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The Pakistan Credit Rating Agency Limited
Press Release

Date
14-Oct-21

Analyst
Shayan Farooq
shayan.farooq@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 Hassan Ali Rice Export Company

Rating Type Entity
Current
(14-Oct-21)
Previous
(14-Oct-20)
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. 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 incorporate the strength of the sponsors of Hassan Ali Rice Export Company ('Hassan Ali' or 'the business') as reflected in the business structure of the group (Hashwani Group of Companies) and its overall governance principles. With a prominent presence in the market, Hassan Ali holds a stable position among the biggest rice exporters of the country, with customers spreading over multiple countries. During FY20, rice industry observed a subtle growth, wherein rupee devaluation slightly favored the rice exporters. However, post Covid-19, relatively lower quantum of rice exports plunged the revenues. While, gross margins remain stable supported by effective cost management. Bottomline, however, remained thin. There is no long term debt on the Hassan Ali's balance sheet. Working capital borrowings are aligned with the business cycle, whilst timely repayments remain crucial as coverages became thin. Hassan Ali is a sole proprietorship hence, room for improvement in its governance structure continues to be significant.
The ratings are dependent upon the business ability to improve its volumes, margins and, in turn, profitability. Meanwhile, rationalizing short-term borrowings to avoid asset liability mismatch and adherence to sound financial discipline including debt servicing capacity, remains imperative for ratings. Strengthening of governance structure will benefit the ratings.

About the Entity
Hassan Ali Rice Export Company is a sole proprietorship established on June 15th, 1994. The business is engaged in processing and trading of rice. Hassan Ali is one of the largest exporters of rice in the domestic landscape. Hassan Ali is one of the founding members of Rice Export Association (REAP). Mr. Abdullah Akbar Ali Hashwani heads the business’s operations along with his team.

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.