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's prominent position in Pakistan’s tracking industry, emanating from its multifaceted product portfolio and superior technology infrastructure. This is adding value to the top line; though incremental cash flows from new segments are critical for growth. Company has added more flings to its product portfolio in order to sustain in a market that has maturity level and is facing a demand shift. The company is strategizing to optimize the working capital cycle through diversifying its product portfolio; including internet of things and hardware - auto business. Moreover, company having an injection of PKR ~600mln from its sponsor, which will be utilized for TPL Trakker's operations, of which PKR ~500mln would be allocated for expansion and enrichment of its own product slate. TPL Trakker is projecting that it will muster a sizable revenue even if it continues to garner a fraction of the expected container movement. The company’s rising debt financing has kept its financial profile under pressure. Keeping in view of muted growth in revenue and loss suffering bottom line for the period under review; outcome of upcoming projects, yet to unfold, and adherence to financial discipline is crucial.
There is dilution in the valuation of pledged shares, due to prevailing market conditions, as a result, the quantum of security in PKR terms has reduced from the time of initial ratings. TPL Corp has given 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. Company’s high financial charges, due to significant increase in key interest rate of the country, have deteriorated the coverages, also impacted by reduced profit margins

The rating is dependent on, possible inflows from the new product lines and strategic business avenues, which are expected to provide much needed support. Adherence to good financial discipline while harnessing working capital management and strengthening debt servicing capacity is vital.

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 57.09% subsidiary of TPL Holdings.
The Board consists of four directors; all four of them including the CEO, are representatives of TPL Corp
Mr. Sarwar Ali Khan is the CEO of the company. Mr. Khan, having more than two decades of experience, has been associated with the company for the last two years. He is directly reportable to the Group CEO, Mr. Ali Jameel.

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