VIS Assigns Initial Entity Ratings to Agriauto Stamping (Private) Limited

Karachi, March 29, 2023 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Agriauto Stamping Company Private Limited (‘ASC’ or ‘the Company’). Long Term Rating of ‘A-’ reflects good credit quality; protection factors are adequate.

Risk factors may vary with possible changes in economy. Short Term Rating of ‘A-2’ signifies good certainty of timely payment, liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.

Agriauto Stamping Company (Pvt) Limited (ASC or ‘the Company’) was established in 2012, as a wholly owned subsidiary of AGIL. ASC is engaged in the manufacture and sale of sheet metal stamping parts – including high tensile parts, sub-assembly operations, dies/checking fixtures/jigs primarily for the auto sector.

AGIL is part of House of Habib (HoH), an established conglomerate headquartered in Pakistan. HoH has diversified operations across different sectors including Automobile (Indus Motor Company Limited, Thal Limited, AuVitronics Limited, Thal Engineering, Thal Boshoku Pakistan Private Limited), Building Materials (Shabbir Tiles and Ceramics Limited, Thal Laminates), Packaging (Paper sack, Jute), Plastics (AuVitronics Limited), Property (Habib Metro Pakistan Private Limited) and Financial Services (Habib Insurance Company Limited, Habib Metro Financial Services and Habib Metropolitan Bank).

The sponsor profile of HoH has been incorporated into the assigned rating. ASC being a subsidiary of a listed company (AGIL) follows the best practices of Corporate Governance. ASC has the advantage of being associated with AGIL which has more than 4 decades of experience in the auto industry. Also, ASC is the sole producer of Sheet Metal Stamping parts and Catalytic Converters in the auto parts industry. ASC has long-term technological collaborations in place with international die maker M/s. Ogihara Thailand Company (OTC) through a technical assistance agreement. This collaboration translates in technological advantage and competitive edge for the Company.

VIS classifies business risk profile of ASC in the high to medium category, given historical volatility in gross margins. This volatility in gross margins is mainly a product of volumetric offtake, while volatility in exchange rate also affects the margins, given significant dependence on imported raw material as the same comprises roughly 3rd/4th of the product costing.

The Company’s revenue base does depict counterparty concentration, albeit the same is largely addressed by the presence of long-term binding contracts and the fact that major institutional clientele constitutes ASC’s related parties. ASC’s financial risk profile incorporates low gearing level, as the Company has historically operated debt-free.

Recently, the Company has acquired debt, including both LT and ST. The Company’s cash flow coverage indicators are considered sound. There is an adequate buffer of coverage of short-term borrowings through inventory and trade debts. Going forward, cash flow coverage indictors will continue relatively weaken during the rating horizon amid lower profitability due to expected declined in sales; however, these are expected to remain adequately high through the rating horizon. The assigned rating remains dependent on maintaining business and financial risk profile in line with benchmark for the assigned rating.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/

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