Press Release

VIS Reaffirms Entity Ratings of Faran Sugar Mills Limited

Karachi, April 11, 2025: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Faran Sugar Mills Limited (‘FSML’ or ‘the Company’) at 'A-/A2' (‘Single A Minus/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' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous ratings action was announced on December 29, 2023.

FSML was incorporated in Pakistan on November 03, 1981 as a public limited company. The shares of the Company are listed on Pakistan Stock Exchange (PSX) with approx. 80% shareholding with sponsors / directors. The principal business of the Company is the production and sale of white crystalline sugar. The registered office of the Company is located in Karachi and the manufacturing unit is located in Tando M. Khan. FSML is part of the Amin Bawany Group, a diversified Pakistani business conglomerate with interests in sectors such as sugar, insurance, modaraba, ethanol production, trading, power, and construction.

Assigned ratings incorporate the business risk profile of Pakistan’s sugar sector, shaped by seasonal and cyclical production patterns, procurement competition, regulatory interventions, and exposure to price and interest rate risks. The concentrated harvesting period necessitates year-round sugar stock maintenance, exposing mills to price volatility and inventory carrying costs. Constraints in crop yields and sucrose recovery persist due to limited mechanization, research, and weather sensitivity. The perishable nature of sugarcane leads to mill clustering near cane growing areas, increasing procurement competition and raw material costs. While supply-side remains sensitive to pricing, demand-side risk is moderate to low due to essential nature of the commodity. Profitability remains susceptible to price fluctuations driven by stock levels, harvesting trends, financing costs of carrying inventory, and government intervention. Regulatory controls, including external trade restrictions, impact pricing and inventory management. Discontinuation of government-mandated minimum support pricing for sugarcane from the 2024-25 season may affect supply dynamics going forward. While procurement costs, pricing, and policy risks persist, sector stability is underpinned by sustained demand on the back of growing population and rising bulk consumption.

Assigned ratings also incorporate the financial risk profile of the company. Profitability was impacted in the outgoing year by higher sugarcane procurement costs as well as inventory buildup due to market conditions which led to high financial costs with significant increase in short term borrowings. Further, FSML booked share of loss from their associated company, Unicol, which has recently acquired a sugar plant as a backend to its main business of ethanol production. Liquidity remained under pressure during the year due to the above factors. The ratings incorporate sponsor support as the company conducted rights share issue with injection of PKR 507 million in January 2025 to ease cashflow stress from the significant loss incurred during the year. Subsequently, the inventory levels have reduced easing short term debt levels and improving overall profitability position according to the management. The sponsors have committed their continued support to the company, if required, though they expect a profitable year with higher sales and gross margins, lower burden of financial costs due to reduction in both outstanding debt and level of interest rates. Going forward, the ratings will remain contingent to improved financial risk profile as mentioned above to be commensurate with assigned ratings.

For further information on this ratings announcement, please contact on 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

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .