Karachi, February 20, 2019 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned the initial entity ratings to Faran Sugar Mills Limited (FSML) at ‘A-/A-2’ (A minus/A – Two). The long term rating signifies good credit quality with adequate protection factors. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ depicts good certainty of timely payment. Liquidity factors and company fundamentals are sound with good access to capital markets. Risk factors are small.
Outlook on the assigned ratings is ‘Stable’. Assigned ratings of FSML derive strength from its sponsor, Amin Bawany Group, an experienced business group of the country. Ratings reflect moderate financial and business risk profile along with adequate corporate governance framework.
Current ratings are constrained by inherent business risk present with volatility in sugar prices in particular and commodity prices in general. Depressed sugar prices in last few years have put pressure on sugar segment margins in the backdrop of regulated cane prices. However, bottom line of the company is also supported by revenues from its associates specifically from its ethanol unit. With anticipated growth in revenue from ethanol in view of currency depreciation, profits from the same will provide impetus to FSML’s profitability.
Leverage indicators of the company are considered adequate. Debt profile of the company largely comprises short term borrowing utilized to finance its working capital. Given that management has no plans for capital expenditure in the near future, leverage indicators are projected to remain sound. Ratings will be contingent on maintenance of sustainable performance metrics and adequate leverage indicators.
For more information, contact:
Director Compliance and Rating Analytics,
JCR-VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan