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The Pakistan Credit Rating Agency Limited
Press Release

Date
14-Oct-21

Analyst
Faiqa Qamar
faiqa.qamar@pacra.com
+92-42-35869504
www.pacra.com

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PACRA Maintains Entity Ratings of Jhulay Lal Parboiled Rice Mill, Assigns Positive Outlook

Rating Type Entity
Current
(14-Oct-21)
Previous
(19-Apr-21)
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Positive Stable
Rating Watch - -

Rice is among the five major crops of Pakistan and is the second main staple food, after wheat. The segment contributes about 3.5% in agriculture value addition and 0.7% in GDP. Pakistan cultivates both basmati and non-basmati rice, most of which is exported. In Pakistan, rice is grown in most of the Sindh and Punjab Province. Sindh specializes in producing the long grains white rice IRRI-6 and IRRI-9, while Punjab produces world-class Basmati rice. Pakistan locally consumes Basmati Rice, which is a long, thin aromatic type of rice, considered premium and luxury category across the globe. Local consumption includes ~95% of basmati rice and ~5% non-basmati. The major players in rice exports include Pakistan, India, Thailand, and Vietnam. Pakistan is in direct competition with India, while Thailand and Vietnamese rice are considered premium. Thailand’s ‘Jasmine’ rice has emerged lately as high-price premium rice. During FY21, the rice cropped area increased to ~3.33MH (FY20: ~3.03MH), reflecting an increase of ~10%. Consequently, the production of rice witnessed an increase of ~13% and stood at ~8.4MT (FY20: ~7.4MT). Out of this, around 3.5mln MT of rice is consumed locally. While ~3.7mln MT is exported (Closing stock: 1.2mln MT) to generate ~ PKR 325bln of export revenue. The maximum contribution is from non-basmati rice (72%) exports, as basmati rice is locally consumed and minimal quantity (28%) is exported. During FY21, rice exports deteriorated to ~USD 2,041mln (FY20: ~USD 2,175mln) owing to the Indian strategy of dumping the commodity in the international market at cheaper rates.
The ratings reflect Jhulay Lal's ('the business') prominent position in the rice export market with a sizable business volume. The business has expanded its capacity over the last few years and strengthened its profile. Jhulay Lal strategizes on adopting a topline centric approach mainly targeting the African region to explore growth avenues. Margins, and in turn profitability witnessed two-fold increase during 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. Furthermore, positive outlook has been assigned to the entity based on the sound financial performance in the business. Sponsor's other ventures have also witnessed improved performance over the years providing comfort to the ratings.
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.