The Pakistan Credit Rating Agency Limited
13-Nov-19
Analyst
Raniya Tanawar
raniya.tanawar@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-19
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-19
Related Research
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PACRA Maintains Entity Ratings of Awami Agro Commodities
| Rating Type | Entity | |
|
Current (13-Nov-19 ) |
Previous (27-Jun-19 ) |
|
| Action | Maintain | Maintain |
| Long Term | BB+ | BB+ |
| Short Term | A3 | A3 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect the strong experienced background of the partners of Awami Agro Commodities ('Awami'). The partners of the business are well equipped with the related sector knowledge. Growth centric strategy of the partnership encompasses maximizing the returns through expanding its export destinations, which it achieved through entering the West African region in FY19. Currently, Awami’s entire export of non-basmati rice vests in African countries. Awami has established two associated companies in Madagascar and Benin during the period under review which will add positively to revenue growth. During FY19, Country’s rice industry observed a subtle growth, where rupee devaluation favoured the rice exporters to enhance the revenue base. Although there was uptick in profits. Awami could not translate the impact of revenue growth in its profits - proportionately - on account of higher operational cost, mainly elevated freight charges. Consistent generation of healthy margins backed by the revenues continue to be a key performance indicator. As Awami is a partnership, governance structure reflects needs for improvement. Financial risk profile is driven by a bottom line centric approach with a good debt servicing capacity and a leverage capital structure. Debt profile entirely constitutes short term borrowings to manage working capital needs.
The ratings are dependent upon sustenance of margins and revenue growth. Lack of proper board structure is a concern. Sustainable profits, adequate cash flows and working capital cycle are majorly backed by reasonable turnover.
About
the Entity
Awami Agro Commodities, established in 2012 by two brothers; Mr. Bhagwan Das and Mr. Sanjesh Kumar, a Partnership, family owned business. Awami Agro Commodities is one of the sustainable companies of rice exports. The business holds membership of Rice Export Association (REAP) and Karachi Chamber of Commerce & Industry (KCCI).
Mr. Bhagwan Das and Mr. Sanjesh Kumar, 50% holding each, are the men behind the name Awami Agro Commodities. Mr. Bhagwan Das has three brothers: Sanjesh Kumar, Naresh Kumar and Govinda Kumar, all associated with Awami Agro. The entire family is in rice industry for past three decades and Mr Vishnu Mal, father of Mr. Bhagwan Das, also owns a company in interior Sindh; Awami Rice Mills.