Karachi: VIS Credit Rating Company Limited has issued a preliminary rating of 'A1 (plim)' for Matco Foods Limited's proposed short-term sukuk worth PKR 2,500 million, which includes a Green Shoe Option of up to PKR 1,000 million. This rating suggests a strong probability of timely repayment of short-term obligations with effective liquidity factors. The rating, however, is preliminary and will be finalized following a review of the final legal documents. Matco Foods Limited currently holds entity ratings of 'BBB+/A2' with a stable outlook, as announced on January 6, 2025.
According to VIS Credit Rating Company Limited, Matco Foods Limited, founded in April 1990 and listed on the Pakistan Stock Exchange since February 2018, specializes in processing and exporting rice and related products under the "Falak" brand. The company operates five rice processing and milling plants in Sadhoke, Punjab, and Karachi, Sindh, and a corn starch production plant in Faisalabad, Punjab. Its product lineup includes basmati rice, rice glucose, rice protein, and gourmet salts, among others.
The proposed sukuk aims to raise PKR 2,500 million for a six-month period to support working capital needs. It offers a profit rate of KIBOR plus a spread, with principal and profit payments due at maturity through a bullet payment mechanism. The sukuk will be secured with GoP Ijarah or similar liquid security, covering 30% of the issue size upfront, with an additional 5% build-up each month during the last quarter.
In the fiscal year 2024, Matco Foods reported growth in topline performance, primarily due to increased export sales, which accounted for 59% of total sales. The rice category led revenue contribution, followed by corn starch, rice glucose, and Falak Spices. Despite revenue growth, profit margins were affected by high raw material costs and financial charges, leading to a negative bottom line. However, prospects for margin recovery are anticipated through interest rate cuts and diversification into additional product lines. While liquidity faced challenges due to high gearing and leverage ratios, financial metrics are expected to improve with projected volume growth and no major additional capital expenditures planned. Future ratings will depend on sustained sponsor support and recovery in financial metrics.