Press Release

VIS Reaffirms Entity Ratings of Agriauto Industries Limited

Karachi, November 16, 2023: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of ‘A-/A-1’ (Single A Minus/A- One) to Agriauto Industries Limited (‘AGIL’ or ‘the company’). Medium to Long Term Rating of ‘A-’ reflects good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ signifies high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on August 10, 2022.

AGIL is engaged in the manufacture and sale of components for automotive vehicles, motor cycles and agricultural tractors. AGIL is part of House of Habib (HoH), an established conglomerate headquartered in Pakistan. The sponsor profile of HoH has been incorporated into the assigned rating. As a listed entity, AGIL has to comply with Corporate Governance regulations for listed entities, which has also been incorporated into the assigned rating. AGIL possesses more than four decades of experience and holds long-term technological collaborations in place with international parts manufacturers.
Ratings take into account high to medium business risk profile of the company, given historical volatility in gross margins. The volumetric sales have been affected by high prices resulting in lower demand while exchange rate fluctuations adversely impacted costs of imported raw material. The risk profile is somewhat supported by the fact that the company is the sole producer of cars shock absorbers & struts in the local market. The company’s sales emanate largely from institutional customers and depict counterparty concentration. However, the concentration risk is addressed by binding contracts in place with clients. The company posted loss during FY23 due lower sales and stressed gross margins. However, some recovery in margins were witnessed in 1QFY24. Resultantly, FFO and coverages improved and gearing remained low. While maintaining low leveraged capital structure, improvement in financial performance and debt service coverages are important for the assigned ratings.

For further information on this ratings announcement, please contact Mr. Maimoon Rasheed at 042-35723411 or the undersigned (Ext. 207) at 021-35311861-64 or email at info@vis.com.pk.




Sara Ahmed
Director

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

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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .