Rice Industry Overview and Outlook

RICE | LOCAL INDUSTRY Financial Risk - BORROWINGS Rice is a moderately leveraged Sector. Borrowings of the Rice Exporters majorly comprise Short Term Export Refinance Facilities (Scheme-II) (3% Mark-up), keeping interest cost low. As per SBP's report on Credit Loans, total borrowings of the Rice Sector clocked in at PKR 9bln in FY20 (PKR~11bln FY19). Financial Risk of the Rice Sector Remains Low. WORKING CAPITAL Rice Working capital pattern is aligned to its crop cycle. Most of the Exported Rice is majorly offloaded following December, after the harvesting season. Milled Rice stock levels at December end are, therefore, generally high, which are largely offloaded in the first quarter of the next year. On the receivable front, all Rice Exports are secured against either Letter of Credit (LC) or Cash Against Document (CAD). The turnaround time for receivables has increased for the Sector ever since export inclination has moved from China to the African countries, due to the increased lead time. However, better prices from the African Region earn better inflow. Most of the Working Capital needs of the Sector are met through Short Term Borrowings - Export Refinance Facilities (ERF). - Source: PACRA database 22 22 $ PACRA

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