Press Release

VIS Assigns Preliminary Rating to the Proposed Sukuk issue of Sunridge Foods (Private) Limited

Karachi, December 26, 2024: VIS Credit Rating Company Limited (VIS) has assigned preliminary rating of ‘AAA (plim)’ (Triple A preliminary) to the proposed Sukuk issue of Rs. 2 billion of Sunridge Foods (Private) Limited (‘SFPL or ‘the Company’). Long term rating of ‘AAA’ indicates highest credit quality; the risk factors are negligible, being only slightly more than for risk-free Government of Pakistan’s debt. Outlook on the assigned rating is ‘Stable’. The preliminary rating will be finalized upon review of final legal documents. SFPL has an entity rating of ‘BBB+/A3’ (Triple B Plus/A-Three) announced on September 10, 2024.

SFPL is a wholly-owned subsidiary of Unity Foods Limited. The Company primarily focuses on processing wheat, flour, and rice, with flour being its main product. It also deals in sugar, salt, lentils, and pulses, with the majority of its sales occurring in the local market. The Company sells its products under the brand name ‘Sunridge’, directly to retailers, restaurants, hotels and a vast network of distributors spread across the country. SFPL manages three flour processing facilities and a rice-processing unit in the provinces of Sindh and Punjab. Additionally, SFPL possesses storage facilities in Punjab, KPK, and Sindh.

SFPL plans to issue a Rs. 2 billion Sukuk to finance capital expenditures, including expanding wheat storage capacity, installing renewable energy solutions, and enhancing production infrastructure through equipment upgrades and facility improvements. The Sukuk, with a five-year tenor and a two-year grace period, will also support the Company’s working capital needs.

The rating of the proposed Sukuk is supported by its security structure and compliances i.e. (a) the Sukuk principal amount of Rs 2.0 billion is guaranteed by Infrazamin Pakistan Limited (IZP). (b)Through a Trustee exclusive lien on (i) Finance Payment Account: For the initial two years, the Company will deposit upcoming (I+G) installments in six (06) equal tranches prior to the 10th of each month, and the last installment is to be deposited at least twenty (20) days prior to the payment date. During the last three years, the Company will deposit upcoming (P+I+G) installments in six (06) equal tranches prior to the 10th of each month, and the last installment is to be deposited at least twenty (20) days prior to the payment date. (ii) Finance Service Reserve Account: The Company from its own sources will deposit two (2) (I+G) semi-annual installments in a Bank/AMC account, which will be under the lien of the Trustee, and this will be a revolving obligation, (c) Hypothecation charge over all present and future fixed and current assets of the Borrower for the value of PKR 1,000 million, and (d) Compliance with Private Infrastructure Development Group (PIDG’s) Disclosure Policy and Procedures, Anti-corruption and Integrity Policy and Procedures, and Environmental and Social Policies and Procedures.

InfraZamin Pakistan Limited (IZP) is a for-profit credit enhancement guarantee Company rated ‘AAA’ by PACRA and backed by equity capital from InfraCo Asia Investments (60%) and Karandaaz Pakistan (40%). The primary objective of the IZP is to issue credit enhancement guarantees for promoting private infrastructure projects This initiative reflects a strategic collaboration under the umbrella of the Private Infrastructure Development Group (PIDG), which is supported by six governments—the UK, the Netherlands, Switzerland, Australia, Sweden, and Germany—alongside the International Finance Corporation (IFC).

The Company recorded topline growth in FY24, supported by volumetric gains and price hikes, but profitability declined due to lower gross margins and negative net margins from high operating expenses and financial charges. Liquidity remained strained, while coverage metrics showed recovery in 1QFY25, with an improved debt service coverage ratio. Rising gearing and leverage from working capital support to associates and payable buildup challenged the capitalization profile. Sukuk proceeds are expected to ease pressures, but maintaining stable liquidity and capitalization profile will remain important for ratings.

For further information on this rating announcement, please contact the undersigned at 042-35723411-12 or email at info@vis.com.pk

Applicable Rating Criteria: Rating the Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.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

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 .