Press Release

VIS Assigns Preliminary Rating to Proposed Short term Sukuk of JDW Sugar Mills Limited

Karachi, December 07, 2023: VIS Credit Rating Company Limited (VIS) has outstanding entity ratings of ‘A+/A-1’ (Single A Plus/A One) assigned to JDW Sugar Mills Limited (‘JDWS’ or the ‘Company’). In lieu of the same, VIS has assigned preliminary rating of A-1 (A One) to JDWS’s proposed Short Term Sukuk (STS). Short-term rating of A-1 reflects high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor.

JDWS is a part of JDW Group. The group has a presence in sugar, corporate farming and power generation. JDWS is principally engaged in manufacturing of sugar, production of electricity and managing corporate farms. The assigned ratings incorporate JDWS market position as the leading player in the country’s sugar industry, significant experience of sponsors in the sugar and agriculture sector and a professional management team. The Company has longstanding relationships with growers along with focus on research activities in sugarcane development. Business risk profile of the Company draws support from diversification of operations into power sector.

JDWS plans to raise a rated, unsecured, privately placed STS, amounting up to Rs. 5b to Rs. 8b (inclusive of a Green Shoe Option of up to Rs. 3b – Rs. 4b) to finance working capital requirements of the Company. Tenor of the instrument is up to six (06) months. Principal will be redeemed in bullet payment six (06) months. Profit rate on the instrument would be 6M KIBOR + 90 bps per annum. Profit will be payable at the time of redemption of STS on the outstanding principal amount.

The ratings incorporate inherent cyclicality in crop yields and price vulnerability in sugar sector leading to competitive challenges for the Company. The ratings also take note of developments with regards to penalties imposed by Competition Commission of Pakistan (CCP) on certain sugar mills. The operation of the said order has been suspended and CCP has been restrained from recovering the penalty imposed in terms of an order of the LHC dated October 2021 followed an interim stay order for the same by the Commission Appellate Tribunal. VIS will continue to monitor further development in this matter.

Ratings draw comfort from liquidity cushion arising from sizeable unsold stock anticipated to be sold at higher prices. The equity base decreased as of Jun’23, influenced by dividend payments. Gearing and leverage indicators were elevated as at Jun’23 but are expected to reduce to historical levels as at year-end Sept’23. Going forward, the Company plans to secure a long term borrowing for upcoming capital expenditure (CAPEX). Hence, maintenance of profitability, debt service coverage and capitalization profile will remain important going forward.

For further information on this rating announcement, please contact the undersigned at 021-35311861-64 (Ext. 207) or email at info@vis.com.pk



Sara Ahmed
Director

Applicable Rating Criteria: Corporate (May 2023)
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Rating The Issue (August 2023)
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.pdf
VIS 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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .