The Pakistan Credit Rating Agency Limited
Press Release


Ayesha Qasim

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PACRA Maintains Entity Ratings of Hunza Sugar Mills (Pvt.) Limited

Rating Type Entity
(08-Mar-19 )
(06-Sep-18 )
Action Maintain Initial
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect the Company's diverse revenue streams (Sugar, Ethanol, Bagasse) and sponsors strong acumen in the sector. The Company remains exposed to volatility in Sugar sector. Low recovery rate and depressed sugar prices resulted in subpar performance in the sugar segment in FY18, having a significant impact on the Company's bottomline. However, sugar prices have recovered to an extent in the local market lately. Financial risk is high owing to highly leveraged capital structure. The Company utilizes short-term borrowings to finance its inventory and has also undertaken significant BMR activities during the year. This, coupled with high finance cost, has put the Company's coverages under distress. Meanwhile, Sponsors commitment to provide financial support in a timely manner cushions the risk profile of the Company.

The ratings are dependent upon the Company’s ability to strengthen its margins, improve profitability and debt service coverages. Any further deterioration in margins and/or cash flows will impact the ratings. Improvement in governance framework and internal controls will be favorable for the ratings.

About the Entity
Hunza Sugar Mills (Pvt.) Ltd (‘Hunza Sugar Mills’) is part of Hunza Group of Industries, which traces its roots back to 1988. The flagship entity of the group is Hunza Ghee (Pvt.) Limited in the edible oils sector. Hunza Sugar Mills has a strong presence in the refined sugar industry along with its allied products ethanol and CO2. It is a family owned entity. The shareholding is among the families of three brothers Mr. Idrees Chaudhury & Family (31%), Mr. Saeed Chaudhry & Family (32%) and Mr. Waheed Chaudhry & Family (37%). Mr. Idress Chaudhry is the Chairman of the Hunza Group of Industries while Mr. Saeed Chaudhry is the CEO.

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.