Press Release

VIS Maintains Entity Ratings of Two Star Industries Limited

Karachi, April 21, 2025: VIS Credit Rating Company Limited (‘VIS’) has maintained the entity ratings of Two Star Industries Limited (TSIL’ or ‘the Company’) at 'BBB+/A2' (‘Triple B Plus/A Two’). Medium to long term rating of 'BBB+' indicates adequate credit quality; Protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur 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 ‘Negative’. Previous ratings action was announced on November 17, 2023.

Two Star Industries (Pvt) Limited (“TSIPL” or “the Company”), incorporated in 2016, is co-owned by Umer Group of Companies and RYK Group. The principal business of the Company is to manufacture and sale of white refined sugar. The registered office of the Company is located in Lahore, Punjab, whereas the manufacturing facility is situated in District Toba Tek Singh.

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. While supply-side remains sensitive to pricing, demand-side risk is moderate to low due to essential nature of the commodity. Discontinuation of government-mandated minimum support pricing for sugarcane from the 2024-25 season may affect supply dynamics going forward. Moreover, the production figures for the 2024–25 season indicate that actual crushing stands at approximately 60 million metric tons (MMT), resulting in sugar production of around 5.8 MMT—significantly lower than the earlier projections. Given the actual production levels and expected consumption, sugar prices are likely to be impacted by this going forward.

There was a significant hit on profitability in FY24 arising from reduced sales volume, thin margins and higher financial costs from carrying inventory despite an increase in average selling prices. However, in the first five months of FY25, the company was able to offload last year’s inventory at strong margins resulting in positive cash generation which the company utilized for working capital needs in the new season. Ability of the company to manage its inventory levels to generate sales at feasible margins and control the financial costs of carrying inventory are core rating concerns in the current fiscal year.

Further, the capital structure of the company needs to be strengthened which is currently supported by sponsor loans. The management has reprofiled its borrowing structure by converting certain level of short-term debt to long term debt to create room for working capital financing.

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 .