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The Pakistan Credit Rating Agency Limited
Press Release

Date
18-Jan-23

Analyst
Kanwal Ejaz
kanwal.ejaz@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 Toyota Jinnah Motors (Pvt.) Limited

Rating Type Entity
Current
(18-Jan-23 )
Previous
(18-Jan-22 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Car dealership (authorized) hinges on the robustness of principal (auto/ manufacturer, assembler). The strength of a car dealer is contingent on the relative positioning of principal in the respective market. There is a pre-set qualitative & quantitative criterion – imposed by the principal on the dealer’s network. The rating takes comfort from Toyota Jinnah’s alliance with Indus Motor Company – owned by Habib Group, Toyota Motor Corporation and Toyota Tsusho Corporation. Toyota Jinnah Motors (TJM) holds 4S car dealership. Over the period of time TJM has built a sustainable position in the competitive industry of Pakistan. TJM’s income streams derived from sales of new vehicles (85%) and after-sales services (15%). The profitability is being supplemented by the 'After Sale' segment reporting net profitability for the dealership and covering its operational cost. Hence limiting and/or cushioning the unforeseen drag on the risk absorption capacity. Currently, the auto industry is facing a downturn due to escalating production costs on account of rupee depreciation, while demand has also declined due to the prevailing economic challenges, tightening the fiscal policy and imposition of higher duties and taxes on vehicles, furthermore due to restrictions on import of CKD kits auto sector is operating at ~50% of its capacity and facing frequent plant shutdowns. Pakistan Automotive Manufacturers Association (PAMA) recent statistical data revealed ~39% decline in the sales of passenger cars as well. During the period under review (FY22) revenues recorded ~73% growth due to the inflationary effect and a slight increase in sales volume, however, margins are largely sustained. The Company has also received benefits under the new leadership and of sponsors’ experience and abilities. The financial risk profile of Toyota Jinnah Motors is demonstrated by comfortable cashflows, coverages, and working capital cycle. Capital structure is moderately leveraged and mainly comprised of short-term borrowings for working capital management. The Company has substantially reduced its long-term borrowings from financial institutions through sponsors’ support and through internally generated cashflows.
The ratings are dependent on the management's ability to sustain its business profile while benefiting from positive demand fundamentals, financial discipline/transparency is crucial. Moreover, strengthening of governance framework is pivotal for any growing business concern.

About the Entity
Toyota Jinnah Motors, incorporated on Jan 17, 2014 as a private limited company and inaugurated its operations on 2nd June 2016. The Company was incorporated to set up 3S authorized dealership (Sales, Service and Parts) of Indus Motor Company Ltd, the partners of Toyota Motor Corporation Japan. The Company is majorly owned by Mr. Muhammad Mushtaq (Chairman), Mr. Muhammad Idrees (Director) and Mr. Asad Munir CEO of the company

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.