Press Release

VIS Assigns Initial Entity Ratings to Ranipur Sugar Mills Limited

Karachi, November 12, 2024: VIS Credit Rating Company Limited (VIS) assigns initial entity ratings to Ranipur Sugar Mills Limited (‘’RSML’’ or ‘’the Company’’) of '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' indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the initial ratings has been assigned as ‘’Stable’’.

Established in 1998, RSML operates a sugar mill in Pakistan, specializing in the production and sale of white crystal sugar, alongside electricity generation through a in-house power plant. By-products include molasses, bagasse and biofuels. Recently, the Company expanded into ferro alloys, producing calcium carbide, which is also used for fruits ripening, in the steel industry & as a source of acetylene, among other applications. The mill is located in Ranipur, District Khairpur, Sindh, while the registered office is in Karachi.

Assigned ratings take into account the moderate business risk profile of the sugar industry, which is characterized by inelastic demand, low substitute risk, and a high degree of fragmentation within the sector. Despite the inherent seasonality and sensitivity to sugarcane production and quality, the industry benefits from stable demand driven by population growth, government measures supporting export activities, and recent discount rate cuts easing pressure on the financial risk profile. The industry’s outlook, however, remains constrained due to prevailing economic conditions and fluctuations in sugarcane production and pricing.

Assigned ratings also take into account RSML's revenue growth driven by increased local sugar prices and diversification into the ferro alloy segment. Profitability has shown resilience despite a higher finance cost burden, supported by other income mainly from writing back of liabilities, which the company believes are no more payable. While liquidity metrics have improved with better internal cash management and enhanced inventory turnover, the capitalization profile is dominated by short-term borrowing and significant loan provided the sponsors. Coverage metrics have exhibited improvement, benefiting from enhanced cash generation and profitability during the period under review.

Going forward, the assigned ratings will remain sensitive to several key financial and operational factors. These include continued improvements in profitability, liquidity, and capitalization metrics, as well as the management’s commitment to convert the sponsors loans into long-term debt. Ratings will remain underpinned by availability of sponsor support for the Company going forward. Improvements in governance and external reporting will also be an important consideration for future reviews.

For further information on this ratings 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

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .