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PACRA Maintains Entity Ratings of Qadir Agro Industries (Pvt.) Limited

Rating Type Entity
(27-Mar-23 )
(18-Mar-22 )
Action Maintain Initial
Long Term BB+ BB+
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

Pakistan's edible oil industry is heavily reliant on imports since oilseeds and edible oil account for ~80% of the cost of production. Edible oil is among the country’s top five imports. Total oilseed imports for FY23 are forecast to be 3.4MMT, unchanged from the estimated imports for FY22. Similarly, no growth is expected in edible oil imports in FY23, forecast at 3.7MMT. The price of soybean oilseed stood at ~547 USD/MT in Jan-23 followed by an increase of ~8% as compared to Jun-22. The industry is facing issues as imports remain restricted at port over GMO concerns impacting operations of many solvent extraction units from Oct-22. Moreover, reduce imports due to LC restrictions has caused surge in costs of essential raw materials for the sector. This, along with latest interest rate hike, will further stretch the working capital requirements for many solvent extraction units. However, import substitution is expected to benefit the local refineries. Future outlook look of the industry is developing due to price volatility and PKR depreciation. Industry's margins are expected to post a dip with stretched cashflows.
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 posted stability but generally remained on the lower side as compared to peers. 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.