PACRA Assigns Initial Entity Ratings to Jhulay Lal Parboiled Rice Mill

The rice sector is pivotal to Pakistan's economy, contributing approximately 3.5% to agricultural value addition and 0.7% to GDP. In FY24, Pakistan’s rice exports reached an unprecedented milestone, generating $3.93 billion in foreign exchange (up from $2.1 billion in FY23) and exporting around 6 million tons. India’s temporary export ban largely facilitated this significant rise. Non-basmati rice dominated export volumes, contributing about 88% of total shipments by quantity, driven by affordability and alignment with international cuisine preferences. Nonetheless, the increasing number of rice consignment interceptions in the EU, triggered by the flagging of a shipment of Pakistan’s organic Basmati rice for GMO contamination, poses a business risk.
In FY24, Jhulay Lal Parboiled Rice Mill (‘Jhulay Lal’ or ‘the Company’) recorded a remarkable 5x revenue growth, according to management's provisional figures (subject to audit completion). This exceptional performance was driven by a substantial increase in volumetric sales, supported by favorable market dynamics. The Company's strategic emphasis on its non-basmati rice segment, a key component of its product portfolio, facilitated successful expansion into new markets. However, the sustainability of this growth is contingent upon the continuation of favorable external conditions and the Company’s ability to diversify its portfolio and maintain competitive pricing. The assigned ratings also reflect the inherent cyclicality associated with rice, a globally traded commodity, where fluctuations in its availability significantly influence the business risk profile.
Despite a positive revenue trajectory, Jhulay Lal faces profitability pressures primarily due to a significant increase in finance costs during the review period. Elevated interest rates have compressed margins, eroded cost buffers, and contracted profit margins. However, with interest rates expected to trend lower in the near term, potential relief may provide a much-needed cushion to improve profitability and enhance cash flow resilience.
Working capital efficiency has markedly improved, evidenced by a shorter inventory holding period and a streamlined receivables cycle. Financial coverage metrics indicate increased vulnerability to rising financing costs, necessitating vigilant cash flow and liquidity management. Jhulay Lal’s capital structure remains moderately leveraged, with short-term borrowings constituting the entirety of its debt. Furthermore, the sponsor's exceptional business acumen and the Company's Long standing history provide added comfort to the ratings.
The ratings are dependent upon the sustenance of business volumes under the current challenging environment. As global economy undergoes distress, business sustainability emerges as the key challenge for the exporters. Meanwhile, keeping up with a stable financial risk profile, with an increased emphasis on working capital management, remains imperative for ratings.

About the Entity
Jhulay Lal Parboiled Rice Mills is a partnership firm run by Mr. Gurmukh Das and Mr. Ramesh Kumar. The two partners share an equal stake in the Company. Mr. Gurmukh Das, is an experienced entrepreneur. He is an MBA in Marketing from SZABIST University. Mr. Das was formerly working in Faysal Bank before being involved in the Rice Business and now is the main face of Jhulay Lal.