The Pakistan Credit Rating Agency Limited
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Sohail Ahmed Qureshi

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PACRA Upgrades Entity Ratings of Ghandhara Industries Limited

Rating Type Entity
(22-Oct-21 )
(05-Nov-20 )
Action Upgrade Maintain
Long Term A+ A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Ghandhara Industries Limited (GIL) has been one of the top leading automobile companies in Pakistan. Its product lines include trucks (light-duty, medium-duty & heavy-duty) buses, and D-MAX pick up. The strength of the company is its alliance with ISUZU – a leading Japanese brand in the country's trucks & buses segment. ISUZU has enabled the company to build a strong fortress in the competitive industry of Pakistan. FY21 has been a ‘recovery period’ for the auto sector. The buying interest among consumers revived after the reopening of markets in June 2020 as trucks sales soared by 20%, followed by 17% in buses, and 57% in pickups. Ghandhara Industries Limited has managed to translate the same in its top-line and achieve revenue growth of 27% in FY21. Further, the company’s sales registered uptick as interest rates were supportive, hence strengthening auto financing. Bottom-line growth of the company is a resultant of improved gross margins for the period under review. Company’s exposure to more advances has proved to be beneficial as business relies less on borrowed capital to fuel growth and other initiatives. There has been a considerable boost in company’s cash flows from operations, thus bolstering coverages position. Over the years, company has been able to sustain its position in domestic automotive sector while managing uprising competition and secured high market share. The sponsoring group built synergies between the associated companies operating in the auto sector. The sponsoring group upholds good corporate governance standards. Their business acumen is further enriched by the group’s stake in the country’s leading tyre manufacturing company. During June 2021, finer working capital and reduced borrowings along with the low finance cost elevated the financial strength of the company. The capital structure remains moderately leveraged mainly comprising short-term borrowings.
The ratings are dependent on upholding of the company’s business as well as financial risk profile. Improvement in margins and intact coverages are imperative. Key element is company’s stance on working capital management. Moreover, management’s ability to sustain its market share during the demand crunch is crucial.

About the Entity
Ghandhara Industries Limited (GIL), incorporated in 1963, is primarily engaged in the assembly, body fabrication and sale of ISUZU buses and trucks in Pakistan and has a total capacity of 7,200 units per annum on a single shift. The group was founded by Gen. Habibullah Khattak in 1960 and has interests in various industrial sectors including Textile, Auto, Tyres & Rubber, Insurance and Construction.
The board comprises seven members; four represent the sponsoring family. Mr. Ahmad Kuli Khan Khattak serves as the CEO whereas day-to-day business activities are monitored by the Deputy Chief Executive (DCE), Mr. Muhammad Kuli Khan Khattak, who is the son of CEO. GIL has an experienced management, which has been associated with the company for a long time.

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.