PACRA Upgrades the Entity Rating of EXIDE Pakistan Limited

EXIDE Pakistan Limited (“EXIDE” or “the Company”) is a pioneer in the battery industry in Pakistan. Since its inception in 1953, the Company has established a prominent position in the sector offering a comprehensive range of batteries to meet the needs of the automotive, industrial, and household energy backup segments. The demand for the local lead acid battery industry primarily stems from (i) the Replacement market related to automotive and power backup solutions (ii) the Electricity shortfall situation during the summer season (load-shedding) which drives the need for household power backup, and (iii) sales from Automobile Original Equipment Manufacturers (OEMs). In recent years, OEM sales have remained subdued owing to high prices driven by currency depreciation, high interest rates, and inflationary pressures affecting the consumers’ purchasing power. Nevertheless, the battery industry has remained stable, supported by sustained demand from the replacement market. Persistent electricity shortages and high energy tariffs have accelerated the adoption of solar power solutions, which has further stimulated the demand for batteries. The rating upgrade is underpinned by sustained improvement in revenue and profitability during the recent years, as reflected by a 3Year CAGR of ~24% and supported by the strong governance framework of the Company featuring seasoned experts and independent oversight, and he presence of an experienced and capable management team. During FY24, the topline of the Company grew by ~10% compared to last year, primarily attributable to inflationary price adjustments, as the volumes declined by ~14%. The Company’s profitability margins have seen slight compression during 6 months ended Sep’24 with the GP Margin standing at ~17.1% as of Sep’24 (~18.9%, Mar’24) and NP Margin at ~3.7% (~4.9%, Mar’24) attributable to intense competition hindering the ability to pass on costs. However, EXIDE has successfully retained its market share of ~ 18%. Moving forward, challenges like stiff competition and margin pressures are expected to persist. However, the Company is committed to navigating these challenges by proactive adoption of the latest technological shifts and has introduced maintenance-free batteries and tubular batteries to meet emerging demand. EXIDE is nearing the launch of imported Lithium Ion Batteries and plans to localize their production once the demand strengthens. As a part of its product diversification strategy, EXIDE is offering integrated solar power solutions for both industrial and household customers with plans to build its market share gradually. The financial profile of the Company is demonstrated by an adequate working capital cycle, and comfortable cash flows & coverages. Capital structure is moderately leveraged, where short-term borrowings dominate the debt portfolio to fund the working capital requirements. The borrowings mix is expected to remain unchanged as there is no CAPEX planned for the near future.
Ratings are dependent on the sustainability of the growth trajectory in the topline and profitability matrix while retaining sufficient cash flows, coverages, and market share along with improvement in the sales volumes. However, adherence to maintaining its debt metrics at an adequate level is a prerequisite.

About the Entity
EXIDE was incorporated in Pakistan in 1953 as a private limited company in association with Chloride Group PLC of the United Kingdom and was listed on the Karachi Stock Exchange in 1982. EXIDE's majority stake is held by the Hashwani Family (75.54%) while the financial institutions and mutual funds hold ~11.47% and the remaining ~12.99% is held by the general public. Mr. Arif Hashwani is the Chairman of the Board while Mr. Arshad Shahzada is the Managing Director/CEO of the Company.