Asif Rice Mills

CREDIT RATING REPORT | Apr-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
18-Apr-25 BBB+ A2 Stable Maintain -
19-Apr-24 BBB+ A2 Stable Maintain -
20-Apr-23 BBB+ A2 Stable Maintain -
22-Apr-22 BBB+ A2 Stable Initial -
About the Entity

Asif Rice Mills (‘Asif Rice’ or ‘the Business’) was incorporated in 2006 as an Association of Persons (AoP). Major ownership of the Business resides with the sons of Mr. Mumtaz Ali. Mr. Asif Ali Shaikh holds ~34% shareholding, while Mr. Hanif Shaikh and Mr. Kashif Mumtaz hold ~33% each. Asif Rice is primarily engaged in processing semi-processed variants of non-basmati rice and limited quantities of basmati rice and exporting it to China, Far-east Asia, Europe, and Africa. The Business has a processing capacity of 90MT per hour, currently. Mr. Asif Ali Shaikh is the CEO, while the other sponsoring individuals Mr. Kashif Mumtaz and Mr. Hanif Shaikh serve as Directors of Sales and Procurement respectively.

Rating Rationale

The ratings indicate Asif Rice Mills’ (the Business) prominent position in Pakistan’s export segment. Founded as a sole proprietorship, the Business specializes in the processing of semi-processed non-basmati rice. The Business has established its presence in China, Far East Asia, Europe, and Africa regions through strategic partnerships and is committed to expanding its international footprint. Asif Rice Mill’s strategic diversification into the food colors segment enhanced its product portfolio and contributed positively to the company’s performance. Under the astute leadership of Mr. Asif Ali, the sole proprietor, Asif Rice Mills leverages a well-equipped operational infrastructure to navigate the global rice export market successfully. Asif Rice Mills demonstrated strong top-line expansion, with revenue increasing by ~175% in FY24, reflecting the company’s growing operational scale. However, this growth was offset by margin compression, as gross profit margins declined by ~36%, primarily driven by elevated raw material costs. Furthermore, net profitability weakened due to higher finance costs, indicating increased pressure on the company’s bottom line. The Business reduced its borrowings, leading to an improvement in its leverage profile. 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.

Key Rating Drivers

The ratings are dependent upon sustenance of business volumes under the current challenges in the local economy. As global economy undergoes distress, business sustainability emerges as the key challenge for the exporters. Meanwhile, keeping up with a stable financial risk profile, particularly debt servicing capacity, remains imperative for ratings.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Asif Rice Mills

rating analysis

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Profile
Legal Structure

Asif Rice Mills (‘Asif Rice’ or ‘the Business’) was incorporated in 2006 as an Association of Persons (AoP).


Background

Mr. Mumtaz Ali joined his family business in 1960s and laid the foundations for Asif Rice Mills by expanding the processing capacity. Capacity enhancement and installation of new machinery including rice husking machines and parboiling machines over the years led to the prominence of the Business in the rice exporter's segment of the country.


Operations

Asif Rice is primarily engaged in processing semi-processed variants of non-basmati rice and limited quantities of basmati rice and exporting it to China, Fareast Asia, Europe, and Africa. Asif Rice, currently, is one of the leading rice exporters of the country, and having processing capacity of 90MT per hour. The Business has also ventured into exporting maize, which is in its initial gestation phases.


Ownership
Ownership Structure

Major ownership of the Business resides with the sons of Mr. Mumtaz Ali. Mr. Asif Ali Shaikh holds ~34% shareholding, while Mr. Hanif Shaikh and Mr. Kashif Mumtaz hold ~33% each. Stability The Business is completely owned.


Stability

The Business is completely owned by the sponsoring family and the structure is seen as stable.


Business Acumen

Mr. Asif Ali Shaikh and his family have been involved in the rice export business for over 3 decades and have witnessed multiple business cycles.


Financial Strength

The sponsors hold sufficient net worth to support the Business in times of distress.


Governance
Board Structure

The Business, being an AoP, is currently governed by three Directors. However, formal structure is not in place.


Members’ Profile

Mr. Asif Ali Shaikh is the CEO; while the other sponsoring individuals, Mr. Kashif Mumtaz holds an overall experience of a decade, and Mr. Hanif Shaikh holds an overall experience of almost two decades, serve as Directors of Sales and Procurement, respectively.


Board Effectiveness

Being an AoP, formal Board structure is not present in Asif Rice


Financial Transparency

The external auditors of the Company, Naeem & Co. Chartered Accountants, have expressed an unqualified opinion on the financial statements of the Company for the year ended Jun-24. The firm is QCR rated but not in SBP’s panel of auditors


Management
Organizational Structure

The Business has a linear organizational structure and operates mainly through Production, Sales, Procurement, and Finance functions. All functional heads reports to the CEO, who then makes pertinent decisions.


Management Team

Mr. Asif Ali, the CEO, has been associated with the Business since inception and has over two decades of experience in rice, commodity trading, and real estate segments.


Effectiveness

There are no management committees in place. Management meets on need basis to ensure efficiency of the Business’s operations.


MIS

The Business has recently implemented an ERP system for reporting purposes


Control Environment

The Business has a formal internal audit function that helps to ensure compliance with the policies and procedures


Business Risk
Industry Dynamics

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.


Relative Position

The Business is one of the leading players in the country’s rice exporters market.


Revenues

This Business is a major player in Pakistan's rice export market, focusing on selling rice to international buyers in diverse regions. Their business model relies heavily on exporting non-basmati rice (like IRRI-6 and PK-386), which makes up the bulk of their sales (85%), with basmati rice (Kainat 1121) contributing the remaining 15%. They deliver their products to countries in China, Far-East Asia, Europe, and Africa, showcasing a wide international reach. During FY24, the Business experienced a significant surge in sales, with revenue jumping to PKR 64 billion, a 175% increase from the previous year's PKR 23 billion. This dramatic growth suggests a substantial expansion in their export volume. However, it's crucial to note that their profits are tied to fluctuations in currency exchange rates, a common factor for export-oriented businesses. Despite this vulnerability, the Business's net profit also saw a significant rise, reaching PKR 2.9 billion in FY24, compared to PKR 1.4 billion in FY23, indicating improved financial performance and efficient cost management alongside the increased revenue.


Margins

Despite substantial revenue growth in FY24, the Business experienced a contraction in profitability margins. Gross profit margins decreased to 12% from 19% in FY23, primarily due to a rise in the cost of goods sold. Similarly, operating profit margins declined to 7% from 10%, reflecting the impact of the higher operating expenses. Furthermore, net profit margins fell to 5% from 6%, attributed to elevated finance costs, suggesting increased debt servicing or borrowing expenses. These margin reductions highlight potential challenges in cost management and financial leverage, despite the significant top-line growth


Sustainability

The sponsors are planning to enhance the capacity of the rice mill, going forward.


Financial Risk
Working capital

The Business's working capital management, facilitated by short-term Export Refinancing Facility demonstrated significant efficiency improvements in FY24. Inventory days decreased sharply to 36 from 59, indicating faster inventory turnover. Similarly, trade receivable days reduced to 22 from 37, suggesting improved collection efficiency. Consequently, gross working capital days fell to 22 from 37. Notably, trade payable days extended to 17 from 8, suggesting better negotiation with suppliers. The combined effect of these changes resulted in a substantial reduction in net working capital days to 5 from 29, signifying a more efficient utilization of short-term assets and liabilities and a reduced operational cash conversion cycle.


Coverages

The Business's financial health, particularly its ability to service debt, has significantly improved in FY24. The interest coverage ratio, a key indicator of this capacity, rose to 6.1x from 3.2x in FY23. This substantial increase is directly attributable to a doubling of Free Cash Flow from Operations (FCFO), which reached PKR 4.2 billion in FY24 compared to PKR 2.1 billion in FY23. This enhanced FCFO provides a much stronger buffer for covering interest expenses, demonstrating a robust ability to meet its financial obligations. Moreover, because total coverage ratios are based on the same factors, they experienced a similar improvement, reinforcing the overall strengthening of the Business's debt servicing capabilities.


Capitalization

The Business has undergone a significant debt restructuring in FY24, resulting in a substantial reduction of its overall debt burden. The Business has availed long term borrowings for CAPEX and short term borrowings for working capital requirements. Total debt decreased from PKR 4.3 billion in FY23 to PKR 1.6 billion in FY24. This deleveraging effort was primarily driven by a sharp decline in short-term borrowings, which fell from PKR 3.9 billion to PKR 1.2 billion. Notably, the Business's reliance on the short-term Export Refinancing Facility-Part II (ERF) has increased proportionally, now constituting approximately 79% of the total debt portfolio. This indicates a strategic shift towards leveraging short-term financing mechanisms, likely to support working capital needs related to export activities. While the overall debt reduction strengthens the Business's financial position, the increased concentration in short-term ERF introduces a higher degree of short-term liquidity risk that warrants careful monitoring.
 
 

Apr-25

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Asif Rice Mills

financial summary

(PKR mln)

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Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 5,221 5,249 4,390
2. Investments 0 0 0
3. Related Party Exposure 0 0 0
4. Current Assets 17,827 7,307 8,688
a. Inventories 8,508 4,221 3,288
b. Trade Receivables 5,947 1,729 3,065
5. Total Assets 23,047 12,556 13,078
6. Current Liabilities 11,167 873 1,846
a. Trade Payables 5,650 212 802
7. Borrowings 1,616 4,395 5,342
8. Related Party Exposure 0 0 0
9. Non-Current Liabilities 0 0 0
10. Net Assets 10,264 7,288 5,889
11. Shareholders' Equity 10,264 7,288 5,889
B. INCOME STATEMENT
1. Sales 64,362 23,412 28,975
a. Cost of Good Sold (56,737) (19,071) (24,732)
2. Gross Profit 7,626 4,341 4,243
a. Operating Expenses (2,951) (2,061) (3,089)
3. Operating Profit 4,674 2,279 1,154
a. Non Operating Income or (Expense) 305 34 37
4. Profit or (Loss) before Interest and Tax 4,980 2,314 1,191
a. Total Finance Cost (703) (690) (70)
b. Taxation (1,288) (199) (291)
6. Net Income Or (Loss) 2,988 1,425 831
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 4,274 2,195 921
b. Net Cash from Operating Activities before Working Capital Changes 3,572 1,505 851
c. Changes in Working Capital 383 (67) (4,699)
1. Net Cash provided by Operating Activities 3,954 1,439 (3,847)
2. Net Cash (Used in) or Available From Investing Activities (48) (939) (11)
3. Net Cash (Used in) or Available From Financing Activities (2,791) (974) 4,651
4. Net Cash generated or (Used) during the period 1,115 (474) 793
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 174.9% -19.2% 180.5%
b. Gross Profit Margin 11.8% 18.5% 14.6%
c. Net Profit Margin 4.6% 6.1% 2.9%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 7.2% 9.1% -13.0%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 34.1% 21.6% 16.5%
2. Working Capital Management
a. Gross Working Capital (Average Days) 22 37 26
b. Net Working Capital (Average Days) 5 29 15
c. Current Ratio (Current Assets / Current Liabilities) 1.6 8.4 4.7
3. Coverages
a. EBITDA / Finance Cost 7.3 3.5 19.2
b. FCFO / Finance Cost+CMLTB+Excess STB 6.1 3.2 14.3
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 0.1 0.3 0.5
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 13.6% 37.6% 47.6%
b. Interest or Markup Payable (Days) 0.0 0.0 0.0
c. Entity Average Borrowing Rate 23.1% 18.7% 2.3%

Apr-25

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Asif Rice Mills

rating scale

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Apr-25

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Asif Rice Mills

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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  3. Conduct of Business
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