The Pakistan Credit Rating Agency Limited
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Sohail Ahmed Qureshi

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PACRA Assigns Initial Entity Ratings to VMS Trading Company

Rating Type Entity
(22-Jun-23 )
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

VMS Trading Company (“VMS” or ‘the Company’) is primarily engaged in the processing and trading of rice. The Company has prominent position in the rice exporter’s market of the country with substantial business. The Company has an end-to-end production capability, where raw rice is procured and processed till finished goods. The Company mainly generates revenue from IRRI-6, it also undertakes the processing and trading of IRRI-9, basmati and non- basmati rice varieties. The Company caters to diverse customer preferences, which may include specific demands for the percentage of rice whitening, rice mixing, level of polish, or simply regular rice without any specific polishing requirement. During FY22, the country’s milled rice production slightly improved which is led by growing area under cultivation, from ~8.4mln MT to ~8.9mln MT. New higher-yielding hybrid rice varieties is another factor driving the increased production. The sector is significant in terms of export proceeds; average rice exports are expected to rise by ~11% on back of larger crop, ample supplies and continued competitive prices. In Pakistan, local consumption of rice increases by ~8%. Around 4.0mln MT of rice is consumed locally, while, the remaining is exported. During FY22, Pakistan’s rice exports increased to ~USD 2.5bln (FY21: ~USD 2bln). Similarly, VMS has been exporting premium quality rice to the East and West African countries along with new clients added in the portfolio from North and South African countries. To cater the high export volumes the company has enhanced the rice processing capacity from 15MT/hr to 35MT/hr. As of 9MFY23, topline clocked in at ~PKR 5,863mln, reflecting a growth of ~89.7% as compared to the same period last year. This is mainly due to rupee devaluation, higher volumetric sales as company expanded its operation at the end of FY23. However, in FY22 company’s topline clocked in at ~PKR 4,121mln, reflecting a growth of ~18% YOY basis (FY21: ~PKR 3,503mln). VMS is a sole proprietorship and requires improvement in legal and governance structure, furthermore external auditors are only QCR rated. Going forward, VMS is envisaged to materialize the strategies through (a) tapping new export markets (b) better pricing model (c) effective working capital management. The Company’s financial risk profile is characterized by comfortable coverages, cashflows and stretched working capital cycle. Capital structure is leveraged where borrowings are mainly comprised of short-term borrowings for working capital management.
The ratings are dependent on rationalization of the management’s strategies to gain position in global market under challenging business environment. With the upcoming growth in firm’s business & volumes; prudent financial discipline and implementation of a stringent control environment shall remain imperative.

About the Entity
VMS Trading Company is a sole proprietorship established in 2010. The Business is engaged in the processing and trading of rice. The company has processing capacity of 306,600MT of rice per annum. Company has two manufacturing facilities located in S.I.T.E and Port Qasim, Karachi. The Business’s ownership resides with the CEO, Mr. Kheem Chand. He is assisted by the team of 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.