The Pakistan Credit Rating Agency Limited
Press Release


Ahmad Faraz Arif

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of United Ethanol Industries Limited

Rating Type Entity
(22-Dec-22 )
(24-Dec-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Pakistan’s ethanol industry is largely export based owing to meager domestic consumption. The Country’s ethanol exports witnessed ~10% during MY22 from 353,937MT during MY21 due to higher molasses production and better recovery. Prices in the global market have been high, on the back of spike in ethanol demand, despite unsteady economic conditions worldwide. Impact of high international ethanol prices was supplemented by devaluation of the Pakistani Rupee. Sugarcane production in Pakistan during MY22 improved, as domestic distilleries posted stable profits. Going forward, the industry's margins are expected to remain stable owing to increased ethanol prices, though raw material prices have also increased from high cost of molasses.
The ratings reflect United Ethanol’s strong business profile emanating from robust margins and export oriented nature of ethanol industry. Strong margins at gross and operating level were a result of price appreciation and better volumes. The recent years have remained favorable for the Company owing to the molasses availability, international demand and lucrative prices of ethanol. The ratings draw strength from the Company’s association with United Group, which has an established presence in the country’s sugar and allied industry. The Company’s comparative advantage, resulting from the backing of sugar mills at Group level and geographical presence, reflects strong financial performance. The Company's financial risk profile remains strong attributable to moderate leveraging and borrowings mainly comprising of Export Refinancing Facility - Part II. The financial risk profile is also supplemented by strong coverages and effective working capital management. United Ethanol has been able to enhance efficiency through effective BMR implementation, yielding positive results.
Ratings are dependent on the management’s ability to effectively maintain margins. Prudent debt and liquidity management is critical for ratings. Any significant increase in debt, deterioration in coverages and/or drag of high advances extended to group concerns, if any, will impact the ratings negatively. Meanwhile, strengthening governance framework remains critical for ratings.

About the Entity
United Ethanol Industries Limited (the Company) is a public unlisted company. Primary business activity of the Company involves manufacturing and sale of food and industrial grade ethanol. The Company was incorporated in October, 2003, and is a part of United Group. The Group's entities include two sugar mills (Sindh Abadgar's Sugar Mills and SGM Sugar Mills), United Ethanol Industries Limited, Agro Trade Private Limited and United Agro Chemicals. The Essarani Family acquired the Company in September, 2016. Shareholding of the Company rests with Essarani Family, through Mr. Deoo Mal Essarani (~24%) and his four sons – Mr. Asha Ram (~29%), Dr. Tara Chand (~24%), Mahesh Kumar (~22%) and Mr. Jugdesh Kumar (~1%).
The Company is headed by Dr. Tara Chand, the Chief Executive Officer. He is ably supported by a team of experienced professionals.

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.