Press Release

JCR-VIS Assigns Preliminary Rating of A- to the Proposed TFCs of Shahmurad Sugar Mills Ltd.

Karachi, February 28, 2007: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has assigned entity ratings of BBB (Triple B) and A-2 (A Two) to Shahmurad Sugar Mills Limited (Shahmurad) for the medium to long –term and short-term respectively. In addition, Shahmurad’s proposed TFC issue of Rs. 400m has been assigned a preliminary medium to long-term rating of A- (Single A Minus). The outlook on both medium to long-term ratings is ‘Stable’. The preliminary rating will be converted to final on review of relevant signed legal documents.

The ratings take into account the improvement in the company’s risk profile with the commencement of distillery operations in FY2006, the full impact of which on the company’s financial performance is expected to become visible in FY2007. Shahmurad has the advantage of relatively smoother access, in comparison to other distillery operators, to the major raw material i.e. molasses (a by-product of sugar manufacturing process), due to availability from its sister concern, Al-Noor Sugar Mills Ltd, as well. The company also has the option to convert its current product to fuel grade ethanol without substantial capital outlay, if that market looks attractive. We have also taken into account the long history of the sponsors in the sugar industry and their financial support to the company as and when needed during the past five years. This is further illustrated by the company’s commitment to ensure equity enhancement of at least Rs 75m by September 30, 2007 over the September 30, 2006 levels.

While noting the improved performance of the sugar sector over the last one and a half year period, due to better crop availability and strong margins, we still believe that the sector remains inherently cyclical primarily due to its dependence on sugarcane crop sizes and the historical level of government involvement in raw material and product pricing and trade controls.

The purpose of the proposed five-year TFC issue is to provide Shahmurad fiscal space by correcting its historic over-reliance on short-term funding. The TFC issue will be priced at KIBOR + 3.25% with no floor and no cap, with an initial two year grace period on principal repayments. The TFC rating is supported by a guarantee of Rs 80m to be arranged from a financial institution rated at least A and a first pari passu charge over all present and future fixed assets of the company with a margin of 25%.

For further information on this rating announcement, please contact the undersigned (safdar@jcrvis.com.pk / Ext: 221) or Mr. Saad Ahmed Madani (saad@jcrvis.com.pk / Ext: 219) at 5671822/5671833/5680996 or fax to 5681105/5671600.




Safdar Kazi
Advisor

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 2007 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .