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 Assigns Entity Ratings to Qadir Agro Industries (Pvt.) Limited

Rating Type Entity
(18-Mar-22 )
Action Initial
Long Term BB+
Short Term A3
Outlook Stable
Rating Watch -

Pakistan's edible oil industry is heavily reliant on imports since oilseeds account for ~80% of the cost of production. Edible oil is the country’s 2nd largest import after petroleum. Pakistan’s total oil and fats consumption is ~ 5 million metric tons per annum and its per capita consumption is ~22 kg. Consumption is met by 70% (~3.3 MMT) of edible oil import. The remaining 30% (~1.7 MMT) of edible oil is produced from oilseeds (local ~ 3.5MMT, imported ~ 3.1 MMT). Additionally, low domestic oilseed production in Pakistan caused by a distortion in support price mechanism and lower yields have pushed farmers away from oilseed, further increasing dependence on imports. On the supply side, the key raw materials – oilseed and RBD palm oil – are imported primarily from USA, Brazil, and Malaysia. Moreover, raw material prices have continued to inflate amid supply uncertainties and historically low global inventory levels, along with rupee devaluation impacting importers. Subsequently, prices of cooking oil and vegetable ghee have remained on the higher side. Going forward, sales are expected to remain stable. Margins and profitability are expected to improve for players and costs will be offset by the increased demand and in turn prices.
The rating reflects Qadir Agro Industries (Pvt.) Limited’s (‘the Company’) developing position in the country's edible oil and poultry feed sectors. The Company's financial performance has remained varied over the years owing to the relatively small market share. Lately, the Company has integrated into poultry feed by setting up a limited capacity feed mill. Margins have also showcased a variation over the years but generally remained on the lower side. Inventory management system and related efficiencies would require the Company’s attention to keep its working capital costs low. Being an importer of oilseeds, the Company remains exposed to the inherent risk related to currency fluctuations and prices of raw material. Forward integration and value addition initiatives could help elevate performance and margins. The Company has an adequate financial risk profile. The Company's debt book majorly comprises short-term running finance availed to fund its working capital needs. The Company's coverages remain adequate, however, any further debt-load and increased finance costs could stretch the interest/debt coverage and capital structure.
The ratings are dependent on the management's ability to prudently improve margins, profitability, and financial profile of the Company. Meanwhile, strengthening governance practices will have a positive impact on the ratings. Any deterioration in debt coverages leading to higher financial risk or substantial losses will adversely impact ratings.

About the Entity
Qadir Agro Industries (Pvt.) Limited (‘the Company’) was incorporated in July, 1987 as a Private Limited Company. The Company is primarily engaged in the process of seed filtering, crushing and solvent extraction. The Company primarily sells soybean oil/meal, canola oil/meal and poultry feed. The Company has seed crushing capacity of 200MT per day. The capacity of the poultry feed mill, currently, stands at 15MT per hour.
The Company’s major ownership resides with Khawaja Mehr Baksh (~34%) and his sons, Khawaja Muhammad Shehzad (~33%) and Khawaja Muhammad Omer (~33%). Mr. Mehr Baksh is the Chairman of the Board, while Mr. Shehzad serves as the CEO of the Company.

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.