PACRA Maintains Entity Ratings of Honda Centre (Pvt.) Limited

The ratings take comfort from Honda Centre's dealership status with Honda Atlas Cars Pakistan Limited– owned by Atlas Group and Honda Motor Company Limited, Japan. Honda Centre (Pvt) Limited is among the largest authorized 3S dealership for Honda Atlas Cars Pakistan Limited in Pakistan. Honda Centre has been in the auto dealership industry for over a decade now and has captured adequate market share. The sponsors have a good understanding of business and injected a sizable amount as a subordinated debt in the company. Demand drivers of the automobile industry are highly correlated with macro-economic indicators such as GDP growth, employment, disposable income, consumer confidence and accommodative monetary policy. Outbreak of COVID-19 coupled with subdued economic activity, massive rupee depreciation, higher interest rates and inflationary pressures reduced the demand of automobiles and also surpressed the profitability of Honda Centre. However, the company has built a sustainable position in this competitive auto industry by securing contracts with a few key institutions which drive bulk of their demand for vehicles and after sale services. It is important to sustain the growth while managing the rising competition, which is more of a Principal’s domain. It is crucial for the overall demand to pick-up for the alleviation of related concerns. In the meantime, 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. Foreign players are also taking interest in the local market. Control environment may be strengthened by including independent directorship and adopting quarterly accounts.
The ratings are dependent on sustaining a steady revenue stream, credit quality of the receivables, the transaction structure and the servicer's experience. Any prolonged downturn in subdued business volume can have a detrimental effect on the rating. Good corporate governance practice is considered pivotal for a growing business concern.

About the Entity
Honda Centre was incorporated in 2007 as a private limited company. It was incorporated to function as an authorized 3S (Sales, Services and Spare Parts) dealership for Honda Atlas Cars Pakistan Limited. The dealership is owned by the three brothers from the sponsoring family. Mr. Yasir Raza as the CEO and Mr. Taimur Raza and Mr. Hassan Raza as executive directors.