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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 Jhulay Lal Parboiled Rice Mill

Rating Type Entity
Current
(08-May-20)
Previous
(13-Nov-19)
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Jhulay Lal's ("the business") emerging position in the rice export market. Jhulay Lal has expanded its capacity over the last few years; the commissioning of two new lines has strengthened the business profile. Jhulay Lal's topline increased significantly in FY19, though net profit margins declined in percentage terms due to the higher cost of sales. The business witnessed a steady increase in its equity in FY19 owing to internal generation of funds. The business has a good track record of building sales volume and the sponsors have a good understanding of the business. The second generation is playing a vital role in the growth of Jhulay Lal. The CEO has built expertise in international trade by virtue of his business in Hong Kong. The challenge is the cyclical nature of the rice business. 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. Historically, Company's financial risk profile has reflected edged debt servicing capacity. Obligations are majorly Short term in nature; Export Refinance Facilities, Amidst the current challenging environment, SBP's Relief Packages to Exporters availing Refinancing Facilities would come handy to the rice players as well.
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.