Final PR
The Pakistan Credit Rating Agency Limited

Jhangeer Hanif

Sehar Fatima

Applicable Criteria

  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]
  • Correlation between Long-term and Short-term rating (Jun 16) [View]

Related Research

  • Sector Study | Electrical Engineering (Dec 16) [View]
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PACRA Maintains Entity Ratings of MicroTech Industries (Pvt.) Limited
 Rating Type Entity
 Action. Maintain Maintain
 Long Term BBB+ BBB+
 Short Term A2 A2
 Outlook Stable Stable
 Rating Watch - -

The ratings reflect MicroTech's adequate business profile characterized by healthy market share in energy meter manufacturing segment. The company's key strength lies in its indigenous Research and Development infrastructure and an able management team spearheading the company's operations. Single product and single buyer exposes the company to concentration risk. This at times lead to volatility in revenue and margins. At the same time, inherent risks of procedural delays in awarding contract and price sensitivity remains. However, comfort is drawn from the company’s currently favorable competitive position in high margin smart metering business and sizeable business potential [particularly for smart meters] in local market, also unveiled by lately initiated foreign funded government projects focused towards infrastructure reforms. However, its translation in revenues may take time. MicroTech is eyeing revenues augmentation through, i) expansion in existing capacity, though small, and ii) diversification in related business; Injecting Molding plant installed and commenced production (Jan-17). The company's financial risk profile is adequate. The company's financial requirements emanate from its needs to fund its working capital (mainly receivables and tax refunds) and arranging requisite quantum of guarantees for soliciting business volumes. Current structure of bank limits provide reasonable support to the company's growth targets. However, participation in any new large project; expected to roll-out by the government over the medium-term, may require further capacities.

The ratings are dependent on the company's ability to adapt to technological progression in its line of business to maintain its market position particularly in local industry. Proactive management of business affairs, thus sustaining margins, is imperative. Working Capital must be managed vigilantly due to receivable and tax refunds risk. Meanwhile, strengthening in governance structure is needed to improve independent oversight of board.

About the Entity
MicroTech Industries (Private) Limited (MicroTech), incorporated in 2003, manufactures digital and smart meters. MicroTech works with key stakeholders of the energy sector in Pakistan in order to develop and implement indigenous smart metering energy solutions. The Company is majority (55%) owned by Saeed family - key sponsors - followed by Siddiqui family (45%).

The company has two member board, both are shareholders and holds executive positions. The CEO, Mr. Nauman Saeed - an electric engineer with over two decades of experience - also holds the office of the Chairman. He is supported by an experienced management team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.