The Pakistan Credit Rating Agency Limited
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Sohail Ahmed Qureshi

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PACRA Upgrades Entity Rating of The General Tyre & Rubber Company of Pakistan Limited

Rating Type Entity
Action Upgrade Maintain
Long Term A+ A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect reputable business profile and strong presence of the Company in tyre industry. Amidst Covid-19 and associated lockdown, the Company managed to increase its topline by 57% YoY basis through focusing on replacement market and rising its market share, coupled with better offtake by OEMs, in particular Car OEMs due to reduction in auto financing rates and agriculture OEMs due to better crop prices. Accommodative monetary policy resulted in significant decrease in in finance cost which supported the Company’s profitability for the period under review. Meanwhile multiple initiatives undertaken by the Company which helped to reduce operating costs also supplemented by plant efficiency. The Company‘s envisaged business strategy with more focus on replacement market and farm segment has helped to maintain margins. The Company has a strong foothold in its respective industry comprising 4 wheeler tyres for cars, LCVs, tractors, buses and trucks. The Company is the sole manufacturer of passenger car radial tyres catering the Original Equipment Manufacturers' (OEMs) market. Two wheeler market, in contrast, displays a broader competitive landscape wherein General Tyre holds a relatively small market share. In last 3-4 years company has invested significantly in modernization and capacity enhancement of its plant. The Company is working on new sizes and designs for both OEM and replacement market segments. Going forward, the Company is expected to receive benefits from (a) Recent budgetary measures taken by Government to encourage higher production of local cars particularly up to 1000cc (b) Government efforts to curb smuggling in replacement market (c) Entry of new OEM manufactures in the market as the Company is also in close coordination with new auto players and has already started supplying tyres to some of new auto players. A well-devised governance framework alongside experienced management team is considered positive for the ratings. Association of General Tyre with Bibojee Services (Private) Limited and Pakistan Kuwait Investment Company Limited is also a consideration. The company's core competence lies in its technical collaboration with Continental AG; Germany (one of the world’s leading tyre manufacturer) which assures adherence to international quality standards. Cautious management strategies amidst changing industry environment are critical.
The ratings are dependent on the company to uphold and improve its business risk vis-à-vis financial risk profile. Revival of the demand driver and coping up with changing tyre market is crucial. Moreover, prudent management of financial affairs remains important.

About the Entity
The General Tyre & Rubber Company of Pakistan Limited was incorporated in 1963 under the Companies Act, 1913 (now Companies Act, 2017) and got listed on the Karachi Stock Exchange in 1982. The company is engaged in the manufacturing and marketing of a complete range of automotive radial tyres. The company currently operates with an annual production capacity of ~3.9mln tyres and ~4.4mln tubes and is the only local manufacturer of passenger car tyres in the country.
The company is majorly owned by two sponsors - Bibojee Services (Pvt.) Limited and Pak-Kuwait Investment Company Limited (PKIC), holding ~28% and ~30% shares respectively. The CEO - Mr. Hussain Kuli Khan has an overall experience of ~25 years. An able management team assists him.

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.