Press Release
VIS Reaffirms Entity Ratings of Veda Transit Solutions (Pvt.) Limited
Karachi, December 13, 2023: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Veda Transit Solutions (Pvt.) Limited (Veda) at ‘BBB/A-2’ (Triple B / A-Two). The medium to long-term rating of ‘BBB’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are sound, while risk factors are small. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on August 24, 2022.
Veda specializes in mass transit services, with a primary emphasis on government-subsidized public transportation initiatives. The core function of the company involves participating in competitive bidding processes conducted by Provincial Government entities, with a particular focus on the Punjab Mass Transit Authority (PMA). Veda oversees the deployment, maintenance, and operation of vehicles, all on behalf of the government. Veda commenced its operations with Multan Metro Bus Feeder Project in 2017 and was subsequently awarded the Lahore Metro Bus System Project by PMA. The sponsoring entities bring a wide range of expertise to the table including logistics, manufacturing, engineering, public transportation, real estate development, product sales and marketing.
Business risk profile also incorporates revenue model encompassing guaranteed receipt of payment against minimum guaranteed kilometers/bus/annum as per the contract awarded. The dispute between Veda and PMA regarding inflationary adjustment of fuel price has reportedly been settled by court through its ruling in favor of Veda.
Assessment of financial risk profile take into account considerable growth in topline emanating majorly from monthly fuel price adjustments. Given the existing financial model, the company has posted losses mainly due to continuous reduction in gross margins on a timeline basis and higher financial charges. Given lower profitability, cash flow coverages deteriorated. Leverage indicators remained relatively high while the ratings draw support from related parties in terms of short-term loans. Implementation of the revised fuel adjustment formula and conversion of sponsors’ loan into equity would be critical for future profitability and capitalization. The company has no plans to mobilize long-term financing in the medium term, the management is projecting gradual decrease in leverage indicators, going forward. Due to non-availability of audited financial statements for year ended 2023, the analysis is based on the management accounts.
For further information on this rating announcement, please contact Mr. Maimoon Rasheed at 042-35723411-12 (8008) or the undersigned (Ext. 201) at 021-35311861-64 or email at info@vis.com.pk
Javed Callea
Advisor
Applicable Rating Criteria: Industrial Corporates (May 2023)
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf