The Pakistan Credit Rating Agency Limited
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Ahmad Faraz Arif

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PACRA Upgrades Entity Ratings of Hassan Ali Rice Export Company

Rating Type Entity
(13-Oct-22 )
(14-Oct-21 )
Action Upgrade Maintain
Long Term BBB+ BBB
Short Term A2 A2
Outlook Stable 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. 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 FY22, rice cropped area increased to ~3.4mln Hec (FY21: ~3.3mln Hec), reflecting an increase of ~3%. Rice production increased by ~6%, standing at ~8.9mln MT in FY22 (FY21: ~8.4mln MT). New higher-yielding hybrid rice varieties, improved agronomic practices and increased planting area, as farmers shift out of cotton, are factors driving the increased production. Around ~4mln MT of rice is consumed locally, while, the remaining is exported. During FY22, Pakistan exports increased to ~USD 2.5bln (FY21: ~USD 2bln). Going forward, 2022 floods are anticipated to cause ~12% loss to the forecasted rice production for FY23. However, rupee depreciation is expected to compensate the players for reduction in export volumes.
The ratings incorporate the strength of the Sponsors of Hassan Ali Rice Export Company ('Hassan Ali' or 'the Business') as reflected in the business structure of the group (Hashwani Group of Companies) and its overall governance principles. With a prominent presence in the market, Hassan Ali holds a strong position among the biggest rice exporters in the country, with customers spreading over multiple countries. During FY21, Hassan Ali observed substantial growth, wherein rupee devaluation also favored the topline. The topline was also supported by wheat and maize trading. While gross margins remain stable supported by effective cost management. Bottom-line, however, remained stable. There is no long-term debt on Hassan Ali's balance sheet. Working capital borrowings are aligned with the business cycle, whilst the trade leverage position has stabilized. Coverages remain strong. Hassan Ali is a sole proprietorship hence, room for improvement in its governance structure continues to be significant.
The ratings are dependent upon the Business' ability to sustain its volumes, margins, and, in turn, profitability. Meanwhile, positive trade leverage to avoid asset-liability mismatch and continued adherence to sound financial discipline including debt servicing capacity remains imperative for ratings. Strengthening of governance structure will benefit the ratings.

About the Entity
Hassan Ali Rice Export Company is a sole proprietorship established on 15-Jun-94. The Business is engaged in the processing and trading of rice. Hassan Ali is one of the largest exporters of rice in the domestic landscape. Hassan Ali is one of the founding members of the Rice Export Association (REAP). Mr. Abdullah Akbar Ali Hashwani heads the business’s operations along with his team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.