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

The ratings underscore the company’s strategic integration within a diversified group. The entity leverages the group’s broad economic footprint, benefiting from established market leadership in energy, logistics, and real estate, alongside a scaling agribusiness portfolio dedicated to livestock and crop management. In Pakistan, rice is the second main staple food and the third-largest export commodity, contributing about 11.7% to the "important crops" agricultural segment and 0.6% to GDP. However, local production in FY25 dipped by 3.0% to approximately 9.7 million MT due to water constraints, climatic variability, and high input costs, while export volumes and average prices for both Basmati and non-Basmati rice faced downward pressure. Rice Sector exports declined ~3.3% YoY, estimated at ~5.8Mn MT (FY24: ~6.0Mn MT). The sector faces a complex risk environment, primarily due to high sensitivity to climate events. Financially, the industry is navigating margin pressures as average export prices fell by 9.5% for Basmati and 13.7% for non-basmati in FY25. Despite these sector-wide headwinds and the threat of flood-related crop damage in Punjab, Al-Khair Rice Mills has demonstrated exceptional resilience. Operating under the "Go Grains" brand and specializing in premium Basmati variants like 1121 and PK386, the company achieved a remarkable growth in revenue, reaching PKR 7,404 million in FY25. This growth was supported by a balanced market strategy, with 76% of sales derived from the domestic market and 24% from exports, demonstrating a successful focus on both domestic and international markets. 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. Despite elevated input costs during FY25, the Company demonstrated improved profitability, reflecting effective cost management and operational efficiency. From a financial risk perspective, the leveraging of the company stands at 57%, solely constituted of short-term borrowings, which, require diligent liquidity management. 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 and maintenance of a stable financial risk profile, especially in terms of the working capital, cash flows, and coverages is imperative for the ratings. Additionally, debt servicing, capitalizing international demands, and envisioned improvements in qualitative factors, going forward, remain crucial for the ratings.

About the Entity
Al-Khair Rice Mills (Private) Limited (‘the Company’), established in January 2019 as a Private Limited Entity, is primarily engaged in the processing and sale of basmati rice, with a processing capacity of 30 MT/hour. The plant is located in Okara. The ownership is spearheaded by the sponsors 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, whose strategic oversight continues to guide the Company’s operations. They are assisted by a team of professionals.