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The Pakistan Credit Rating Agency Limited
Press Release

Date
30-Sep-19

Analyst
Muhammad Usman
muhammad.usman@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 Ravi Automobile (Pvt.) Limited

Rating Type Entity
Current
(30-Sep-19)
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

Ravi Automobile (Pvt.) Limited (Ravi) operates in two segments of the automotive industry, i.e., manufacturing components (parts) for motorcycles and tractors, and assembly of complete motorcycles. The ratings draw comfort from the diversity in Ravi's business streams and the historical association of its sponsors to the related business segments. This is asserted through the group's expansion into eight separate entities on a timeline basis of which Infinity Engineering and Ravi Spherocast represent the major investments and the augmented strength of the group. The ratings also incorporate the growth trajectory of Ravi in the components business, claiming the larger portion of the turnover. The company has built a formidable position therein, given its long standing history. Governance practices, as endorsed by the Code, desire improvement. Meanwhile, further refinement in management structure would be of benefit in the long horizon. The sales reflect top party concentration. The sponsors are of the view that the concentration is acceptable since decades-long relationships exist. There is no major history of bad debts. The management has committed to certain steps which will be of benefit to the control environment and governance practices of the company. Ravi's financial risk profile is reflected by strong coverages as debt profile remains low, majorly constituting short term borrowings. Working capital cycle is longer, which the management represents, has been shortened due to increasing focus on the component business. Challenging times are ahead. Comfort is drawn from the need driven nature of the business, backward integration and synergies in the overall group. The management does not intend to increase debt, post rating assignment.
The ratings are dependent on Ravi's ability to sustain its business profile amidst changing operating environment. Meanwhile, improvements can be made in terms of financial discipline. Any dilution in profit margins, cash flow and/or increase in leverage would be considered negative.

About the Entity
Ravi Automobile (Pvt.) Limited was incorporated, on May 19, 1998, as a private limited company. It specializes in the manufacturing of components and auto parts for major automotive companies and OEM suppliers. The parts manufacturing division is equipped with pressure die-casting and CNC machining lines. It also manufactures, assembles and distributes its own brand of motorcycles under the name, Ravi. Production of parts started in the year 1998, while assembly operations were initiated in 2004.
Ravi is part of a group of eight companies serving the agriculture and automobile industry, with various core competencies, all owned by Mr. Iqbal Khalid and his son, Mr. Fahad Iqbal.

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.