K.K. Rice Mills (Pvt.) Limited

RATING REPORT | Feb-26

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
12-Feb-26 BBB+ A2 Stable Upgrade -
14-Feb-25 BBB A2 Stable Maintain -
16-Feb-24 BBB A2 Stable Maintain -
18-Feb-23 BBB A2 Stable Maintain -
19-Feb-22 BBB A2 Stable Maintain -
About the Entity

K.K Rice Mills (Pvt) Ltd was incorporated in 2009 as a privately limited company. The Company is primarily involved in the business of exporting non-basmati rice. It has two rice processing plants located in Port Qasim and Nooriabad. K.K Rice is majorly owned by Mr. Chela Ram (~50%), The Board comprises four members and is dominated by the Sponsoring family. Mr. Chela Ram, Chairman of the Board and CEO of the Company, holds an experience of over two decades in the rice business. He is assisted by team of experienced professionals.

Rating Rationale

The ratings of K.K Rice Mills (Pvt.) Limited (“K.K Rice” or “the Company”) reflects its emerging presence as a prominent rice exporter. K.K Rice specializes in the processing of semi processed non-basmati rice. The Company has strengthened its presence in Middle East and African region through strategic relationships and is committed to increase its foreign footings. K.K Rice leverages a well-equipped operational infrastructure to navigate the global rice export market successfully. During the year, the Company expanded its production capacity in the rice segment, reinforcing its operational scale and market presence. In addition, the product portfolio was further diversified with the induction of sesame seeds, enhancing the Company’s sustainability profile. The Company’s operations are strengthened by a highly qualified and experienced management team. During FY25, the Company reported a topline of PKR 21,100 million (1QFY26: PKR 1,986 million), marking a robust growth of ~195% over the past two years from PKR 7,167 million recorded in FY23. The Company maintained stable gross margins during the period, supported by disciplined cost management and favorable raw material pricing. Operating margins remained broadly aligned with prevailing inflationary conditions, reflecting effective operational and cost-control measures. The Company reported net income of PKR 111 million (1QFY26: PKR 24 million) for the period, representing an increase of ~127% compared to PKR 49 million recorded in FY23. The Company’s financial risk profile remains the moderate, supported by the Company’s highly leveraged capital structure, and the working capital primarily financed through short term borrowings. 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.
Rice is a strategically significant crop within Pakistan’s agricultural economy, serving as both a staple food and a major source of export earnings. In FY25, the agriculture sector accounted for approximately ~23.5% of national GDP, with crops contributing ~32.8% to agricultural value addition. Within this, rice represented around ~11.7% of important crops and contributed an estimated ~0.6% to overall GDP, underscoring its macroeconomic relevance despite being a single-crop segment. Rice exports totaled ~5.8 million MT in FY25, generating export revenues of approximately USD 3.35 billion. Although export value declined 14.7% YoY, rice still contributed ~10.5% of Pakistan’s total export proceeds, ranking among the top three exportable commodities.

Key Rating Drivers

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.

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

K.K. Rice Mills (Pvt.) Limited


Rating Analysis

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Profile
Legal Structure

KK Rice Mills (Pvt.) Ltd. ('KK Rice' or 'the Company') was incorporated as a private limited company in 2009.


Background

The Sponsors were in the business of commodity trading for three decades, formally named as Meskay & Femtee (Pvt.) Ltd. In 2005, the Sponsors decided to separate their businesses. In 2006, KK Rice Commodities was setup by Mr Chela Ram as a sole proprietorship concern. In 2009, the Company was registered as a private limited concern and was renamed as KK Rice (Pvt.) Ltd. The Company received the license to export from Rice Export Association (REAP) in Sept-09.


Operations

The Company is primarily involved in the business of exporting non-basmati rice. KK Rice has Four rice processing plants located at Port Qasim and Nooriabad. The Company utilized up to ~35% of its production capacity. The Company’s registered office is situated at Beamount Road, Karachi.


Ownership
Ownership Structure

The Company’s major ownership resides with Mr. Chela Ram (~50%). The remaining stake resides with his wife, Mrs. Khami Bai (~10%), Mr. Jatinder Kumar (~10%), Mr. Pradeep Kumar (~10%), Mr. Anil Kumar (~10%), and Mr. Ashok Kumar (~10%). 


Stability

The company's sole ownership by the founding family provides inherent stability. Despite this, a formal succession plan has not been established, although the second generation has been progressively integrated into business operations.


Business Acumen

Mr. Chela Ram, CEO and founder, is an experienced professional. He is the Chairman of National Commission for Minorities and Rice Exporters Association of Pakistan (REAP). Mr. Chela Ram comes from an entrepreneurial background and has been in commodity trading since last three generations. His family is well known veterans in trading of rice, wheat and sugar


Financial Strength

The company's sponsors maintain a substantial net worth, providing a strong financial foundation for the business. This financial capacity ensures the company has access to the necessary resources to support its current operations, pursue strategic initiatives, and weather potential economic downturns. It also signals a commitment from the sponsors to the long-term viability and success of the enterprise.


Governance
Board Structure

The Company’s Board comprises three Executive Directors and One non-Executive Director. All four Directors are from the sponsoring family.


Members’ Profile

Mr. Chela Ram, the CEO, is an experienced professional. He is supported by experienced professionals from diverse backgrounds.


Board Effectiveness

The company currently lacks formal board committees. This, combined with the active involvement of directors in management, highlights the need for improved governance. Establishing board committees would enhance oversight and structure decision-making. This would promote accountability and long-term sustainability.


Financial Transparency

A.M. Laliawala & Co., Chartered Accountants, serves as the company's independent auditor. While the firm possesses a Quality Control Review (QCR) rating, it is not currently empaneled with the State Bank of Pakistan (SBP). For the fiscal year ended June 2025, the auditors issued an unqualified opinion on the company's financial statements. This signifies that, in the auditors' professional judgment, the financial statements are fairly presented, in all material respects, in accordance with applicable accounting standards.


Management
Organizational Structure

The company's organizational structure has been aligned with its operational requirements. It operates across three core functions: Export, Finance, and Administration & Human Resources. Each functional manager reports directly to the Chief Executive Officer (CEO), who holds ultimate decision-making authority for the group. This centralized leadership structure, with the CEO responsible for all aspects of the business, presents a significant key man risk. The company's performance and strategic direction are heavily reliant on the CEO, creating potential vulnerability should the CEO become unavailable or incapacitated. This concentration of authority underscores the need for succession planning and risk mitigation strategies to ensure business continuity.


Management Team

Mr. Chela Ram, CEO of the Company, is supported by a team of experienced professionals. Mr. Jatindar Kumar, Mr. Pardeep Kumar, Mr. Anil Kumar, and Mr. Ashok Kumar oversee the Company’s operations and manage its financial activities.


Effectiveness

The company currently lacks formally constituted management committees. While management engages in informal discussions regarding relevant operational matters, this ad-hoc approach may not provide the same level of structure and documented decision-making as formalized committees. The absence of established committees could potentially limit the effectiveness of strategic planning, risk oversight, and performance evaluation. Formal management committees, with clearly defined roles and responsibilities, would facilitate more structured discussions, improve documentation of decisions, and enhance accountability within the management team.


MIS

The company utilizes a customized Enterprise Resource Planning (ERP) software solution tailored to its specific business needs. This system was implemented by Sidat Hyder, a technology consulting and implementation firm. The customized nature of the ERP allows the company to generate reports on demand, providing flexibility and access to relevant data for decision-making. This suggests the company has invested in a system designed to support its unique operational processes and information requirements, rather than relying on a generic, off-the-shelf solution. The involvement of Sidat Hyder further indicates a professional approach to the implementation and customization of this critical system.


Control Environment

The company maintains an internal audit function to provide independent assurance over the effectiveness of its policies and procedures. This function plays a crucial role in evaluating and improving the company's internal controls, risk management processes, and governance framework. By systematically reviewing operations and identifying potential areas for improvement, the internal audit function helps ensure compliance with regulations, promotes operational efficiency, and safeguards company assets. It acts as an independent check within the organization, providing valuable insights to management and the board.


Business Risk
Industry Dynamics

The rice sector, a significant contributor to Pakistan's agricultural economy, representing approximately 3.5% of agricultural value addition and 0.7% of the nation's Gross Domestic Product (GDP), experienced a substantial surge in production during the fiscal year 2024 (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 $650 million to $876 million in FY24. Whereas non - basmati exports surged from $ 1,498mln to $3,954mln. KK’s contribution to these exports was 155,722 metric tons, generating $ 85 million in revenue.


Relative Position

The Company is operating in the semi-processed non-basmati IRRI-6 segment. However, the Company's market positioning in the overall rice sector is considered adequate. 


Revenues

The Company generates revenue by exporting non-basmati Rice. During FY25, the top-line of the Company decreased and stood at PKR 21.1bln (FY24: PKR 25.3bln), owing to the export sales that clocked at PKR 19.6bln (FY24: PKR 24.4bln). The Company’s export destinations include Indonesia, Ivory Coast, Madagascar, and Philippines. The Company’s local sales clocked at 1.5 billion (FY24: PKR 847mln), reflecting an adequate contribution in the sales mix. During 1QFY26, the Company’s revenue clocked at PKR 2.0bln.


Margins

During FY25, the Company observed dilution in margins as gross margin declined and stood at 8.2% during FY25 (FY24: 8.9%), driven by the declined sales volumes. Operating profits margin of the Company stood at 3.6% during FY25 (FY24: 4.5%).Net profit margins of the Company remained stagnat at 0.5% during FY25 (FY24: 0.5%), as the net income clocked at PKR 111mln (FY24: PKR 131mln). During 1QFY26, the Company’s gross and net margin stood at 10.0% and 1.2% respectively.


Sustainability

During the year, the Company has added new machinery in the existing plant for the production and sales of Sesame seeds, strategically diversifying the Company’s product slate. The rating team further added that the management also shows intent to add basmati rice into their product line in the near future


Financial Risk
Working capital

The Company’s working capital requirement management is supported through short-term running finance facility obtained under ERF (Export Refinance Facility. As of Sep’25, the Company's inventory days stood at 152 days (Jun’25: 54 days, Jun’24: 42days). Receivable days stood at 73days (Jun’25: 23 days). The Company’s short term trade leverage sizably improved and stood at 17.1% (Jun’25: 10.6%).


Coverages

During FY25, the Company’s FCFO sizably declined, clocking at PKR 281mln ( FY24: PKR 945mln), owing to the declined EBITDA. Consequently, the Company’s interest coverage ratio decreased and stood at 1.0x (FY25: 1.5x). During 1QFY26, the Company’s FCFO clocked at PKR 41mln, with the interest coverage ratio stood at 1.3x.


Capitalization

At end-Jun25, the Company operates under highly leveraged capital structure (Sep’25: 55.5%, Jun’24: 60.7%).  The Company’s borrowing book clocked at 2.1bln ( Jun’25: 2.6bln), entirely constituted of short term borrowings. The Company’s equity base clocked at 1.7bln ( Jun’25: PKR 1.1bln).
 
 

Feb-26

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K.K. Rice Mills (Pvt.) Limited


Financial Summary

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(PKR mln)


 Sep-25
3M		 Jun-25
12M		 Jun-24
12M		 Jun-23
12M
A. BALANCE SHEET
1. Non-Current Assets 1,127 1,143 1,195 901
2. Investments 0 0 0 0
3. Related Party Exposure 0 0 0 0
4. Current Assets 3,144 4,452 4,420 4,266
a. Inventories 1,092 2,520 1,983 3,507
b. Trade Receivables 1,730 1,459 1,201 51
5. Total Assets 4,271 5,595 5,615 5,167
6. Current Liabilities 343 1,203 2,277 379
a. Trade Payables 35 132 733 146
7. Borrowings 2,099 2,588 1,643 3,225
8. Related Party Exposure 81 81 81 81
9. Non-Current Liabilities 0 0 0 0
10. Net Assets 1,748 1,724 1,614 1,482
11. Shareholders' Equity 1,748 1,724 1,614 1,482
B. INCOME STATEMENT
1. Sales 1,986 21,100 25,321 7,167
a. Cost of Good Sold (1,787) (19,378) (23,059) (5,802)
2. Gross Profit 199 1,722 2,263 1,365
a. Operating Expenses (87) (963) (1,113) (633)
3. Operating Profit 111 759 1,149 732
a. Non Operating Income or (Expense) 4 (66) 4 (184)
4. Profit or (Loss) before Interest and Tax 115 693 1,153 549
a. Total Finance Cost (38) (351) (721) (428)
b. Taxation (53) (232) (300) (72)
6. Net Income Or (Loss) 24 111 131 49
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 41 281 945 738
b. Net Cash from Operating Activities before Working Capital Changes 6 (134) 196 441
c. Changes in Working Capital 377 (1,558) 2,264 46
1. Net Cash provided by Operating Activities 383 (1,692) 2,460 487
2. Net Cash (Used in) or Available From Investing Activities (1) (23) (345) (152)
3. Net Cash (Used in) or Available From Financing Activities (488) 0 (10) (10)
4. Net Cash generated or (Used) during the period (107) (1,715) 2,104 324
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) -62.3% -16.7% 253.3% -59.3%
b. Gross Profit Margin 10.0% 8.2% 8.9% 19.0%
c. Net Profit Margin 1.2% 0.5% 0.5% 0.7%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 21.0% -6.1% 12.7% 10.9%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 5.5% 6.6% 8.5% 3.4%
2. Working Capital Management
a. Gross Working Capital (Average Days) 156 62 49 220
b. Net Working Capital (Average Days) 152 54 42 204
c. Current Ratio (Current Assets / Current Liabilities) 9.2 3.7 1.9 11.2
3. Coverages
a. EBITDA / Finance Cost 4.1 2.6 1.9 2.7
b. FCFO / Finance Cost+CMLTB+Excess STB 1.3 1.0 1.5 2.3
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 2.0 -24.1 0.3 0.2
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 55.5% 60.7% 51.7% 69.1%
b. Interest or Markup Payable (Days) 89.4 43.9 56.5 7.2
c. Entity Average Borrowing Rate 5.5% 13.6% 19.0% 9.1%

Feb-26

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K.K. Rice Mills (Pvt.) Limited


Rating Scale

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Feb-26

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K.K. Rice Mills (Pvt.) Limited


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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