PACRA Upgrade Entity Rating of Jasons Commodities

Rice is among the five major crops of Pakistan and is the second maia n staple food, after wheat. The segment contributes about 3.5% in agriculture value addition and 0.7% to GDP. Local consumption includes ~95% of basmati rice and ~5% non-basmati. During FY23, rice crop area decreased to ~3.2mln Hec (FY22: ~3.4mln Hec), reflecting a decrease of ~6%. Rice production decreased by ~17%, standing at ~7.4mln MT in FY23 (FY22: ~8.9mln MT). Floods during Aug-22 razed rice crops, causing an average crop loss of ~20-25%. New higher-yielding hybrid rice varieties and improved agronomic practices are factors minimizing the production loss. Around ~4mln MT of rice is consumed locally, while, the remaining is exported. During FY23, Pakistan exports decreased to ~USD 2.1bln (FY22: ~USD 2.5bln). Thus, impacting the industry’s overall topline. However, rupee depreciation provided some cushion to the export players. The industry's overall margins and cashflows may become stretched. Industry poses a developing outlook for the ongoing year.
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. 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. The recent ban on Indian rice exports, India, being the second-largest producer of rice and the largest exporter since 2012, has opened an opportunity for Pakistan’s rice exporters to capitalize on this situation by increasing both sales volume and prices. Currently, the Business has posted revenue of (FY23: 12,175mln, FY22: 9,385mln). The Business profit margins improved and stood at (FY23: 4.2%, FY22: 1.6%) 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 strong; 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. The management has undertaken to improve audit quality and financial transparency in the coming period is also an important factor for the rating. 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.