PACRA Maintain Entity Ratings of Loads Limited | RW and Negative Outlook

Pakistan's auto industry is a part of large scale manufacturing, accounting for ~76% of the overall value of manufacturing activities within the country. The auto industry is considerably fragmented, holding over ~2,000 vendors in the OEM market. The demand is primarily driven by auto sales and are met through OEMs, replacements and export markets; while, the remaining is met through imports. However, during FY23, production level and thus, sales of auto industry posted a decline, primarily due to import restrictions imposed by the SBP; encompassing essentials like CKD and SKD kits. Overall the sector’s margins remain exposed to inclining inflation, interest rates, and exchange rate fluctuations.
Loads Limited ('Loads' or the Company') holds association with Treet Corporation. The assigned ratings reflects the Company's position in the niche market of automotive products. Loads is a prominent automotive parts manufacturer catering to Original Equipment Manufacturers (OEMs) and Replacement/After Market (RM). Persistent economic instability, inflationary pressures, and exchange rate fluctuations has impacted the overall performance of the Company. Loads maintains an adequate topline, despite a decline of ~42%. Profitability was impacted due to impairment booked on the markup receivable from Hi-Tech Alloy Wheel Limited ('Hi-Tech'), a subsidiary. The Company holds significant investment in Hi-Tech and its commissioning got delayed due to economic uncertainty and downturn in the auto sector. The Company’s envisions to strategies its financial risk, however, remains susceptible. Expected sale of assets may bring in substantial liquidity so as to manage the Company's repayment schedule.
Negative Outlook assigned to the Company reflects a persistently weak financial performance and position. A cautious effort is required to keep the financial profile intact. It is crucial for the Company to overcome its working capital challenges and hold the declining in equity base.
The ratings are dependent on the Company’s ability to improve its business risk vis-à-vis financial risk profile along with sustainable margins. Cautious management strategies amidst challenging industry environment are pertinent. Moreover, prudent management of financial affairs remains important.

About the Entity
Loads Limited ('the Company') was established in 1979 as a private limited company and got listed on Pakistan Stock Exchange in 2016. The Company is mainly engaged in the production of auto parts namely: exhaust systems, metal sheet components and radiators. Major stake of ~41% is held by Mr. Syed Shahid Ali. Mr. Shahid chairs the Company's BoD; while, Munir K. Bana heads as the CEO, and is assisted by team of experienced professionals.