PACRA maintains entity ratings of Al-Khair Rice Mills (Pvt.) Limited

The ratings underscore Al-Khair Rice Mills' association with prominent entities in the oil marketing and distribution sector, including Gas & Oil Petroleum, which is partially owned (40%) by Saudi Aramco, and Sitara Petroleum which also serves as the logistics provider for Go Petroleum, ensuring nationwide coverage across Pakistan. These partnerships significantly enhance the group's market position and operational strength. The group maintains a diversified portfolio, with a significant presence in real estate through Sitara Heights. Additionally, the group has expanded its footprint in the cultivation of crops, poultry, and cattle farming under the umbrella of Go-Agro. The rice sector, contributing ~3.5% to Pakistan's agricultural value addition and 0.7% to GDP, saw production rise by 35%, driving basmati exports from $650 million to $876 million in FY24. This growth was supported by India’s temporary export ban and heightened global demand. Al-Khair Rice Mills markets its products under the brand name ‘Go Grains,’ catering to domestic and international markets. The Company majorly deals in different variants of Basmati including 1121 Basmati classic and premium, Super Basmati rice, and PK 386 Long grain. In FY24, the company achieved ~12% growth in its top line, predominantly driven by local sales, which accounted for 98% of total revenue. In contrast, the company’s decline in exports was principally attributed to constraints in working capital. This issue is being addressed as the Company refocuses its efforts on the rice segment following the acquisition by Aramco. The Company’s capacity, initially 10MT/hr, has been expanded to 30MT/hr. Previously underutilized, the company has now fully optimized and leveraged its enhanced capacity of 30MT/hr. Streamlined operations at the group level are anticipated to be beneficial for the Company and assist in improving the Company’s relative position in the rice segment of the country. The company has demonstrated resilience in maintaining its profit margins. The Company posted growth in its profit margins, effectively mitigating the impact of elevated financing costs. The Company’s transition to a 1MW solar energy system has significantly cut energy costs, boosting the bottom line. Additionally, Increased automation will further reduce labor dependency, decreasing salary expenses and overall administrative costs. The Company maintains a low-leveraged capital structure, supported by a significant reduction in short-term borrowings. This reflects the prudent approach to managing financial exposure. Coverages remain stable due to better cost management. Furthermore, ratings take comfort from the sponsors’ depth of experience and unwavering commitment to accelerating the Company’s growth, this reinforces the ratings and strengthens the outlook for sustained operational success.
The ratings are dependent on the management's ability to improve the revenue streams through better distribution channels. Prudent management of expansion and related debt in order to meet financial obligations will remain important. Any significant decline in coverages and/or erosion of margins may adversely impact the ratings.

About the Entity
Al-Khair Rice Mills (Pvt.) Limited is a private limited company, incorporated in 2019. Core operations include the processing and sale of basmati rice, with a processing capacity of 30 MT/hour. The plant is located in Okara. Ownership of the Company resides between Mr. Javed Iqbal (~80%) and his son, Mr. Siddique Javed (~20%). The Board is dominated by the Sponsoring family and includes, Mr. Javed Iqbal and Mr. Siddique Javed, only. They are assisted by a team of professionals.