~USD 1,338mln (8MFY20: ~USD 1,397mln) owing to higher prices at the mill-gate and shortage of exportable non-basmati rice.
The ratings reflect Jhulay Lal's ("the business") emerging position in the rice export market with a sizable business volume. The business has expanded its capacity over the last few years strengthened its profile. Jhulay Lal strategizes on adopting a topline centric approach mainly targeting the African region to explore growth avenues. Margins, in turn profitability were on the lower side due to higher cost. Competitiveness in the international market in terms of pricing and branding remain a key challenge for the rice exporters in FY21. The CEO has built expertise in international trade by virtue of his business in Hong Kong. The ratings derive comfort from the progress in financial performance as indicated in adequate margins over the periods. Sponsor's invested efforts are reflected in the development of a corporate culture through enhanced business practices & clarity on the succession to the next generations.
The ratings are dependent upon sustenance of business volumes under the current challenging environment. As global economy undergoes distress, business sustainability emerges as the key challenge for the Exporters. Meanwhile, keeping up with a stable financial risk profile, particularly debt servicing capacity, is imperative.

About the Entity
Jhulay Lal Parboiled Rice Mills is a partnership firm run by Mr. Gurmukh Das and Mr. Ramesh Kumar. The two partners share an equal stake in the company. Mr. Gurmukh Das, is an experienced entrepreneur. He is an MBA in Marketing from SZABIST University. Mr. Das was formerly working in Faysal Bank before being involved in the Rice Business and now is the main face of Jhulay Lal. Syed Hassan & Co. Chartered Accountants are the auditor for Jhulay Lal.

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.