Press Release

VIS Assigns Preliminary Rating to Proposed Short term Sukuk 2 of JDW Sugar Mills Limited

Karachi, February 07, 2024: VIS Credit Rating Company Limited (VIS) has outstanding entity ratings of ‘A+/A-1’ (Single A Plus/A One) assigned to JDW Sugar Mills Limited (‘JDWS’ or the ‘Company’). In lieu of the same, VIS has assigned preliminary rating of A-1 (A-One) to JDWS’s proposed Short Term Sukuk-2 (STS-2). Short-term rating of A-1 reflects high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor.

The Company is part of JDW Group which has presence in sugar, corporate farming and power generation. JDWS is principally engaged in manufacturing of sugar, production of electricity and managing corporate farms. The assigned ratings incorporate JDWS market position as the leading player in the country’s sugar industry, significant experience of sponsors in the sugar and agriculture sector and a professional management team. The Company has longstanding relationships with growers along with focus on research activities in sugarcane development.

JDWS plans to raise a rated, unsecured, privately placed STS, amounting up to Rs. 5b to finance working capital requirements, whereas 75% of the total proceeds will be utilized for sugarcane procurement and the remainder 25% for general working capital expense of the Company. Proposed tenor of the instrument is up to six (06) months. Principal will be redeemed in bullet payment six (06) months after the issue date and JDWS may repay the entire outstanding facility amount or part thereof through Company’s internal cashflows with fifteen (15) days prior written notice. Profit rate on the instrument proposed at 6M KIBOR + 75-80 bps per annum. Profit will be payable at the time of redemption of STS on the outstanding principal amount.

Rating incorporates inherent cyclicality in crop yields and price vulnerability in sugar sector leading to competitive challenges for the Company. However, the Company draws support from diversification of operations into power sector. The rating also takes note of developments with regards to penalties imposed by Competition Commission of Pakistan (CCP) on certain sugar mills. The operation of the said order has been suspended and CCP has been restrained from recovering the penalty imposed in terms of an order of the LHC dated October 2021 following an interim stay order for the same by the Commission Appellate Tribunal. VIS will continue to monitor further development in this matter.

Rating draws comfort from liquidity cushion arising from sizeable unsold stock anticipated to be sold at higher prices and significant cash and bank balances as of Dec’23. In 1QMY24, the equity base saw an increase as a result of higher profitability and retention. However, gearing and leverage indicators remained elevated as of Dec’23 due to increased short-term borrowing and advances from customers. The Company anticipates a reduction to historical levels by the end of Sept’24, despite plans to secure long-term borrowing for upcoming capital expenditure to set up an Ethanol/ Distillery Project having per day production capacity of 230,000 liters. Maintenance of profitability, debt service coverage and capitalization profile will remain important considerations going forward.

For further information on this rating announcement, please contact the undersigned at 021-35311861-64 (Ext. 207) or email at

Sara Ahmed

Applicable Rating Criteria: Corporate
Rating The Issue
VIS Rating Scale

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