The Pakistan Credit Rating Agency Limited
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Muhammad Zain Ayaz

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PACRA Maintains Entity Ratings of Hassan Ali Rice Export Company

Rating Type Entity
(13-Oct-23 )
(13-Oct-22 )
Action Maintain Upgrade
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Rice is among the five major crops of Pakistan and is the second main staple food, after wheat. The segment contributes about 3.5% in agriculture value addition and 0.7% to GDP. Local consumption includes ~95% of basmati rice and ~5% non-basmati. During FY23, rice crop area decreased to ~3.2mln Hec (FY22: ~3.4mln Hec), reflecting a decrease of ~6%. Rice production decreased by ~17%, standing at ~7.4mln MT in FY23 (FY22: ~8.9mln MT). Floods during Aug-22 razed rice crops, causing an average crop loss of ~20-25%. New higher-yielding hybrid rice varieties, and improved agronomic practices are factors minimizing the production loss. Around ~4mln MT of rice is consumed locally, while, the remaining is exported. During FY23, Pakistan exports decreased to ~USD 2.1bln (FY22: ~USD 2.5bln). Thus, impacting the industry’s overall topline. However, rupee depreciation provided some cushion to the export players. Industry's overall margins and cashflows may become stretched. The industry poses a developing outlook for the ongoing year.
The ratings incorporate Hassan Ali Rice Export Company's strong presence in the rice export market, with a sizable business volume, and its overall governance principles. With a prominent domination in the market, Hassan Ali holds a strong position among the biggest rice exporters in the country, with customers spreading over multiple countries. During FY22, the Business observed substantial growth, wherein rupee devaluation also favored the topline. During FY22, the gross margin of the Business remained stable at ~6.1% (FY21: ~6.4%), where as net margins decline to ~0.5% (FY21: ~1%), this is due to high interest rate environment as well as tax implications. The capital structure of the Business is adequately leveraged at ~69% (FY21: ~66%), which is completely based on short term borrowings used for working capital management. The Business is a sole proprietorship concern so room for improvement in its governance structure continues to be significant.
The ratings are dependent upon the Business' ability to sustain its volumes, margins, and, in turn, profitability. Meanwhile, positive trade leverage to avoid asset-liability mismatch and continued adherence to sound financial discipline including debt servicing capacity remains imperative for ratings. Strengthening of governance structure will benefit the ratings.

About the Entity
Hassan Ali Rice Export Company is a sole proprietorship established on 15-Jun-94. The Business is engaged in the processing and trading of rice. Hassan Ali is one of the largest exporters of rice in the domestic landscape. Hassan Ali is one of the founding members of the Rice Export Association (REAP). Mr. Abdullah Akbar Ali Hashwani heads the business’s operations along with his team.

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.