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The Pakistan Credit Rating Agency Limited
Press Release

Date
19-Feb-20

Analyst
Usama Liaquat
usama.liaquat@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 Maintains Entity Ratings of Toyota Jinnah Motors (Pvt.) Limited

Rating Type Entity
Current
(19-Feb-20 )
Previous
(24-Aug-19 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes -

Car dealership (authorized) hinges on the robustness of principal (auto/ manufacturer, assembler). The strength of car dealer is contingent to the relatively positioning of principal in the respective market. There is a pre-set qualitative & quantitative criteria – imposed by principal on the dealer’s network. The rating takes comfort from Toyota Jinnah’s alliance to Indus Motor Company – owned by Habib Group, Toyota Motor Corporation and Toyota Tsusho Corporation. Toyota Jinnah Motors (TJM) holds 4S car dealership. Toyota Jinnah has built a sustainable position in the competitive industry of Pakistan. Toyota Jinnah has managed to sustain its volumes as well as the profits, in lackluster market. Toyota Jinnah Motors has seen rising business in its early years of operations. It is important to sustain the growth while managing the rising competition, which is more of the principal’s domain. The profitability is being supplemented by the 'After Sale' segment - reporting net profitability for the dealership and covering its operational cost. Hence limiting and/or cushioning the unforeseen drag on the risk absorption capacity. The dealership with its brand name perpetuates relative position in the Customer Relationship. The financial risk profile of Toyota Jinnah Motors is adequate. Company has substantially availed its short term running finance limit to finance its working capital needs. Company intends not to raise any long term and short term debt borrowing in future.
The ratings are dependent on the management's ability to sustain its business profile while benefiting from positive demand fundamentals; financial discipline/transparency is crucial. Moreover, strengthening of governance framework is pivotal for any growing business concern. One of the company's key sponsor is planning to divest its stake in the Company. The final decision regarding this is yet to be announced. Considering the expected change in ownership structure and possible change in the Company's policies, PACRA has placed the entity ratings of Toyota Jinnah on ‘Rating Watch'. Smooth transition and upholding the business and financial matrix during the transition is important.

About the Entity
Toyota Jinnah Motors, incorporated on Jan 17, 2014 as a private limited company and inaugurated its operations on 2nd June 2016. The Company was incorporated to set up 3S authorized dealership (Sales, Service and Parts) of Indus Motor Company Ltd, the partners of Toyota Motor Corporation Japan. The Company is owned by sponsoring family. Mr. Khursheed Ahmad is Chairman and his nephew Mr. Asad Munir is the CEO of the company.

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.