The Pakistan Credit Rating Agency Limited
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Silwat Malik

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PACRA Assigns Initial Entity Ratings to Mehran Sugar Mills Limited

Rating Type Entity
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

The Ratings reflect Meharan Sugar's strong business profile emanating from consistently high recovery rates (one of the highest in the country), diversified revenue stream and robust governance framework. To cushion against seasonality inherent in sugar industry, the bottom-line is supported through the Company's strategic joint venture investment in ‘Unicol Limited’, an ethanol production company, and sale of electricity generation. Of late, the Company has made investments in FMCG sector in similar joint venture ‘UniFoods Industries Limited’ and investments in the energy sector. Income from said projects are not expected anytime soon. Meanwhile, Mehran Sugar’s financial risk profile is characterized by moderately leveraged capital structure and relatively weak coverages. The Ratings draw comfort from Mehran Sugar’s ability to maintain healthy margins despite volatility in the sugar industry and a sizeable liquid investment portfolio.

The Ratings are dependent on the Company’s ability to improve its cashflows and coverages while maintaining strict financial discipline, especially in it’s working capital. Any significant deterioration in margins/ coverages would have negative impact on ratings.

About the Entity

Mehran Sugar Mills Limited (‘Mehran Sugar’) is the flagship entity of Hasham Family ('Hasham Group') that was established in 1965. The Company is involved in the production and sale of Sugar and ancillary products i.e molasses, bagasse and electricity. It is listed on Pakistan Stock Exchange. Majority shareholding rests with Individuals of Hasham Family (76%); through families of three brothers; Mr M. Kasim Hasham (30%), Mr. M. Ebrahim Hasham (28%), and Mr. M. Hussain Hasham (18%). The Company is headed by Mr. M. Ebrahim Hasham as Cheif Executive Officer whereas Mr. Ahmed Ebrahim is acting as Managing Director. The Board comprises eight members and is chaired by Mr. M. Kasim Hasham. There are two independent directors on the Board.

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.