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The Pakistan Credit Rating Agency Limited
Press Release

Date
29-Jul-21

Analyst
Raniya Tanawar
raniya.tanawar@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 Honda Centre (Pvt.) Limited

Rating Type Entity
Current
(29-Jul-21)
Previous
(04-Aug-20)
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

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 managing it well. 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. An unprecedented yet challenging phase that occurred due to COVID-19 outbreak have gradually reverted. Year 2021 started with a good fortune for the entire industry as demand slate witnessed a significant uptick. Reduced interest rates helped in improving the ratio of car financing, leading to higher car sales particularly in the period 1HCY21. Similar trend is likely to continue. This time the industry witnessed a large range of different versions of cars available to the buyer as new players entered the market (KIA, MG, Hyundai), making it more competitive. Honda has sustained its position within its respective niche, along with its peers, also reflecting in its revenues and profitability. Revenues are on a growth trajectory. To keep up with the rising competition Honda Atlas is also bringing in new car variants, including Honda City’s 6th generation. The dealership revenues reciprocates from company’s (Honda Atlas) performance against the demand. In view of the demand side, the future prospects appears promising. At the same time sustainability of ‘After sale' segment based inflows remains imperative. 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. 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. The sponsoring family has other successful running business in oil and gas sector as well which is named as 'EGAS Private Limited'.

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.