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PACRA Maintains Debt Instrument Ratings of TPL Trakker Limited | Sukuk-I | May-16 | Rating Watch

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

The ratings incorporate TPL Trakker's prominent position in Pakistan’s tracking industry, emanating from its multifaceted product portfolio and sanguine technology infrastructure. As diversity becomes inevitable to sustain in its operating segment, the Company is gradually shifting towards new avenues; incremental cash flows from the new segments are critical for growth. Recent developments precisely include acquisition of majority stake of Trakker Middle East LLC, and merger of TPL Maps and TPL Rupiya into TPL Trakker. The Company's process of going listed is at an advanced stage wherein approval from the regulatory authorities has been received. Underpinning the IPO is the Privately Placed Commercial Paper (PPCP) in issue whose repayment becomes due in July'20. Under the current fluid environment, the management sees that IPO will take sometime to roll out. Steps are being taken in this regard especially obtaining underwriting and capturing investors interest, and also to avail deferment of PPCP repayment under the SECP's Relief Package; availing deferment within the due timeline is critical to the ratings. Overall, the Company's financial risk profile displays a stretched outlook on account of elevated borrowings and persistent bottomline losses in 9MFY20. The situation has further compounded on account of the outbreak of COVID-19 pandemic in the country which has led to severe economic disruption and demand deceleration. As a consequence, TPL Trakker is in the process of availing benefits of the Relief Package for deferment of its loan book - including Sukuk (PKR 600mln) in order to relieve its risk profile from the mounting debt obligations in the short horizon. Currently, interest and debt coverages display a deteriorated outlook alongside leveraged capital structure. Also, there is an imminent necessity to optimize the Company's cash conversion cycles, in order to keep its liquidity profile adequate.
The ratings are dependent upon the company's aptness to arrest the adversities impacting its risk profile in a timely manner. Improved performance indicators, including reversal of losses and sanguine financial discipline are imperative to the ratings. Meanwhile, the ratings are placed under “Watch” to oversee the roll out of IPO and other steps needed to manage the financial challenges arising from the current mix of debt wherein contractual maturities are around.

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. 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.