The Pakistan Credit Rating Agency Limited
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Muhammad Atif Chaudhry

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PACRA Assigns Preliminary Ratings to Loads Limited | ICP-1 | TBI

Rating Type Debt Instrument
(27-Sep-22 )
Action Preliminary
Long Term A
Short Term A1
Outlook Stable
Rating Watch -

The ratings reflect the niche industry positioning of Loads Limited ("Loads" or the "Company") in the auto parts industry. With a presence of up to four decades in the automotive industry, the Company has established a considerable forte in the domestic market along with a committed client base. The Company employs its specific business model i.e., working through subsidiaries catering to the current product suite. Loads Limited has an admirable market share (~95%) in the sales of the exhaust system, strength in this segment emanates from exclusive agreements signed with the leading OEMs in the country and technical collaborations with international players. Loads Limited is gearing towards further diversification and is in the process of completing an Alloy Wheels plant under Hi-Tech Alloy Wheels Limited. The plant completion is advancing however, certain challenges like rupee devaluation have interrupted the momentum but management is committed to resolving all issues including an arrangement of the remaining portion of requisite funding.
On the financial profile side, the Company is managing its leveraging on average within ~42% since Jun'19. However, in order to meet the working capital requirements, the Company is going to issue Islamic Commercial paper (ICP) amounting PKR 500mln. Despite being unsecured, the structure of the ICP is designed in such a way that for timely payment of principal and rentals at maturity, an issuing & paying account (IPA) would be maintained with IP Agent (Bank Islami). To ensure the timely funding of IPA, the Company will issue irrevocable standing instructions to Habib Metro Bank to entrap the throughput of sales to Indus Motor (One of the major customers of Loads) maintained with the Bank and divert the cash receipts to the IPA.
The ratings are dependent on the management's ability to sustain the financial risk profile while embarking into the new business venture. Timely repayment and compliance with instruction letter and term sheet covenants would remain critical.

About the Entity
Loads Limited was established in 1979 as a private limited company. The company was converted to a public limited company in 1994 and was listed on Pakistan Stock Exchange in 2016. The company is engaged in the manufacturing of auto parts for passenger cars, buses, tractors and trucks while also participating in the spare parts market. Sponsored by Treet Corporation Limited, a group dealing in razor blades, soap, batteries and motor cycles, the company has a seven-member board of directors. The board includes two Non-Executive Directors including the Chairman, Mr. Syed Shahid Ali. The CEO - Mr. Munir K. Bana, a Chartered Accountant, has been associated with the company for 26 years. An able management team assists him.

About the Instrument
Loads Limited is in the process of issuing privately placed, unsecured Islamic Commercial Paper (ICP) up to PKR 500mln (plus a green shoe option of up to 40% of the base issue size) to finance the company’s working capital requirements. The tenor of ICP will be up to 6 months and will be carrying a profit rate of 6MK+200bps. Rental payment and principal will be realized at the time of maturity. The instrument would be unsecured.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.