Armstrong ZE (Pvt.) Limited

RATING REPORT | Apr-26

Logo
Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
09-Apr-26 A- A2 Stable Initial -
About the Entity

Armstrong ZE (Pvt.) Limited, incorporated in Karachi, Pakistan on October 05th, 2018, operates as a tyre manufacturer. The Company’s governance structure consists of a four-member Board of Directors, headed by Mr. Azim Khan Yusufzai as Chairman. Executive management is led by the Chief Executive Officer - Dr. Murtaza Abbas Mooman, who oversees operations with the support of a qualified and experienced management team.

Rating Rationale

Armstrong ZE (Pvt) Limited (“Armstrong” or “the Company”) is engaged in the manufacturing of Passenger Car Radial (PCR) tyres. The Company is owned by the Hussain and Yusufzai families through HY Overseas Investment Holding Limited. The sponsors bring over five decades of experience in tyre manufacturing, distribution of international brands, and related automotive segments, primarily through ZAFCO Group Holdings Ltd. This provides operational and commercial support during the initial stabilization phase. The domestic tyre industry remains competitive, with imported tyres, both legal and smuggled, exerting persistent pricing pressure. This underscores the importance of cost efficiency, product quality, and brand positioning. Armstrong aims to penetrate the domestic replacement market while gradually expanding into select regional exports under the “Armstrong” brand, leveraging the sponsors’ established distribution network.
The Company operates a greenfield manufacturing facility spanning ~50.25 acres near Gharo Industrial Area, ~55 km from Jinnah International Airport. The total project cost was estimated at USD 93mln (~PKR 28bln), financed through a mix of international and local funding sources. This includes a USD 25mln facility from International Finance Corporation (IFC), PKR ~7bln in local Islamic borrowings, and sponsor support comprising ~PKR 2.8bln in equity and ~PKR 10.81bln in subordinated loans. IFC’s involvement lends strength to governance and financial discipline. Public announcement of CoD is anticipated any time soon. The management has represented that their products are being well received in the market. This was made possible because of sponsors already deep penetration into the market and knowledge of other markets. The plant is being rolled out in phases, with a planned capacity of 1.8mln tyres (Phase I), scaling to 2.7mln (Phase II), and reaching 4.3mln tyres at full capacity. Capacity utilization is expected to build gradually, supported by the Company’s expansion strategy and growth in the domestic demand, largely driven by the replacement market.
From a financial perspective, the Company exhibits a leveraged capital structure typical of greenfield projects, with total assets of ~PKR 29.3bln as of Dec’25. The Company expects to generate operational profits during the first 6months of production, while net profits would be generated during the FY27. Liquidity remains adequate, supported by sponsor backing, available banking lines, and working capital management. The debt profile is predominantly long-term, with a tenor of 7 years, providing repayment visibility. Debt servicing commenced in June 2025, with principal repayments starting from June 2026, aligning with the expected cash flow ramp-up. The Company benefits from Special Economic Zone (SEZ) status, providing tax exemptions until 2035, which supports cash flow retention during the early operational phase. Profitability and cash flow generation are expected to strengthen as production scales up, subject to market acceptance and operational execution. The equity base is deemed adequate, with a sponsor history to provide support in case of any future need. Inventory levels are sufficient to support approximately three months of production requirements.

Key Rating Drivers

The assigned ratings are contingent upon the Company’s ability to achieve projected capacity utilization, ensure timely operational stabilization, and maintain financial discipline. Achieving breakeven within the projected timeline and demonstrating sustainable profitability and cash flow generation remain key rating sensitivities.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Armstrong ZE (Pvt.) Limited


Rating Analysis

Logo
Profile
Legal Structure

Armstrong ZE (Pvt.) Limited ("Armstrong" or "the Company") by shares and incorporated in Karachi, Pakistan on October 05th, 2018. The Company is engaged in the business of trading, manufacturing and import/export of engineering goods and automobile accessories. 


Background

Armstrong ZE (Pvt.) Limited is a wholly owned enterprise engaged in the tyres manufacturing sector, leveraging over five decades of industry experience through its ownership by the Hussain and Yousufzai families. Armstrong Tyres was founded in 1912 by George F. Armstrong in a small New Jersey loft. By the early 1960s, Armstrong had become the 5th largest tyre manufacturer in the world. Purchased by Pirelli in the late 1980s, the brand Armstrong was aquired by ZAFCO Holdings in 2012 to drive its next phase of growth and legacy. 


Operations

The Company developed a large-scale greenfield production facility in Gharo, Sindh. With an extendable annual capacity of more than four  million tyres annually, the project represents a significant capital commitment of approximately USD 93mln. Financing is structured through a mix of international and local sources, including a USD 25mln loan from International Finance Corporation (IFC) and additional USD 25mln (at prevailing exchange rate) facilities from local banks. The project spans approximately 50.25 acres, initially covering the passenger car segment only. The Company leverages the already established domestic distribution network and procurement network from its Thailand and Indonesian manufacturing plants.


Ownership
Ownership Structure

The Company’s shareholding structure is dominated by Hussain & Yousufzai family through HY Overseas Investment Holding Limited, which holds 99.99% of the total shares, effectively centralizing ownership and control within one institution.


Stability

The Hussain family and Yusufzai family are of Pakistani Origin with over 50 years of experience in the tyre industry. The business is now led by the second generation of these families, with Zafar Hussain and Asif Yusuzai serving as Executive Directors.


Business Acumen

Both families have over five decades of experience in the tyre industry. The sponsors of the Company carry significant industrial experience and are actively involved in their respective roles. Through Zafar Enterprises, the sponsors have a well established distribution network for multiple tyre brands within Pakistan and through ZAFCO Group Holdings Ltd. the sponsors have a wide internationally recognized tyre manufacturing and distribution network. 


Financial Strength

The sponsors have demonstrated commitment and support for the Armstrong. The Company has obtained a subordinate loan from the sponsors, supporting their commitment towards the Company. 


Governance
Board Structure

The Company has a four-member board. Mr. Azim Khan Yusufzai acts as the board Chairman and Director, while Dr. Murtaza Abbas Mooman is the CEO. The board is dominated by the members from sponsoring family. Presence of indepedent directorship will prove beneficial for the Company. 


Members’ Profile

Mr. Azim Khan Yousafzai, the Company’s Chairman and the Co-founder, is one the pioneers in the sector with over five decades of experience. Mr. Asif Yousafzai holds the position of director in the Company. He is a graduate of University of Texas and is associated with the industry since 1993. Mr. Asif holds experience of more than 30 years of international tyre business with key expertise in Import and Distribution of tyres. Mr. Amir Abbas, the Company’s director is a graduate from University of Ottawa. He started his career with UAE distribution business and then moved on to setting up distribution centres in KSA and Kazakhstan alongside UAE.


Board Effectiveness

No board committees in place currently. The Board members directly look after the Company matters.


Financial Transparency

Grant Thornton Anjum Rahman Chartered Accountants, the Company’s external auditors, have expressed an unqualified opinion on the financial statements for the year ended June 30, 2025.


Management
Organizational Structure

The company’s organogram depicts a structured hierarchy led by the Board of Directors along with the CEO & Managing Director, Dr. Murtaza Abbas. Key functional areas include Supply Chain, Operations, Finance, HR, IT, Communications, and Security. Several management and assistant manager positions are clearly defined, ensuring departmental accountability and reporting clarity. The presence of dedicated roles in HR, Communication, and Administration demonstrates a focus on organizational development, employee engagement, and operational governance. Overall, the structure provides a comprehensive view of leadership and reporting relationships. While the framework is sound, filling key vacancies and strengthening mid-level management will be essential to achieving operational stability and supporting the company’s strategic and production objectives.


Management Team

The CEO - Dr. Murtaza Abbas’s corporate and business experience spans over 20 years in Pakistan and globally US and Germany. As a specialist in Strategy, Corporate, Business and Board Governance, his professional experience includes managing and leading the key strategic positions, in Siemens, ThalNova, and Lucky Cement. Dr. Murtaza Abbas holds a Doctorate in “Leadership in organizational change management”. He is also a Chartered Accountant and a fellow member Chartered Institute of Management Accountants (CIMA), UK. He also holds a Master’s degree in Business Administration from IBA with International Business major. Dr. Abbas is a member of Harvard Club by virtue of being a certified GMPian. He also attended Executive Development Program at Stanford University USA. The CFO - Mr. Khurram Tabba is a seasoned finance executive with extensive experience in corporate finance, financial leadership, and commercial operations. His career includes senior governance roles at multinational organizations. 


Effectiveness

No management committees are in place at the moment depicting a gap that needs to be satisfied for operational effectiveness.


MIS

The Company is in process of implementing SAP GROW as the ERP solution. SAP GROW is cloud based,  designed for fast-growing, mid-size industrial companies that need full SAP discipline without the heavy cost and complexity of traditional on-premise SAP.


Control Environment

The internal audit department is headed by a senior Chartered Accountant, Mr. Riaz Kapadia who has over 35 years of industry experience in Finance, Governance, Corporate Compliance and Regulatory Affairs. Alongside, the periodic reports from implemented MIS system provide additional control measures.


Business Risk
Industry Dynamics

The estimated revenue size of the Tyres Sector in FY25 stood at PKR~150bln (FY24: PKR~142bln). Key players in the tyres sector include Ghandhara Tyres and Rubber Company, Panther Tyres Ltd, Service Industries Ltd and Service Long March Tyres Pvt Ltd. The demand drivers of the tyres sector in Pakistan can be broadly segmented into the OEM and replacement markets where the average share of the replacement market is ~80%. The major raw material used in the production of tyres is rubber, both natural and synthetic. The market for radial tyres in Pakistan's trucks and buses segment has been experiencing steady growth over the years. The sector is experiencing a gradual shift towards radial tyres due to their superior performance, longer lifespan, better fuel efficiency, and improved safety.


Relative Position

The relative position of the Company is considered preliminary as the commercial production has just commenced in January 2026 with an installed annual capacity of 1.8mln tyres.


Revenues

As the Company remains in the early commercial phase of its tyre manufacturing operations, no revenue has been recognized during the reporting period. Significant progress has been achieved toward operational readiness, including completion of plant construction, installation of production equipment, and recruitment of key technical and managerial personnel. The revenue generation will be realized in accordance with the Company’s strategic sales and distribution plan.


Margins

During 1HFY26, the Company’s loss after tax clocked at PKR 31.9mln while FY25: PKR 28mln profit was driven by the markup received on deposits/investments that clocked at PKR 165mln as other income.


Sustainability

The business model of the Company is skewed towards passsenger cars' replacement market only while utlizing the already established domestic distribution network and augmenting the profit margins as a tyre manufacturing business. The strategic placement of the manufacturing plant in a Special Economic Zone along with being a Greenfield project provides the Company with tax holiday and exemptions.


Financial Risk
Working capital

As of Dec 31, 2025, the Company’s trade assets stood at PKR ~1.31bln (FY25: PKR ~731.6mln), primarily comprising raw material inventory accumulated in anticipation of commercial operations. Given the pre-operational stage during CY25, the working capital cycle remains largely untested, with limited contribution from trade receivables or finished goods. Going forward, working capital dynamics are expected to evolve in line with the scale-up in production and sales, with inventory optimization and receivables management remaining key areas to monitor.


Coverages

During FY25, coverage indicators remain unestablished, as the Company had not commenced commercial operations for the majority of the year. Consequently, cash flow generation was not reflective of steady-state operations. Following the commencement of commercial production in January 2026, coverage metrics are expected to build gradually, supported by revenue generation and improving operating cash flows. The Company’s ability to generate sufficient cash flows to meet its financial obligations will remain contingent upon achieving projected capacity utilization and maintaining margins.


Capitalization

The Company operates with a moderately leveraged capital structure, with leverage recorded at approximately 49.9% as at Dec 31, 2025. The capital structure is supported by a sizeable equity base alongside subordinated sponsor loans, which provide additional financial flexibility and comfort to lenders. Going forward, capitalization indicators are expected to evolve with the planned conversion of subordinated debt into equity and the gradual build-up of retained earnings, subject to the Company’s ability to achieve projected profitability.
 
 

Apr-26

www.pacra.com

Armstrong ZE (Pvt.) Limited


Financial Summary

Logo

(PKR mln)


 Dec-25
6M		 Jun-25
12M		 Jun-24
12M
A. BALANCE SHEET
1. Non-Current Assets 24,660 20,927 4,761
2. Investments 0 0 948
3. Related Party Exposure 0 0 0
4. Current Assets 4,596 5,971 2,341
a. Inventories 1,309 732 0
b. Trade Receivables 0 0 0
5. Total Assets 29,255 26,897 8,050
6. Current Liabilities 1,654 2,204 205
a. Trade Payables 1,428 0 0
7. Borrowings 13,779 10,880 0
8. Related Party Exposure 0 0 281
9. Non-Current Liabilities 0 0 0
10. Net Assets 13,823 13,813 7,564
11. Shareholders' Equity 13,823 13,813 7,564
B. INCOME STATEMENT
1. Sales 0 0 0
a. Cost of Good Sold 0 0 0
2. Gross Profit 0 0 0
a. Operating Expenses (58) (105) (38)
3. Operating Profit (58) (105) (38)
a. Non Operating Income or (Expense) 27 152 37
4. Profit or (Loss) before Interest and Tax (31) 47 (1)
a. Total Finance Cost (1) (0) (0)
b. Taxation 0 (19) (2)
6. Net Income Or (Loss) (32) 28 (3)
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) (49) (24) (13)
b. Net Cash from Operating Activities before Working Capital Changes (50) (25) (14)
c. Changes in Working Capital (1,710) (154) 75
1. Net Cash provided by Operating Activities (1,760) (178) 61
2. Net Cash (Used in) or Available From Investing Activities (3,722) (15,214) (4,961)
3. Net Cash (Used in) or Available From Financing Activities 2,940 17,101 7,044
4. Net Cash generated or (Used) during the period (2,542) 1,709 2,144
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) N/A N/A N/A
b. Gross Profit Margin N/A N/A N/A
c. Net Profit Margin N/A N/A N/A
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) N/A N/A N/A
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] N/A N/A N/A
2. Working Capital Management
a. Gross Working Capital (Average Days) N/A N/A N/A
b. Net Working Capital (Average Days) N/A N/A N/A
c. Current Ratio (Current Assets / Current Liabilities) 2.8 2.7 11.4
3. Coverages
a. EBITDA / Finance Cost N/A N/A N/A
b. FCFO / Finance Cost+CMLTB+Excess STB -0.2 -0.2 N/A
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) -139.5 -446.4 -21.1
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 49.9% 44.1% 3.6%
b. Interest or Markup Payable (Days) N/A N/A N/A
c. Entity Average Borrowing Rate 0.0% 0.0% 0.0%

Apr-26

www.pacra.com

Armstrong ZE (Pvt.) Limited


Rating Scale

Logo

Apr-26

www.pacra.com

Armstrong ZE (Pvt.) Limited


regulatory disclosure

Logo
  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
    6. PACRA has established policies and procedures governing investments and trading in securities by its employees and for monitoring the same to prevent insider trading, market manipulation, or any other market abuse. (Chapter III; 11-B-(g))
  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
  7. Proprietary Information
    1. All information contained herein is considered proprietary by PACRA. Hence, none of the information in this document can be copied or otherwise reproduced, stored, or disseminated in whole or in part in any form or by any means whatsoever by any person without PACRA’s prior written consent.

Apr-26

www.pacra.com