PACRA Assigns Initial Entity Ratings to Armstrong ZE (Pvt.) Limited.

Armstrong ZE (Pvt) Limited (“Armstrong” or “the Company”) is engaged in the manufacturing of Passenger Car Radial (PCR) tyres. The Company is owned by the Hussain and Yusufzai families through HY Overseas Investment Holding Limited. The sponsors bring over five decades of experience in tyre manufacturing, distribution of international brands, and related automotive segments, primarily through ZAFCO Group Holdings Ltd. This provides operational and commercial support during the initial stabilization phase. The domestic tyre industry remains competitive, with imported tyres, both legal and smuggled, exerting persistent pricing pressure. This underscores the importance of cost efficiency, product quality, and brand positioning. Armstrong aims to penetrate the domestic replacement market while gradually expanding into select regional exports under the “Armstrong” brand, leveraging the sponsors’ established distribution network.
The Company operates a greenfield manufacturing facility spanning ~50.25 acres near Gharo Industrial Area, ~55 km from Jinnah International Airport. The total project cost was estimated at USD 93mln (~PKR 28bln), financed through a mix of international and local funding sources. This includes a USD 25mln facility from International Finance Corporation (IFC), PKR ~7bln in local Islamic borrowings, and sponsor support comprising ~PKR 2.8bln in equity and ~PKR 10.81bln in subordinated loans. IFC’s involvement lends strength to governance and financial discipline. Public announcement of CoD is anticipated any time soon. The management has represented that their products are being well received in the market. This was made possible because of sponsors already deep penetration into the market and knowledge of other markets. The plant is being rolled out in phases, with a planned capacity of 1.8mln tyres (Phase I), scaling to 2.7mln (Phase II), and reaching 4.3mln tyres at full capacity. Capacity utilization is expected to build gradually, supported by the Company’s expansion strategy and growth in the domestic demand, largely driven by the replacement market.
From a financial perspective, the Company exhibits a leveraged capital structure typical of greenfield projects, with total assets of ~PKR 29.3bln as of Dec’25. The Company expects to generate operational profits during the first 6months of production, while net profits would be generated during the FY27. Liquidity remains adequate, supported by sponsor backing, available banking lines, and working capital management. The debt profile is predominantly long-term, with a tenor of 7 years, providing repayment visibility. Debt servicing commenced in June 2025, with principal repayments starting from June 2026, aligning with the expected cash flow ramp-up. The Company benefits from Special Economic Zone (SEZ) status, providing tax exemptions until 2035, which supports cash flow retention during the early operational phase. Profitability and cash flow generation are expected to strengthen as production scales up, subject to market acceptance and operational execution. The equity base is deemed adequate, with a sponsor history to provide support in case of any future need. Inventory levels are sufficient to support approximately three months of production requirements.
The assigned ratings are contingent upon the Company’s ability to achieve projected capacity utilization, ensure timely operational stabilization, and maintain financial discipline. Achieving breakeven within the projected timeline and demonstrating sustainable profitability and cash flow generation remain key rating sensitivities.

About the Entity
Armstrong ZE (Pvt.) Limited, incorporated in Karachi, Pakistan on October 05th, 2018, operates as a tyre manufacturer. The Company’s governance structure consists of a four-member Board of Directors, headed by Mr. Azim Khan Yusufzai as Chairman. Executive management is led by the Chief Executive Officer - Dr. Murtaza Abbas Mooman, who oversees operations with the support of a qualified and experienced management team.