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The Pakistan Credit Rating Agency Limited
Press Release

Date
10-Oct-18

Analyst
Muhammad Nadeem Sheikh
nadeem.sheikh@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Entity Ratings to The General Tyre & Rubber Company of Pakistan Limited

Rating Type Entity
Current
(10-Oct-18)
Action Initial
Long Term A+
Short Term A1
Outlook Stable
Rating Watch -

The ratings are reflective of the company's strong foothold in its respective industry comprising 4 wheeler tyres for cars, LCVs, tractors, buses and trucks. The company is the sole manufacturer of passenger car radial tyres catering to the OEMs market. Two wheeler market, in contrast, displays a broader competitive landscape wherein General tyres is gradually building up its market share to compete with other local players. A well-devised governance framework alongside experienced management team is considered positive. Technical collaboration with Continental AG (German tyre company) assures adherence to the quality standards, which remains to be the core competence of the Company. Additionally, growing demand for tyres with emergence of new entrants in the automobile sector should bode well for business prospects of the company. Despite volatility in macro-economic conditions, the company's topline represented a steady growth. Margins remained relatively healthy at the gross and net level, though witnessed a constraint in comparison to previous periods on account of currency devaluation and increased cost of doing business. The company's financial risk profile is reflected by comfortable coverages and slightly leveraged capital structure. Association of General Tyre with Bibojee Services (Private) Limited and Pakistan Kuwait Investment Company Limited is a consideration.

The ratings are dependent on the management's ability to uphold the company's leading position, while benefiting from positive demand fundamentals; Perceptive financial policy to rationalize capital structure amidst expansion is critical. Meanwhile, sustenance of margins in context of certain duties/tax protections is important.

About the Entity
The General Tyre & Rubber Company of Pakistan Limited was incorporated in 1963 under the Companies Act, 1913 (now Companies Act, 2017) and got listed on Karachi Stock Exchange in 1982. The company is engaged in the manufacturing and marketing of a complete range of automotive radial tyres. The company currently operates with an annual production capacity of ~3.5mln tyres and ~3.6mln tubes and is the only local manufacturer of passenger car tyres in the country.

The company is majorly owned by two sponsors - Bibojee Services (Pvt) Limited and Pak-Kuwait Investment Company Limited (PKIC), holding ~28% and ~30% shares respectively. The CEO - Mr. Hussain Kuli Khan has an overall experience of ~22 years. An able management team assists him.

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.