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The Pakistan Credit Rating Agency Limited
Press Release

Date
06-Mar-19

Analyst
Muhammad Obaid
muhammad.obaid@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 Revises Entity Ratings of EXIDE Pakistan Limited

Rating Type Entity
Current
(06-Mar-19)
Previous
(27-Dec-18)
Action Downgrade Maintain
Long Term BBB A-
Short Term A3 A2
Outlook Negative Negative
Rating Watch - -

The ratings reflect the squeeze in the profitability of the company - both at the gross and net level. This is an industry wide phenomenon. The competition is intense in the backdrop of reduced demand and high cost of doing business. With a considerable improvement in the power sector, demand of UPS batteries is diminishing. Decreased demand coupled with entry of new players has intensified the competition. Rationalization in the price - upward trend - is needed to ensure sustainability in future. Demand may positively benefit when CPEC related projects pick up. The big three players hold about ~75% of the market while the remaining is held by numerous smaller ones. Success is pivotal on maintaining market share. The sponsors have a good understanding of the business. EXIDE’s leveraging has peaked and the company does not intend to raise long term debt. Debt servicing capacity is deteriorated on the backdrop of eroded margins. EXIDE is a pioneer in the battery industry; it has a presence in Pakistan since 1968. Demand for batteries is generated through two segments (i) OEMs and (ii) replacement market.
The negative outlook captures the deteriorated business condition of the sector having negative impact on the players operating in this industry. The ratings are dependent on the revival of subdued business volumes and impacted profitability. Prolonged downturn amidst market oversupply can have a detrimental effect.

About the Entity
EXIDE Pakistan Limited was incorporated in Pakistan in 1953 as a private limited company in association with Chloride Group PLC of United Kingdom. EXIDE got listed on the Karachi Stock Exchange in 1982. It is considered as a pioneer and one of the three major players of battery industry in Pakistan.
EXIDE is majorly owned (75%) by the three brothers from Hashwani family. Mr. Altaf Hashwani is the Chariman of the Board. Mr. Arshad Shahzada is the Chief Executive Officer of the company. He has overall experience of ~53 years and has been associated with the company for ~32 years.

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.