Press Release

VIS Reaffirms Entity Ratings of Faran Sugar Mills Limited

Karachi, October 31, 2022: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of Faran Sugar Mills Ltd (‘FSML’ or ‘the Company’) at ‘A-/A-2’ (Single A minus/Single A-Two). The medium to long term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk factors are considered variable if changes occur in the economy. The 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. Outlook on the assigned ratings is ‘Negative’. Previous rating action was announced on August 11th, 2021.

The assigned ratings take into account satisfactory operating track record, and extensive experience of sponsors in the sugar sector. VIS classifies the business risk profile of Sugar sector as ‘Medium’, which incorporates high cyclicality medium competition, capital intensity and technology risk, low energy sensitivity and high regulatory risk.
Business risk profile of FSML is diversified, given additional revenues from ethanol sales through Unicol Limited, which are sizable. Given the sale of Uni Food Industries recently, which was a loss making entity, and better profitability metrics, the Company’s cash flow coverage indicators have improved. Given the stress on profitability, the Company’s reliance on debt financing increased, which is reflected in terms of increase in gearing. Going forward, the management has envisaged the gearing to reduce on the back of improved profitability outlook. The rating incorporates improvement in cash flow coverage indicators and envisaged improvement in gearing.
The outlook on the assigned ratings remains negative on account of flood related losses, which is expected to affect sugarcane availability in Sindh and present operational challenges for Sindh-based sugar companies. VIS will continue to monitor the developments in this regard on an ongoing basis. The assigned ratings remain dependent on maintenance of business & financial risk metrics in line with the threshold for the assigned rating.
For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 215) or the undersigned (Ext: 207) at (021) 35311861-66 or email at info@vis.com.pk.







Sara Ahmed
Director


Applicable Rating Criteria: Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .