Lahore, PACRA has assigned its initial rating to Guard Agriculture Research and Services (Pvt.) Limited, reflecting the company's expanding profile within the Agriculture and Food sector. While rice, a staple food in Pakistan, has experienced a downturn in production due to recent floods, the company continues to navigate its way, selling packed basmati both locally and internationally. Additionally, the company has embarked on a significant partnership for chili cultivation, which, combined with its solid financial indicators, solidifies its growing presence in the industry.

According to a news release by PACRA, rice holds a significant place in Pakistan's agricultural landscape, contributing 3.5% to agriculture value addition and 0.7% to the GDP. The majority of the rice consumed is basmati, at around 95%. However, in FY23, rice production took a hit, declining by roughly 17% to stand at about 7.4 million MT, largely due to the floods in August 2022 which resulted in crop losses of around 20-25%. This adverse situation also impacted rice exports, with a decrease from approximately USD 2.5 billion in FY22 to around USD 2.1 billion in FY23, pressuring the industry’s overall revenue. Nevertheless, the depreciation of the rupee provided some relief to exporters. The industry is grappling with challenges like shrinking arable land and an increasing population, which are putting a strain on food supplies. However, a ray of hope is seen in the increasing trend towards hybridization in crops like corn, paddy, and vegetables, which is anticipated to drive growth in the sector.

Guard Agriculture Research and Services (Pvt.) Limited is making notable strides in this environment. The company sells its packed basmati rice under its brand name, exporting to 45 countries spanning continents from Asia to Australia. A significant move in its portfolio is a collaboration with a Chinese partner to cultivate 200,000 acres for chili, focusing on enhanced seed breeding and research on high-quality chili seeds. Financially, the company showcases a rising top-line and maintained healthy margins, although they are modest when compared to industry competitors. The company’s working capital management was deemed adequate, with net working capital for FY23 at 84 days due to judicious management of debtors and creditors. The slight decline compared to the previous fiscal year arises from elevated inventory stocks, a cyclical characteristic of the business. With a strong capital structure, the company's leverage stood at approximately 20% for FY23. The company manages its working capital needs through short-term borrowings and possesses substantial equity for long-term project financing.

PACRA emphasizes that the ratings for Guard Agriculture Research and Services (Pvt.) Limited rely heavily on maintaining brand reputation and customer satisfaction. It also underscores the importance of financial discipline, efficient debt management, and the positive outcomes of future endeavours for the stability of these ratings.