The Pakistan Credit Rating Agency Limited
19-Dec-19
Analyst
Ayesha Malik
ayesha.malik@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-19
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-19
- Criteria | Rating Modifier | Jun-19
Related Research
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA
PACRA Assigns Initial Entity Ratings to Islamabad Farms
| Rating Type | Entity | |
|
Current (19-Dec-19 ) |
||
| Action | Initial | |
| Long Term | BBB- | |
| Short Term | A3 | |
| Outlook | Stable | |
| Rating Watch | - | |
Poultry is one of the largest agro based segment in Pakistan, accounting both domestic & commercial poultry. With an investment of almost PKR 700bln in FY19, industry has posted an annual growth of ~ 12%. Pakistan is sufficient in poultry meat and egg production. However, per capita protein consumption remains low when compared to the world's average.
The ratings reflect Islamabad Farms developing position in poultry industry and sponsors strong acumen across the integrated supply chain. Islamabad Farms revenue showed concentration towards day old chicks and posted a dip. Procuring feed in bulk from Group’s own company benefited the margins and remain in line with industry players. Profitability remain modest. Islamabad Farms remains exposed to price volatility and contingent health risk associated to its product. Financial risk profile of Islamabad Farms is characterized by moderate leverage and adequate coverage ratios. Loan mix is skewed towards short term borrowings to fulfill the working capital requirements.
The ratings are dependent on the management's ability to prudently manage the working capital requirements. Improving margins,in turn, building profitable volumes remain critical for the ratings. Effective changes in governance framework would be beneficial for the ratings. Significant deterioration in coverages and/or margins will have negative impact on the ratings.
About
the Entity
Islamabad Farms was established in 1981 as an Association of Persons (AoP). Islamabad Farms operates 18 breeder farms to maintain parent flocks of different breeds and 4 hatcheries for day old chicks. Its registered office is located in Satellite Town, Rawalpindi. While, the farms and hatcheries are scattered across the country.
Islamabad Farms major ownership resides with Dr. Muhammad Aslam (50%), followed by Dr. Azhar Mehmood (25%). Remaining shareholding vests equally with Mr. Muhammad Masood (12.5%) and Mr. Mamoon-ur-Rasheed (12.5%). Sponsors dominates the Board comprising four members. Board’s Chairman and Islamabad Farms CEO, Dr. Muhammad Aslam, plays a pivotal role in making strategic decisions.