PACRA Assigns Initial Entity Ratings to Hi-Tech Edible Oils (Pvt.) Limited

September 26, 2018: Pakistan Credit Rating Agency maintained its Entity Ratings for Hi-Tech Edible Oils at ‘BBB’ for the Long Term and ‘A2’ for the Short Term, with a ‘Stable Outlook’ assigned to the firm.

According to the rating agency, the ratings reflect long association of Hi-Tech Edible Oils with Hi-Tech Group; well-known player of poultry industry.

Hi-Tech is primarily operating in two segments, that is, Edible Oil (well structured) and Poultry Feeds (fragmented). Company's turnover increased during past few years, owing to the plant expansion in two phases, reported the agency.

“Although, margins remained on the lower side due to risk related to the price fluctuation depending upon the demand supply gap. Higher costs are majorly related to raw material procurement, which is being imported”, the report added.

As per the press release, the company is locally selling both edible oil and poultry meal as of now. However, some export avenues may be explored by management in future.

“Going forward, company’s sales are expected to improve owing to increased installed capacity”, it added.

Inventory management system and related efficiencies would require attention which are being effected by the long lead time. Being an importer of oil seeds (Soybean) in Pakistan, there is an inherent risk involved of currency fluctuations and prices of product, left open to market forces.

Financial risk profile of the company is characterised by leveraging due to high short term borrowing related to working capital.

The report suggests that the ratings are dependent on relative positioning of the company and its ability to prudently manage the liquidity and debt profile of the company, particularity working capital, while improving business margins. The company plans no long term debt. Effective changes in governance framework would be good for ratings.

Hi-Tech Edible Oils (Pvt.) Limited, is a venture of Hi-Tech Group; well-known player of Pakistan’s poultry industry. Hi-Tech Edible oil was incorporated in 2002 and commenced business in 2006 as Private Limited Company. Hi-Tech Edible Oils (Pvt.) Limited is primarily engaged in the process of seed filtering and crushing, selling edible oil and meal.