PACRA Maintains the Entity Ratings of VMS Trading Company

VMS Trading Company (“VMS” or ‘the Company’) is primarily engaged in the processing and trading of rice. The Company has a prominent position in the rice exporter’s market of the country with substantial business. The Company has an end-to-end production capability, where raw rice is procured and processed till finished goods. The Company mainly generates revenue from IRRI-6, it also undertakes the processing and trading of IRRI-9, basmati, and non-basmati rice varieties. The Company caters to diverse customer preferences, which may include specific demands for the percentage of rice whitening, rice mixing, level of polish, or simply regular rice without any specific polishing requirement. Rice is one of the major staple foods (second after wheat) as well as cash crops in Pakistan. Punjab accounts for ~52% of Pakistan’s rice production, while Sindh contributes about 38%, and the remaining 8% from Baluchistan. Pakistan ranks 11th in the global rice production (~50% basmati; remaining ~50% coarse types). After absorbing the consequences of floods during FY23, the rice production is estimated at ~9.0mln MT for FY24 due to better climatic conditions and more availability of water for irrigation. Meanwhile, Exports are forecast to reach ~5.5mln MT in FY24. The abundant harvest, along with India’s export bans, competitive pricing, and heightened demand from Indonesia and Africa is driving the current robust export performance. Also, it is noteworthy that out of the forecast exports of ~5.5mln MT in FY24, the actual rice export of ~4.0mln MT for the period 8MFY24 is higher than the export level in FY23 (~3.6mln MT). Similarly, VMS has been exporting premium quality rice to the East and West African countries along with new clients added to the portfolio from North and South African countries. During 9MFY24, the company recorded sales of ~PKR 8,919mln, reflecting a growth of ~93.8% due to price inflation and increased volumes (FY23: ~PKR 6,137mln). Out of the total sales, ~71% is from the export side and ~29% is from the local side. To meet the rising export demand, the company is currently enhancing its production capacity, which currently stands at ~35 MT per hour. VMS is a sole proprietorship and requires improvement in legal and governance structure, furthermore, external auditors are only QCR-rated. Going forward, VMS is envisaged to materialize the strategies through (a) tapping new export markets (b) better pricing models (c) effective working capital management. The Company’s financial risk profile is characterized by comfortable coverages, cashflows, and working capital cycle. The company's capital structure is leveraged, with borrowings primarily composed of short-term at concessionary rates to manage working capital.
The ratings are dependent on the rationalization of the management’s strategies to gain a position in the global market under a challenging business environment. With the upcoming growth in the firm’s business & volumes; prudent financial discipline and implementation of a stringent control environment shall remain imperative.

About the Entity
VMS Trading Company is a sole proprietorship established in 2010. The Business is engaged in the processing and trading of rice. The company has a processing capacity of 306,600MT of rice per annum. The company has two manufacturing facilities located in S.I.T.E and Port Qasim, Karachi. The Business’s ownership resides with the CEO, Mr. Kheem Chand. He is assisted by a team of professionals.