Press Release

VIS Assigns Preliminary Instrument Short Term Rating to RYK Mills Limited’s Proposed Short Term Sukuk

Karachi, September 20, 2024: VIS Credit Rating Company Limited (VIS) has assigned preliminary rating to RYK Mills Limited’s (‘’RYKML’’ or ‘’the Company’’) proposed short-term sukuk (STS) of A-1(plim) (‘A-One preliminary’). The short-term rating of A-1 indicates a strong likelihood of timely repayment of short-term obligations with excellent liquidity factors.

RYKML is a public limited company incorporated in 2007. The Company’s registered office is located in Lahore Cantt, while its manufacturing facilities are situated in Rahim Yar Khan, Punjab. RYKML's business activities include the production and sale of sugar, ethanol, related by-products, as well as the generation and sale of electricity. Alliance Sugar Mills Limited is wholly owned subsidiary of RYKML.

RYKML plans to issue an unsecured, privately placed short-term Sukuk (STS) of up to PKR 4 billion, including a green shoe option of PKR 1 billion. The proceeds will be utilized to finance the Company’s working capital requirements. The STS employs a Musharakah structure based on Shirkat-ul-Aqd, with a tenor of up to six months from the drawdown date. The proposed profit rate is 100 basis points per annum. An early redemption option allows prepayment 30 days before the redemption date. Profit and principle will be payable at maturity. A Debt Payment Account (DPA) is to be maintained under lien with the Agent Bank, which is to be funded 14 business days prior to the maturity date for up to 50% of the payment amount and up to 100% of the payment amount 7 business days prior to the redemption date. A minimum sales throughput of Rs. 6b is to be maintained by the Company on a quarterly basis during the tenor of the instrument.

Assigned rating incorporates the business risk profile of the sugar sector, characterized by low exposure to economic cyclicality, but high sensitivity to sugarcane production levels and quality. Currently, the industry is facing the challenge of surplus sugar stock, which has kept prices under pressure. With the new crushing season approaching, industry players are seeking additional export allocations, the outcome of which will remain important. Assigned rating remains underpinned on projected profitability of the Company which is expected to increase as a result of growth in ethanol exports and tariff revisions by NEPRA in power segment, contributing positively to margin improvement. Anticipated reduction in interest rates is also expected to boost the bottom line. Liquidity metrics have shown improvement, and coverage metrics remain adequate. The gearing and leverage ratios, although high, are projected to improve with anticipated profitability increase from power and ethanol segments. Going forward, timely reduction in sugar inventories, maintenance and subsequent improvement in margins and realization of power segment arrears will remain important rating considerations.

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
Rating The Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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