Press Release

JCR-VIS Assigns Initial Ratings to Procon Engineering (Private) Limited

Karachi, April 6, 2018: 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 & 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 further information on this rating announcement, please contact the undersigned (Ext: 201) or Mr. Jamal Abbas Zaidi (Ext: 207) at 35311861-70 or fax to 35311872.

Javed Callea
Advisor

Applicable Criteria: Industrial Corporates (May 2016)
http://www.jcrvis.com.pk/docs/Corporate-Methodology-201605.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright April 06, 2018 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.