The Pakistan Credit Rating Agency Limited
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Raniya Tanawar

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PACRA Maintains Debt Instrument Rating of TPL Trakker Limited | Sukuk - l | May - 16

Rating Type Debt Instrument
Action Maintain Maintain
Long Term A+ A+
Short Term - -
Outlook Stable Stable
Rating Watch - -

The ratings incorporate TPL Trakker's ("the Company") prominent position in Pakistan’s tracking industry, emanating from its multifaceted product portfolio and superior technology infrastructure. This adds value to its topline; though incremental cash flows from new segments are critical for growth. The Company is adding more diversity to its product portfolio. As part of the Group's strategic vision to strengthen the Company's position, TPL Trakker is now embarking on new avenues through merger & acquisition of its associate entities. This is expected to augment its business and bring synergies to the Group. The developments precisely include acquisition of majority stake of Trakker Middle East LLC, and merger of TPL Maps and TPL Rupiya into TPL Trakker. Sponsor support is also reflected from the recent injection of PKR~600mln into the company to fulfil needs. Additionally, process of going listed on the PSX is also initiated, though currently at an initial stage. On the operational front, the management's pivotal focus lies on optimising the company's business cycle, mainly receivable turnaround time, through diversifying into products with better credit terms, i.e., Internet of Things (IoT) and Video Monitoring Solutions. The Company’s financial risk profile displayed a pressured outlook during the period under review, owing to rising debt financing on the backdrop of hiked interest rates. As a result, the company's bottomline also closed in red in 1QFY20. Keeping in view of the management's intent to raise short term, financing in the near future, financial comfort to reciprocate debt burden, particularly in the form of listing proceeds, is crucial - as would be a reliever to the debt profile of the Company. As a result, the quantum of security in PKR terms has reduced from the time of initial ratings. TPL Corp. has given an undertaking that it will keep additional security (shares of TPL Life) as unencumbered to cover up the deficiency until such time that the original security restores its valuation.
The ratings are dependent upon successful translation of the upcoming ventures into sustainable revenue streams and positive performance indicators. With the emergence of new short-term debt on the books, provision of reciprocal comfort in the related covenants, particularly security in the form of listing proceeds or otherwise is essential to uphold the ratings

About the Entity
TPL Trakker Limited (TPL) – a wholly owned subsidiary of TPL Corp Limited – is a vehicle tracking and fleet management solutions provider. TPL Corp is a ~62.41% subsidiary of TPL Holdings. The Board consists of eight directors; including the CEO. Mr. Sarwar Ali Khan is the CEO of the Company, having more than a decade of experience and has been associated with the Company for the last three years.

About the Instrument
The Company issued an unlisted Sukuk of PKR 600mln, on April 08, 2016, for a tenor of 5 years to meet its working capital and business expansion requirements. The issue has quarterly coupon payments payable @ one year KIBOR plus 3% based on Shirkat-ul-Milk arrangements. The security structure comprises, in addition to ranking charge on current assets, shares of TPL Properties Limited pledged with an Investment Agent with 20% margin - marked to market or at fair value (if unlisted). Repayment terms - Each repayment (principal + profit) has a grace period of 15 (fifteen) days after due date. In the event of delay in quarterly repayment from the due date, the Investment Agent is entitled to divest the pledged shares to enable repayment of principal plus profit within the assigned grace period.

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.