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The Pakistan Credit Rating Agency Limited
Press Release

Date
01-Feb-21

Analyst
Bazah Tul Qamar
bazahtul.qamar@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 KSB Pumps Company Limited

Rating Type Entity
Current
(01-Feb-21)
Action Initial
Long Term A+
Short Term A1
Outlook Stable
Rating Watch -

The ratings reflect leading position of KSB Pumps Company Limited ("KSB Pumps" or "the Company") as a premier manufacturer of pumps, valves and related services in Pakistan. Ratings incorporate KSB Pumps’ association with KSB SE & Co. KGaA, Germany (KSB Germany), which is one of the top 5 pump manufactures of the world. The Company has a state of the art manufacturing facility certified by KSB Germany as MBK – Made by KSB – and a foundry with backward integration capability which was enhanced and upgraded in 2017. This is supplemented by robust systems and controls with access to KSB Germany for licensing and technical knowledge. Resultantly, the Company enjoys competitive advantage in domestic market as well as for exporting to other companies across the world including group companies. The Company has leading market share in the pump industry, a testament of its superior manufacturing quality and after-sale services. The Company’s revenues are mainly driven through public sector and private sector projects, although public sector proportion has decreased in recent years. However, the Company takes the advantage of foreign funded projects which ease the pressure on receivables of the Company. Private sector industrial pumps and exports made up a significant part of revenues as the Company increased the exports to its group companies by leveraging its MBK certification and strong expertise. Covid-19 has impacted the Company’s operations and demand to an extent but in 3QCY20 company's revenues took a boost and it sustained its Pre-COVID market position. KSB Pumps enjoys strong margins at the gross level but remain susceptible to currency risk as ~25% of raw material is composed of imported material. Higher exports will mitigate this to a large extent. KSB Pumps has an adequate financial profile characterized by moderately leveraged capital structure and coverages. The working capital of the Company is stretched due to long overdue receivables, mainly from the government against which significant collection has been made during 2nd and 3rd quarters. SBP initiative to defer principal repayments for one year has provided relief to cashflows and, in turn, coverages. Company's association with KSB Group is considered positive. Ratings also take comfort from strong group support, technically and financially, and from its eligibility, under KSB group guidelines, to obtain intercompany loans and utilize umbrella credit facilities created by the parent company. However, during its entire history, the company never resorted to borrowing from Germany.
The ratings are dependent on the Company's ability to sustain its core margins and profitability. Meanwhile, increasing exports and diversifying the business profile will have a positive impact. Prudent working capital management and maintaining strong coverages is important.

About the Entity
KSB Pumps is a public limited company, incorporated in July 1959 and got listed in 1971 on Pakistan Stock Exchange. KSB Pumps is a subsidiary of KSB SE & Co. KGaA, Germany with ~58.89% of the shareholding. KSB SE & Co. KGaA, Germany is a leading international supplier of pumps, valves and related systems for the Industrial applications. The group has an international presence in almost 120 countries in Europe, North America, South America, Asia, Australia and Africa. NIT is the second largest shareholder with 8.57% stake. Rest of the shareholding is divided among Corporates, Financial Institutions and General public. KSB Pumps manufacturing facility is located at Hassanabadal. The board comprises eight-member and is chaired by Dr. Sven Baumgarten. The CEO, Mr. Mohammad Masud Akhtar is an Electrical Engineer by profession and has a Master’s degree in Manufacturing Systems Engineering from Pennsylvania USA. He is supported by an able team of professionals.

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.