Press Release
VIS Reaffirms Entity Ratings of Deharki Sugar Mills (Private) Limited
Karachi, May 16, 2025: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Deharki Sugar Mills (Private) Limited (‘DSML’ or ‘the Company’) at ‘A/A2’ (‘Single A/A Two). Medium to long term rating of 'A' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A2' indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating is ‘Stable’. Previous Rating action was announced on May 13, 2024.
DSML was incorporated in Pakistan in December 2016 as a private limited company. The principal activities of the Company are production and sale of crystalline sugar including its by-products i.e., molasses, bagasse, and mud. The Company’s head office / registered office is located in Lahore with manufacturing facility located in Ghotki, Sindh. DSML is a part of the JDW Group and wholly owned subsidiary of JDW Sugar Mills Limited (JDWSML), Being a wholly owned subsidiary of JDWSML, the Company draws various benefits from its parent including operational integration.
Assigned ratings take into account the business risk profile of Pakistan’s sugar sector, which is shaped by seasonal and cyclical production trends, government intervention, and exposure to price and interest rate fluctuations. Production remains concentrated within a short harvesting window, requiring mills to manage inventory and financing needs throughout the year. Competitive procurement pressures persist due to the clustering of mills and the perishable nature of sugarcane, while the prior application of minimum procurement pricing further impacted cost structures, particularly for smaller players. This policy has since been discontinued. Sector demand is driven primarily by population growth and demand from food processing industries, with supply-side competition remaining elevated. The sector also remains exposed to climatic variations and sucrose recovery rates, which have affected production levels and contributed to recent supply-demand gaps.
Assigned ratings also consider the financial risk profile of the Company. Profitability remained largely stable during the review period due to inventory gains, though margin compression was observed in the subsequent quarter due to pricing and cost-side pressures. Capital structure indicators deteriorated during the period under review, with higher reliance on short-term borrowings for working capital needs, particularly for unsold inventory. However, subsequent repayment of short-term obligations is expected to alleviate pressure on gearing and leverage indicators. Liquidity levels remain adequate, and coverage indicators also continue to be satisfactory, supported by ease in finance costs, with refinancing risk mitigated by the absence of long-term debt on the balance sheet.
Going forward, ratings will remain sensitive to changes in the industry’s supply-demand dynamics, regulatory developments, and commodity price trends. The Company’s ability to manage working capital efficiently, maintain margins, and reduce reliance on short-term borrowings will remain important. Ratings will continue to consider the sustainability of coverage metrics, improvement in liquidity levels, and the impact of any further variability in production volumes or recovery rates.
For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf