Press Release
VIS Reaffirms Entity Ratings of Optimus Limited
Karachi, November 04, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Optimus Limited (‘OL’ or ‘the Company’) at ‘BBB+/A2’ (Triple B Plus/A Two). Medium to long term rating of 'BBB+' indicates adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short-term rating of 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating is ‘Stable’. Previous ratings action was announced on August 03, 2023.
Optimus Limited (‘OL’ or ‘the Company’) was incorporated in Pakistan in 2004 as a public limited unlisted company under the Companies Ordinance, 1984 (Companies Act, 2017). The Company is a subsidiary of Ithaca Capital (Private) Limited (the holding Company) and is engaged in providing car rental services.
Assigned ratings incorporate the high to medium risk of the car rental industry in Pakistan due to its competitive and largely fragmented, unorganized structure. This sector faces several key challenges, including rising automobile prices, fluctuating interest rates, and limited access to auto financing. Persistent inflation and an economic slowdown have softened demand for short-term rentals, particularly in the corporate travel sector. However, there has been a shift in the long-term leasing market, as companies increasingly prefer leasing vehicles over direct ownership, primarily to manage the rising costs associated with vehicle purchases.
The assigned ratings reflect the company’s profitability, capitalization, liquidity, and coverage profiles. Net revenue has maintained an upward trend since the post-pandemic period, supported by a gradual recovery in operations and fleet expansion, with corporate clients remaining the dominant customer base. Both gross and net margins have shown slight improvements, aided by increased revenue and lower effective tax expenses. Funds from operations declined due to rising financial expenses, yet cash flow coverage remained adequate. Ratings remain constrained on account of elevated capitalization metrics, which have shown moderate improvement over the review period. Moving forward, sustainability of profitability metrics, enhancement in capitalization, and operational expansion will be key rating drivers.
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf