PACRA Assigns Initial Ratings to Diamond Tyres Limited
Diamond Tyres Limited ("Diamond Tyres" or the "Company") has a reputable presence in 2 & 3 wheelers industry since long. Being a volume driven plus price sensitive industry, the competition is tough. Diamond Tyres has demonstrated resilience in the competitive environment and achieved a strong footprint as a prominent player in its respective niche. Over the years the company has progressed both in terms of financial aspects and operational level, by enhancing its product range of offering within the tyre & tubes domains. Given the industry dynamics, innovation and advancement has become inevitable. Aiming for growth, the company is eyeing to increase its market share in replacement market as well as in Agriculture and Ultra-Light Trucks by adding more flares to its existing product palette through expansion. This will reap benefits in the future and shall boost up the already growing revenues of the company, deriving strength to the financial matrices. Revenue stream is segmented into OEMs and Replacement Markets (RM), wherein (RM) has a higher inclination. In line with the industry, Company’s profitability has been restricted on account of continuous increase in input costs on the back of frequent rounds of rupee depreciation as the Company imports majority of its raw materials. At present the company’s debt book is adequately leveraged, however it is expected to elevate - yet remain comfortable - in coming years as the expansion is under way. Despite COVID-19 outbreak and subsequent impacts of lockdown, the company has performed at par. The measures introduced by SBP in the wake of the COVID-19 pandemic; principal deferment and rate cut of 625bps, will benefit the financial profile amidst projected future cashflows. The company operates under the umbrella of Diamond Group of Industries, which comprises five other companies and constitutes renowned names; Diamond Supreme Foam, Dolce’ Vita and Diamond Jumbolon, reflecting good financial backing. Both businesses (foam & tyre) are cyclical in nature hence, corroborating continuous inflows at group level. The subsequent generations of sponsoring family are the joint owners of the business. The group entails a central treasury & financial management system where decision making is held mutually. In light of this the assigned ratings reflect Diamond Tyres profound acumen of the sponsor and relatively stable position in the tyre industry. However, the governance framework needs strengthening. The management is mindful of the essence of corporate structure and is keen towards change for the better. This lends support to ratings.
The ratings are dependent on management’s ability to sustain its business profile and profitability in line with business expansion. Prudent management of the working capital, maintaining sufficient cash flows and coverages is imperative. Improvement in governance structure remains important for the ratings.
Diamond Tyres Limited is a public unlisted company incorporated in 2004 under the Companies Ordinance, 1984 (now “Companies Act, 2017”). It is a family owned business who are the owners of Diamond Group. The company has classified its business operation into one main division called "Tyre & Tubes Division". It deals in 2 & 3 wheelers tyre industry, with an installed capacity of 8mln units of tyres and 26mln units of tubes. Presently the company is engaged in the manufacturing of tyres and tubes of two & three wheelers and Auto richkshaws and foam products.
It is owned and governed by the sponsoring family members, decedents of Mr S.M Shaffi, the founder of Diamond Rubber Mills. Mr Muzammil Ejaz, Mr Bilal Ejaz, Mr Shariq Iftikhar and Mr Mudassir Iftikhar, grand sons of Mr S.M Shaffi, comprises the Board of Diamond Tyres Limited. Mr Shariq Iftikhar is the CEO of the company. All members of the board are involved in the executive roles of the company.