Anam Waqas Ghayour
PACRA Maintains Entity Ratings of Awan Trading Company (Pvt.) Limited
The ratings reflect adequate profile of Awan Trading Company (the Company) characterized by stable market share in imported coal, especially retail market. The Company imports its raw material, where currency fluctuations and pricing risk effect margins. The management intends to pass on the impact onto customers, though demand sensitivity is a consideration. Major demand vests in the domestic cement landscape followed by power producers and food processing companies that are dependent on coal for their operations. The Company has arrangements regarding supply of coal with various suppliers globally. Awan Trading Company follows strategy of keeping some inventory in stock which is stored in rented/custom bonded warehouses. Post Covid the Company has improved its business and financial profile, on the back of rising demand. As a result during 9MFY21 the Company exhibited improved performance and posted a profit of PKR 559mln (FY20: 334mln). Similarly, margins are expected to follow the same trend in coming years. The company has sizable lines (funded and un-funded) available from different banks to cater to suppliers demand utilization level remained moderate.
The ratings are dependent on the company’s ability to sustain its customer base. Proactive management of business affairs with improved margins and coverages is important. Meanwhile, strengthening in governance structure is needed to improve financial transparency and oversight.
Awan Trading Company (Pvt.) Limited was established in October 1992. However, it remained dormant for several years till 2002. The company is engaged in import and trading of coal. The overall control of the company vests in four member board of directors (BoD) including the Chief Executive – Mr. Govind Ram. He is associated with the company since its inception and is accompanied by management having long association with the company.