PACRA maintains Entity Ratings of K.K. Rice Mills (Pvt.) Limited

The ratings incorporate K.K Rice Mills (Pvt.) Ltd. (KK Rice) strong presence in the rice exporting market with a sizable business volume. K.K Rice strategizes on adopting a top-line centric approach mainly targeting the Middle East and African region to explore growth avenues. Competitiveness in the international market in terms of pricing and branding remains a key challenge for rice exporters. The Company’s operations are strengthened by a highly qualified and experienced management team. The absence of board committees presents an opportunity for enhanced organizational governance. Pakistan's rice sector, a key contributor to the national economy (representing approximately 3.5% of agricultural value addition and 0.7% of GDP), witnessed substantial production growth in FY24. This increase, driven by heightened global demand and a temporary export ban in India, resulted in a remarkable 35% production surge. Consequently, basmati rice exports increased significantly, rising from $650 million to $876 million in FY24. Whereas non - basmati exports surged from $ 1,498mln to $3,954mln. KK’s contribution to these exports was 155,722 metric tons, generating $ 85 million in revenue. This positive trend was mirrored in the Company's topline, which saw a surge of 253%. This growth reflects the Company's ability to effectively leverage the increased production and heightened global demand. However, despite this revenue growth, margins contracted. Gross profit margins were negatively impacted by the increased cost of goods sold while operating and net profit margins declined due to higher operating expenses and finance costs. Although funds from operations (FFO) increased by 28%, providing a degree of financial resilience, coverage ratios deteriorated due to elevated finance costs. The Company's capital structure consists entirely of short-term borrowings, though a recent decline in borrowings indicates improved leverage. The sponsors' financial strength provides additional support to the ratings.
The ratings are contingent upon the management’s efficacy in actualizing the envisaged strategies, optimizing the cost structure, and preserving the business margins. A material enhancement in the business and financial profile would be favorable for the ratings. The management’s pledge to augment the audit quality and financial transparency in the ensuing period is also a vital factor for the rating. Any substantial and/or protracted deterioration in the revenues and/or coverages will impinge negatively on the ratings.

About the Entity
K.K Rice Mills (Pvt) Ltd was incorporated in 2009 as a privately limited company. The Company is primarily involved in the business of exporting non-basmati rice. It has two rice processing plants located in Port Qasim and Nooriabad with a combined production capacity of 100 MT per hour.
KK Rice is majorly owned by Mr. Chela Ram (~55%), while, the remaining stake resides with his wife, Mrs. Khami Bai (~20%), nephew, Mr. Dileep Kumar (~20%), and son Mr. Jatindar Kumar (~5%). The Board comprises four members and is dominated by the Sponsoring family. Mr. Chela Ram, Chairman of the Board and CEO of the Company, holds an experience of over 2 decades in the rice business. He is assisted by team of experienced professionals.