Analyst
Ahmad Faraz Arif
ahmad.faraz@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Assigns Entity Ratings to Jasons Commodities
Rating Type | Entity | |
Current (31-Jan-22 ) |
||
Action | Initial | |
Long Term | BBB- | |
Short Term | A2 | |
Outlook | 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. 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. 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. During FY21, rice cropped area increased to ~3.3mln hec (FY20: ~3mln hec), reflecting an increase of ~10%. This led to an increased rice production by ~13%, standing at ~8.4mln MT (FY20: ~7.4mln MT). Out of this, around 3.5mln MT of rice is consumed locally, while, ~3.7mln MT is exported. 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 2bln (FY20: ~USD 2.2bln) owing to stiff competition from India. Going forward, the industry's cashflows and in turn liquidity are expected to remain afloat due to the stability in demand for rice.
The ratings reflect the emergence of Jasons Commodities ('the Business') as a growing rice exporter. In line with the overall industry and its changing trend, the Business has expanded its export sales mix to China along with African countries in the recent past. The Business has marked its presence in African regions through strategic relationships and is committed to increase its foreign footing. Additionally, a forecast of decelerated competition on the African side, particularly from Thailand and Vietnam, backs up a stable outlook for Irri/non-basmati export. On the flip side, as crisis in the European countries have heightened, the export demand for basmati rice brinks on a blurred outlook and is expected to absorb an impact in the days to come. Currently, the Business has stable presence in the local market with adequate profits. However, revenue and in turns margins are expected to grow as envisioned expansion may streamline till Dec-22. Financial profile characterized by strong coverages on the back of minimal finance costs. The debt book of the Business solely comprises Export Refinancing Facility availed to fund its working capital needs. The financial risk profile of the Business is adequate, however, qualitative factors indicate room for improvement.
The ratings are dependent on the management's ability to materialize the envisioned strategies keeping costs in control and maintaining business margins. Significant improvement in business and financial profile would be good. Any significant and/or prolonged deterioration in revenues and/or coverages will adversely impact the ratings.
About
the Entity
Jasons Commodities (‘the Business’) was incorporated in Dec-2012 as a Sole Proprietorship. The Business has witnessed exponential growth since inception owing to the streamlined vison of the management. The production facility of the Business includes a rice mill with a capacity of processing 20MT of rice per hour. The Business’s ownership resides with the CEO, Mr. Danish Jessani.