Karachi, April 06, 2018 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial ratings of ‘A/A-2’ (Single A/A-Two) to Procon Engineering Private Limited (PEPL). Outlook on the assigned ratings is ‘Stable’. The assigned ratings to PEPL derive strength from the company’s prominent market position in cars’ seats and interior manufacturing. PEPL has a sound business risk profile supported by growing demand of passenger and commercial vehicles, protective tariffs and secured margins through indexation of selling prices to input costs. However, ratings could be constrained by adverse changes in operating environment and duty structure on raw products. Current ratings also incorporate the support received for operations and quality assurance through PEPL’s technical assistance program.
Revenue base of the company increased at a CAGR of 31% over the past four years on the back of healthy local demand. Nonetheless, client concentration remains on the higher side given the oligopolistic nature of industry. In view of new entrants in the automobile industry, concentration in sales may be improved on a timeline basis along with projected growth in top line. The same may result in improved profitability and lower leverage indicators.
Outstanding debt of the company comprises both a long term obligation and running finance facility. Long term debt is a foreign currency denominated loan, procured from an investment company in United Arab Emirates; the foreign currency debt carries significant currency risk on PEPL’s books. Short term debt of the company constitutes an interest free facility acquired from directors and related parties and a running finance facility mobilized from a commercial bank. At current debt levels, debt servicing coverage remains comfortable with the company projecting further improvement in the same. Moreover, management envisages meeting its future funding requirements through internal capital generation and director’s loans.
For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk