PACRA Maintains Entity Ratings of Ghandhara Tyre & Rubber Company Limited

Ghandhara Tyre & Rubber Company Limited (“GTR” or “The Company”) is a leading player in Pakistan’s automotive tyre manufacturing industry. The Company serves a diverse customer base that includes Original Equipment Manufacturers (OEMs), the replacement and aftermarket segment, institutional clients such as government and defense, and export markets. The ratings reflect GTR’s established market presence, strong business profile, and wide product portfolio across Passenger Car Radial (PCR), Light Truck/Bus (LTB/R), Agricultural (Agri), Off-the-Road (OTR), and two-wheeler tyre segments. As the only domestic producer of PCR tyres, GTR caters to a significant portion of OEM demand. In FY25, Pakistan’s auto industry witnessed signs of recovery supported by improving macroeconomic conditions. Stabilization of exchange rates, gradual reductions in inflation and policy rates, and improved consumer confidence contributed to a rebound in sector activity. The relaxation of restrictions on the establishment of Letters of Credit (L/Cs) further enhanced raw material availability and production continuity. According to PAMA’s latest data (11MFY25), passenger car sales grew by approximately 32%, light commercial vehicles by 66%, trucks by 95%, and buses by 91%, reflecting a broad-based recovery in vehicle demand and strengthening OEM performance. Currently, OEMs contribute 40% of GTR’s sales while the replacement market accounts for 60%. However, during 9MFY25, GTR’s topline declined by approximately 9.4% year-on-year to PKR 13.9bln. This contraction was mainly driven by a significant reduction of nearly 36% in farm tyre sales volume across OEMs and sluggish demand from the replacement market, influenced by subdued rural purchasing power amid lower wheat prices. Profitability came under further pressure from higher input costs, including raw materials and energy tariffs, which could not be fully passed on to customers. This led to margin compression across all levels and underpins the continuation of the rating watch. The financial risk profile reflects a stretched working capital cycle, modest cash flow generation, and moderate debt servicing metrics. The capital structure remains leveraged, with borrowings primarily concentrated in short-term facilities to support working capital needs. Looking ahead, GTR is focusing on consolidating its domestic market position and increasing export volumes through targeted investments in capacity enhancement and operational efficiency initiatives. The recent commissioning of a 2MW solar energy project highlights its commitment to sustainability. Engagements with new OEMs, particularly for SUV tyres, are progressing, while product innovation continues to support brand strength. Backed by robust sponsorship, a structured governance framework, and technical collaboration with Shandong Huasheng Rubber of China, GTR maintains alignment with international quality standards and is positioned to capture long-term growth opportunities.
The ratings are dependent on the Company’s ability to improve its business risk vis-à-vis financial risk profile along with sustainable margins. Cautious management strategies amidst a challenging industry environment are pertinent. Moreover, prudent management of financial affairs remains important

About the Entity
GTR was incorporated in 1963 and was listed on the Karachi Stock Exchange in 1982. It is engaged in the manufacturing & marketing of a complete range of automotive radial tyres. At present, the Company operates with an annual production capacity of ~4.4mln tyres. The Company is majorly owned by two sponsors - Bibojee Services (Pvt.) Limited and Pak Kuwait Investment Company Limited (PKIC), holding ~28% and ~30% shares, respectively. The CEO - Mr. Hussain Kuli Khan has an overall experience of ~29 years and has been trained by Continental Germany in their plants. An able management team assists him.