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The Pakistan Credit Rating Agency Limited
Press Release

Date
29-Sep-20

Analyst
Sohail Ahmed Qureshi
sohail.ahmed@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 Maintains Entity Ratings of Ravi Automobile (Pvt.) Limited

Rating Type Entity
Current
(29-Sep-20)
Previous
(30-Sep-19)
Action Maintain Initial
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Ravi Automobile (Private) Limited (Ravi) operates in two segments of the automotive industry, i.e., manufacturing components (parts) for motorcycles and tractors, and assembly of complete motorcycles under the brand name of “Ravi”. 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 multiple standalone entities on a timeline basis of which Infinity Engineering (Private) Limited and Ravi Spherocast (a registered partnership) represent the major investments and the augmented strength of the group. The company has built a formidable position therein, given its long standing history. The ratings also incorporate the focus of Ravi on the components manufacturing business, claiming to have healthier margins. As the company operates mostly in low income driven segment, it is expected to have advantage of post Covid19 situation which has impacted the disposable income of people making them switch to cheaper mode of transportation. Governance practices, as endorsed by the Code, desire improvements. Ravi aims for expanding its business lines through capitalisation of opportunity of localization / import substitution by exploiting its in-house capabilities developed over time. To achieve its aim and improving its governance standard, Ravi has also engaged with the private equity partner for fresh equity injections and sharing of professional expertise to support its business expansion and control environment. The management does not intend to raise further debt for the existing operations, however it may seek to raise expansion capital, which may include debt , in order to capitalize on the import substitution opportunity presented by the significant depreciation of PKR over the past years. There is no major history of bad debts. The sales reflect top party concentration. The sponsors are of the view that the concentration is acceptable since decades-long relationships exist. Comfort is drawn from the need driven nature of the business, backward integration and synergies in the overall group.
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 (parts) for major automotive companies and OEM suppliers. The parts manufacturing division is equipped with pressure die-casting and CNC machining lines. It also assembles and distributes its own brand of motorcycles under the brand name, Ravi. Production of parts started in the year 1998, while motorcycle assembly operations were initiated in 2004.
Ravi is part of a group of multiple companies serving the automotive industry, with various core competencies, all owned by Mr. Iqbal Khalid, his son Mr. Fahad Iqbal and family members.

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.