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The Pakistan Credit Rating Agency Limited
Press Release

Date
08-May-20

Analyst
Shazia Afzal
shazia.afzal@pacra.com
+92-42-35869504
www.pacra.com

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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 Reliance International Commodities Export

Rating Type Entity
Current
(08-May-20)
Previous
(13-Nov-19)
Action Maintain Maintain
Long Term BB BB
Short Term B B
Outlook Stable Stable
Rating Watch - -

The ratings reflect emergence of Reliance ("the business") as a growing rice exporter. In line with the overall industry changing trend, the company has shifted its export sales mix from China to African countries in the recent past. This has reaped better top-line growth but has also enlarged its cash conversion cycle. The company has marked its presence in African regions through two distribution entities and is committed to increase its foreign footing. Presence in local market remains indifferent. Profitability margins, that have a perceptible impact on the ratings, are low as compared to peers. Coverages diluted on the backdrop of higher interest costs in FY19, though still remained comfortable. The trend is expected to improve, going foward. The company's debt book solely comprises Export Refinancing Facility availed to fund its working capital needs. Bearing a sole proprietor status, the overall structure of the company lacks basic requisite governance and management framework. The CEO, Mr. Arif Hussain is the man behind the entire management of the entity. The country's rice sector remained well performing in 6MFY20, reflecting on the performance of the rice sector players. The recent outbreak of Covid-19 pandemic across the globe and domestically, is impacting various economic sectors at different levels. This being said, the susceptibility of influence on crop-linked businesses is impliedly low, owing to their inescapable demand at all times and their exceptional treatment under the lockdown situation. Comfort is also drawn from the fact that the Country’s Non-Basmati/Irri Export revenues are largely concentrated in the African Regions, where the pandemic spread is relatively moderate, thus not creating an export hindrance. Additionally, a forecast of decelerated competition on the African side, particularly from Thailand and Vietnam, backs up a stable outlook for Irri/Non-Basmati Export. The same proxy is used to develop a comfort on the business sustainability of Awami, as it deals in Irr/Basmati Rice solely. On the flip side, as crisis in the European countries have heightened, the export demand for Basmati Rice brinks on a blurred outlook and is expected to absorb an impact in the days to come.
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 is imperative.

About the Entity
Reliance International Commodity Exports is a sole proprietorship. It is wholly owned and managed by Mr. Arif Hussain. Mr. Arif Hussain is a seasoned professional with an experience of more than two decades. Mr. Arif served as the former president of Sindh & Baluchistan Rice Millers Association from 2007-2010 and 2010-2013. M/s Sajid & Co., a non-QCR rated firm, are the External Auditors of the company.

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.