VIS Assigns Initial Entity Ratings to Kausar Ghee Mills (Private) Limited

Karachi, September 09, 2020 (PPI-OT): VIS Credit Rating Company Limited (VIS), has assigned initial entity ratings of ‘A-/A-2’ (A-minus /A-Two) to Kausar Ghee Mills (Pvt.) Limited (KGML). The long-term rating of ‘A-’ signifies good credit quality; protection factors are adequate meanwhile risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment with sound liquidity and company fundamentals. Access to capital markets is good along with low risk factors. Outlook on the assigned ratings is ‘Stable’.

The ratings assigned to KGML take into account its association with Kausar Group of Companies, having business stake in various sectors involving edible oils, poultry, feed and rice processing. The assigned ratings reflect stable business model, sizeable equity base and sound liquidity profile. The ratings incorporate growth in revenues in the last two years, ongoing capex to enhance value addition in manufacturing operations, projected improvement in financial profile post capex completion and positive demand prospects for edible oil in the domestic market.

Furthermore, ratings draw comfort from integrated production facility, well established distribution network, brand recognition in the local market and vertical integration with group owned feed mill. KGML’s conservative capital structure as an outcome of minimal reliance on credit financing coupled with sound coverages is a key rating driver. The sponsors have supported the company with interest free loans to meet working capital requirements, the same is expected to continue during the rating horizon. However, the ratings remain sensitive to highly price sensitive import market of raw material and relatively low margins compared to peers.

The ongoing geopolitical scenario and slowdown in domestic economic activity amidst the COVID-19 pandemic has not posed any considerable threat to the financial risk profile of the company given its presence in relatively inelastic consumer goods sector catering to day to day food based requirements of the population. Nevertheless, ratings will remain dependent on the company’s ability to maintain scale of operations, access to sponsor funds for bridge financing, improvement in margins and containing of leverage indicators around current levels.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873