PACRA Maintains Entity Ratings of Exide Pakistan Limited | Assigns Positive Outlook

EXIDE Pakistan Limited (“EXIDE” or “the Company”) is a pioneer in the battery industry; it has had a presence in Pakistan since 1953. With a strong legacy of over 6 decades, EXIDE offers a wide range of batteries, catering to the demand for automotive, industrial, and household portable energy backup. The strength of the local lead acid battery industry is preliminarily derived from (i) the Replacement market related to automotive and power backup solutions (ii) the Electricity shortfall situation during the summer season (load-shedding) (iii) Automobile (OEMs) sales. Pakistan Automotive Manufacturers Association (PAMA) recent statistical data revealed ~54% decline in the sales of passenger cars, trucks & buses, and Jeeps & pickups whereas tractor sales dropped to ~47% during FY23 as compared to FY22. Deterioration in demand was mainly attributable to hyperinflation that led to reduced purchasing power of the consumers, PKR depreciation, and elevated policy rates which resulted in tapering off in vehicle financing. However, during FY23, the topline of the company recorded growth of ~63% compared to last year, mainly attributable to the price hike on the back of inflation, as the volumes showed a marginal dip of ~6.7% as the company’s sales predominantly emerge from the replacement segment. Margins also improved significantly, as the GP Margin increased to 20.3% as of Sep-23 (14.4%, Mar-23) while the NP Margin surged to 6.0% (3.2%, Mar-23) as the company was able to pass on the impact of elevated costs and the raw material (lead) prices decreased during FY23. The market share is expected to stand around ~ 20%. On the flip side challenges like stiff competition and low margins are expected to sustain in the future. The Company is well aware of the latest technological shift within the battery sector and has introduced maintenance-free batteries and tubular batteries to cater to the associated demand. Going forward, the company has appropriate plans intact for the adoption of the latest trends. As a part of product diversification, EXIDE is also offering end-to-end solar power backup solutions for industrial/household customers and will build its market share gradually. The sponsors have a good understanding of the business and the Company is led by an experienced management. The financial profile of the Company is demonstrated by an adequate working capital cycle, and comfortable cash flows & coverages. Capital structure is moderately leveraged, where short-term borrowings dominate the debt portfolio to fund the working capital requirements. The borrowings mix is expected to remain unchanged as there is no CAPEX planned for the near future.
Ratings are dependent on the sustainability of the growth trajectory in the topline and profitability matrix while retaining sufficient cash flows, coverages, and market share along with improvement in the sales volumes. However, adherence to maintaining its debt metrics at an adequate level is a prerequisite.

About the Entity
EXIDE Pakistan Limited was incorporated in Pakistan in 1953 as a private limited company in association with Chloride Group PLC of the United Kingdom and was listed on the Karachi Stock Exchange in 1982. EXIDE's majority stake is held by the Hashwani Family (75%) while the financial institutions and the general public hold approximately 25% of the company shares. Over the years, no major change has been observed in the shareholding structure. Mr. Arif Hashwani is the Chairman of the Board while Mr. Arshad Shahzada is the Managing Director/CEO of the company.