The Pakistan Credit Rating Agency Limited
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Muhammad Zain Ayaz

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PACRA Maintains the Entity Ratings of Mumtaz Feeds & Allied Industries (Pvt.) Limited

Rating Type Entity
(21-Oct-23 )
(22-Oct-22 )
Action Maintain Maintain
Long Term BBB- BBB-
Short Term A2 A2
Outlook Positive Positive
Rating Watch - -

Pakistan's poultry industry is one of the largest agro-based segments, comprising domestic & commercial poultry. Livestock having share of ~62.6% in agriculture and ~14.3% percent in GDP. Pakistan has the capacity to produce ~10mln MT of feed annually. The industry generates an estimated annual turnover of ~PKR 350bln to ~PKR 450bln from local sales to poultry farms. Currently, an uptick in poultry prices has improved the dynamics of poultry and poultry feed segments. In FY23,a surge in the cost of soybean oilseed and maize has seen i.e. ~53.1%. However, during 9MFY23, oilseed cost has remained on an increasing trend. While rupee depreciation made exports expensive for the local crusher; hence, meal cost also posted an inflationary trend. Despite increase in the feed and poultry product prices, the industry's margins remain stretched. However, the industry is able to manage its working capital cycle effectively. The FY22 floods have damaged livestock and crops as ~31% of livestock /poultry and ~54% poultry feed is lost. This has lead to an increase in feed prices in FY23.
The ratings reflect Mumtaz Feeds & Allied Industries (Pvt.) Limited's ('Mumtaz Feeds' or 'the Company') growing business profile. The Company involves in manufacturing and selling poultry feed. The Company remains exposed to inherent risks in the feed industry emanating from raw material price changes. The Company's working capital remains in check on account of procuring raw materials on a prolonged credit period and prudent debtor management. The Company enjoys synergies as it procures raw material (mainly soybean meal) from an associated concern. Decrease in short term debt and equity injection through bonus share issue resulted in strong leverage structure (FY23: ~15.4%, FY22: ~33.2%), thus the share capital is increased to PKR ~260mln (FY22: PKR ~70mln). Further, subordinate loan from sponsor signifies support to the ratings. The Company experienced decreasing profit margins (FY23: 3.3%, FY22: 7.7%) due to import restrictions affecting cost of sales. During 1QFY24, the margins have increased as progressive revenues are being experienced (1QFY24: PKR ~2,684mln, 1QFY23: PKR ~1,777mln) coupled by decrease in cost of sales due to alternate usage of raw material's import.
The ratings are dependent on the management's ability to gain market share, improve margins, and, in-turn, profitability. Maintaining strict working capital discipline and adequate leveraging remains critical. Any significant deterioration in margins and/or coverage's will have negative impact on the ratings.

About the Entity
Mumtaz Feeds & Allied Industries (Pvt.) Limited was incorporated as a Private Limited Company in 2016. Commercial operations began in 2017. The Company is primarily involved in manufacturing and sale of broiler and layer feed in sixteen variants. The installed annual production capacity is 144,000 MT (40 MT per hour). Major shareholding of Mumtaz Feeds resides with Mr. Aamir Ali Khan (~35%), followed by Mr. Muhammad Umer (~20%). Mr. Nasir Malik and his brother Mr. Yasir Malik owns an equal stake (~17.5%) in the Company. Mr. Aamir Ali Khan, the CEO and Board's Chairman, holds more than 2 decades of relevant industry experience which remains instrumental for the Company's operations.

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.