Press Release

VIS Reaffirms Entity Rating of Karachi Grains (Private) Limited

Karachi, Jun 11, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Karachi Grains (Private) Limited (KGPL or ‘the Company’) at ‘BBB+/A-2’ (Triple B Plus/A-Two). The medium to long-term rating of ‘BBB+’ denotes adequate credit quality; reasonable and sufficient protection factors. Risk factors are considered variable if changes occur in the economy. Short-term rating of ‘A-2’ reflects good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on March 28, 2023.

KGPL is primarily engaged in the extraction, refining and sale of edible oil products. KGPL caters to B2B (business-to-business) market mainly covering local institutional clients. It also produces industrial fats, and various feed ingredients for the poultry and livestock sector. The assigned ratings are underpinned by high business risk given fragmented market structure and heavy reliance on imported raw materials. Variations in raw material costs, which result in inventory losses, and fluctuations in foreign currency rates are major risk factors that cause margin instability in the edible oil industry. The capacity to manage the same, which is connected to the degree of competition and operational effectiveness, is factored into the ratings

The company posted healthy topline growth and higher gross margins in FY23 mainly on account of appreciation in product prices, primarily an outcome of local currency devaluation. The same declined in HY24 and KGPL’s financial indicators in the ongoing year worsened mainly on account of significant inventory losses. As a cyclical trend, the same are projected to improve in FY25.

The ratings also reflect the Company's adequate liquidity and capitalization profile, which is supported by short-term liquid investments and a low leveraged capital structure. The Company's working capital needs are met through internal cash generation and interest-free short-term loans from related parties. The ratings remain dependent on effective working capital management, improvement in margins and maintenance of ungeared balance sheet over the rating horizon.

For further information on this rating announcement, please contact at 042-35723411-12 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

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