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. The Company enjoys a strong relative position with a diversified product base. The Company has an end-to-end production capability, where paddy is procured and processed till finished goods. The Company benefits from the leadership of owners possessing extensive international experience and a demonstrated track record of successful business ventures. Meskay maintains a strong governance framework, underpinned by rigorous internal controls and an experienced management team. Sponsors' acumen is reflected in the development of corporate culture through enhanced business practices. The Company has demonstrated a consistent improvement in its financial performance, primarily underpinned by robust volumetric sales growth. During fiscal year 2024 (FY24), the Company achieved a substantial 147% increase in its topline revenue. This significant expansion was largely propelled by record rice production throughout the period, a recovery attributed to the beneficial flood effects experienced in FY23. However, this positive trend has faced challenges during first half of FY25, where climatic changes and reduced rainfall have led to a decrease in production. Revenue primarily originated from Rice (83%), followed by Wheat (11%), Corn (2%), Sesame Seeds (2%), and Guar (1%). Despite the substantial increase in revenue, the Company experienced a declining trend in profitability margins. The gross profit margin contracted by 36%, primarily due to higher raw material costs. Operating profit margins were adversely impacted due to increasing inflation. Consequently, the net profit margin declined by 75% in FY24, largely attributable to an increase in finance costs. The Company's financial risk profile is underpinned by a well-capitalized structure, efficient working capital management, and healthy debt service coverage indicators. The sponsor’s support is crucial for the ratings. The rice sector, a significant contributor to Pakistan's agricultural economy, representing ~3.5% of agricultural value addition and ~0.7% of the nation's Gross Domestic Product (GDP), experienced a substantial surge in production during FY24. This surge, coupled with heightened global demand and a temporary export ban imposed by India, propelled a remarkable ~35% increase in rice production. Consequently, basmati rice exports experienced a significant boost, soaring from $650mln to $876mln in FY24. Furthermore, exports of non-basmati rice witnessed a substantial surge, increasing from $1,498mln to $3,054mln during the same period.
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
Meskey & Femtee Trading Company (Pvt.) Ltd. (‘Meskey & Femtee’ or ‘the Company’) 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. Currently, the Company has a rice processing capacity of 134MT per hour. Meskey & 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.