The Pakistan Credit Rating Agency Limited
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Mustafa Hassan

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PACRA Maintains Entity Ratings of Mehran Sugar Mills Limited

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

The Ratings reflect Meharan Sugar's strong business profile emanating from consistently high recovery rates (highest in the country in MY18), diversified revenue stream and robust governance framework. To mitigate risks associated with seasonality and volatility in the sugar industry, the Company’s profitability is supported through a strategic joint venture investment in ‘Unicol Limited’, an ethanol production company, and sale of electricity generation. Of late, the Company has made investments in the FMCG sector in a similar joint venture, ‘UniFoods Industries Limited’, and investments in the energy sector through its wholly-owned subsidiary, 'Mehran Energy Limited'. However, income from these avenues are not expected anytime soon. The Ratings draw comfort from Mehran Sugar’s ability to maintain healthy margins despite volatility in the sugar industry and a sizable liquid investment portfolio. The Company’s financial risk profile is characterized by a leveraged capital structure and adequate coverages and working capital management.
The Ratings are dependent on the Company’s ability to improve cashflows and coverages while maintaining strict financial discipline, with an increased emphasis on working capital management. Any significant deterioration in margins and/or coverages will have a negative impact on ratings.

About the Entity
Mehran Sugar Mills Limited, established in 1965, is the flagship entity of Hasham Family ('Hasham Group'). 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 who acts as the Cheif Executive Officer, whereas, Mr. Ahmed Ebrahim serves as the 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.