Press Release

VIS Reaffirms Entity Ratings of Deharki Sugar Mills (Pvt.) Limited

Karachi, July 27, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Deharki Sugar Mills Limited (DSML) at ‘A-/A-2’ (Single A Minus/Single A-Two). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely repayment, sound liquidity factors and good company’s fundamentals. Outlook on the assigned ratings is stable. Previous ratings action was announced on April 27, 2020.

The assigned ratings take into account its association with JDW Sugar Mills Limited (JDWS), the largest sugar manufacturer in the country, and longstanding relations with the sugarcane growers due to regular payments made through their bank accounts and sugarcane procurement on better prices vis-à-vis minimum support price. Being a wholly owned subsidiary of JDWS, the company draws various synergies from its parent including operational integration. The risk profile of sugar sector is considered high given inherent cyclicality in the crop levels and raw material prices. While increase in cane crop has positively impacted sugar production during MY21, the said impact has been diluted on account of lower recovery rates due to early start of the crushing season. While narrow demand and supply dynamics may lead to high sugar prices, government intervention to control prices is expected to remain intact.

During HY21, the company recorded recovery in revenues and profit after witnessing a decline in the previous year. Increase in revenues was mainly supported by increase in selling price of sugar and molasses largely in line with highest-ever sugarcane procurement price. Despite overall pressure on cash flows, the company’s capacity to meet its financial obligations remained adequate. Going forward, leverage indicators are expected to improve with the internal capital generation and offloading of sugar inventory by end-FY21. Ratings remain dependent on the cyclicality of sugarcane production and prices along with maintenance of threshold financial indicators. VIS will continue to monitor developments regarding inquiries being conducted against the parent company of DSML as an outcome of the ‘Inquiry Committee’ constituted by the Prime Minister of Pakistan and will incorporate the outcome in rating action accordingly.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 201) or email at

Faryal Faheem Ahmed
Deputy CEO

VIS Entity Rating Criteria: Corporates (May 2019)

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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited