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The Pakistan Credit Rating Agency Limited

Date
29-Dec-2017
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Faraan Taimoor
faraan.taimoor@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Corporate Rating Methodology (Jul 17) [View]

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Disclaimer
This press release is being
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PACRA assigns Initial Ratings to Ghandhara Industries Limited
 Rating Type Entity
Current
(29-Dec-2017)
 Action Initial
 Long Term A+
 Short Term A1
 Outlook Stable
 Rating Watch -

Ghandhara Industries Limited (GIL) operates in the truck & buses segment of the automobile sector. The strength of the company is its alliance with ISUZU – a leading Japanese brand in the aforementioned segment. ISUZU has enabled the company to build a strong fortress in the competitive industry of Pakistan. The volumes have been steadily rising – boosting the relative market share of GIL. The company ranks 2nd in the market and has recently announced to launch its pickup range by the name of Isuzu D-Max. The group has built synergies between the two companies operating in the same sector. The sponsoring group upholds good corporate governance standards. Their business acumen is further enriched by the group’s stake in the country’s leading tyre manufacturing company. GIL has enhanced its market share over the last couple of years. It is important to sustain the growth while managing the rising competition. Foreign players are also taking interest in the local market. The landscape of the industry is expected to change – although it is yet to be seen. The financial risk profile of GIL is strong. The working capital is supported by cash cum advances sale mechanism.

The ratings are dependent on upholding of the company’s business as well as financial risk profile. Two key elements are company’s stance on long term debt and working capital management. Moreover, management’s ability to sustain its market share while benefiting from positive demand fundamentals is crucial.
About the Entity
Ghandhara Industries Limited (GIL), incorporated in 1963, is primarily engaged in the assembly, body fabrication and sale of Isuzu buses and trucks in Pakistan and has a total capacity of 7,200 units per annum on a single shift. The company is quoted on the Pakistan Stock Exchange and has been accredited amongst the Forbes list of ‘Asia’s Top Two Hundred companies under a Billion’ in year 2017. Currently with a market share of 39.5% as at end-Sep17, it is owned by Bibojee Group of Companies. The group was founded by Gen. Habibullah Khattak in 1960 and has interests in various industrial sectors including Textile, Auto, Tyres & Rubber, Insurance and Construction.

The board comprises seven members; three represent the sponsoring family. Mr. Ahmed Kulli Khan Khattak serves as the CEO whereas the day to day activities of the company are overseen and monitored by the Deputy Chief Executive (DCE) Mr. Muhammad Kuli Khan Khattak, son of the CEO. GIL has an experienced management, which has been associated with the company for a long time.
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.
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