The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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PACRA Maintains Entity Ratings of Engro Eximp Agriproducts (Pvt.) Limited

Rating Type Entity
Action Maintain Maintain
Long Term A- A-
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. 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 or USD 248mln (2MFY20: ~PKR 53bln or 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 reflect the strength of ownership structure of Engro Exim Agriproducts (Pvt.) Ltd. ('Engro Eximp' or 'the Company'), a wholly owned subsidiary of Engro Corp Ltd., one of the largest conglomerate in Pakistan (rated AA+ by PACRA). The CEO of Engro Corp Ltd. is also the Chairman of Engro Eximp. Ratings take comfort from the strong corporate governance framework of the parent company. The Company’s revenue continue to hold its position after successfully achieving its break even in CY18. Profits have sustained since then, after suffering from huge losses in the past. As rice industry struggles with stiff competition in the international market, mainly with India, due to lack of Govt. support - basmati exports from Pakistan remained below its potential mark. However, post Covid-19, Thailand curtailed its import of premium rice variety in the international market, thus, benefitting Pakistani rice exporters - including basmati. Rupee devaluation came in favorable, as dealing in a product – basmati - a high priced commodity assisted the Company in sustaining its revenues. Engro Eximp's financial risk profile has also recovered adequately, while, slightly dwindling due to high end debt profile.
The ratings are dependent upon growth in business volume and redemption of profits. Adherence to sound financial discipline while strengthening debt servicing capacity through improved cash position is vital for the ratings. Positive outcome of the future projects and sustainability of profits remain a catalyst for the business.

About the Entity
Engro Eximp Agriproduct (Pvt.) Ltd. was incorporated in 2010 as a wholly owned subsidiary of Engro Corp Ltd. The Company's Board, comprising two members, is Chaired by the CEO of Engro Corp, Mr. Ghias Khan. Mr. Khusrau Nadir Gilani, CEO of the Company, is an experienced professional and has deployed his services at Director level in Engro Eximp, previously.

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.