PACRA Maintains Entity Ratings of Meskay & Femtee Trading Company (Pvt.) Limited

The ratings reflect Meskay & Femtee Trading Company (Pvt.) Ltd.'s ('Meskay' or 'the Company') prominent position in the rice exporters market of the country. Rice is among the five major crops of Pakistan and is the second main staple food, after wheat. This segment contributes ~3.5% in agriculture value addition and 0.7% to GDP. During FY23, the rice crop area decreased to ~3mln Hec (FY22: ~3.5mln Hec) as a result of massive flooding. However, in 9MFY24 the area increased to ~3.6mln Hec reflecting an increase of ~20%. During 9MFY24, total rice production in Pakistan stood at 9mln MT (FY23: 7.3mln MT, FY22: 9.3mln MT). Following the same trajectory exports also rose to 4mln MT during 9MFY24 (FY23: 3.7mln MT, FY22: USD 4.8mln MT) backed by the cushion provided by enhanced production. Accordingly, Meskay's exports rose by ~98% standing at PKR 37bln during 9MFY24 when compared with PKR 18bln during 9MFY23. On the financial front, the Company’s revenue is derived from four main product segments: Rice, Guar, Wheat, and Corn, with rice contributing over ~84% of the total revenue. During 9MFY24, the Company’s topline clocked in at PKR 47bln as compared to PKR 19bln in 9MFY23 (FY23: PKR 23bln, FY22: PKR 20bln) reflecting ~150% growth due to the volumetric and price increase. Gross Margins witnessed a significant dip of ~45% during 9MFY24 due to the higher cost of paddy. Operating margins followed a similar trend and declined due to high operating expenses including increased cost of production and overheads. Despite the increase in the topline, the net effect at the bottom line was reduced due to increased finance cost. Resultantly, Net margin stood at ~2% during 9MFY24, compared to ~4.1% during 9MFY23. Net income slightly increased to PKR 919mln during 9MFY24 (9MFY23: PKR 807mln, FY23: PKR 1bln). The Company's financial risk profile is characterized by moderate capital structure of ~66% due to increased short-term borrowing for working capital, while coverages and working capital management remains adequate. The ratings derive confidence from the sponsors’ expertise. This expertise is evident in Meskay's successful navigation of market challenges and its ability to maintain a leading role in the industry.
The ratings are dependent upon the 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, with an increased emphasis on working capital management, remains imperative for ratings.

About the Entity
Meskay & Femtee was incorporated in 2006 as a Private Limited Company. The Company is primarily engaged in processing/manufacturing and export of grains (rice, corn, guar, and wheat)and all types of agricultural products, trading in agriculture machinery, and accessories, and providing agriculture farming services. Meskay & Femtee mainly exports rice to Africa, America (North and South), Asia, and Europe. Major ownership of the Company resides with Mr. Shahid Tawawalla (~ 72%); followed by an equal holding between his father, Mr. Wahid F Tawawalla (~14%), and his wife, Mrs. Huma Darugar (~14%). Mr. Shahid heads the Company as the CEO and is supported by a team of experienced individuals.