Press Release

VIS Maintains Entity Ratings of Allied Rental Modaraba on ‘Rating Watch - Developing’

Karachi, Aug 07, 2023: VIS Credit Ratings Company Ltd. (VIS) has maintained entity ratings of ‘A+/A-1’ (Single A plus/A-One) to Allied Rental Modaraba (ARM). Medium to long-term ratings of ‘A+’ signifies good credit quality with adequate protection factors. Risk factors are considered variable if changes occur in the economy. Short term ratings of ‘A-1’ denote high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors; risk factors are minor. Ratings have been placed on ‘Rating Watch - Developing’. The previous rating action was announced on June 17, 2022.

Ratings continue to be on Rating Watch-Developing on account of pending demerger. The demerger, announced on April 14, 2022, is currently awaiting approval from the Sindh High Court. It involves the transfer of assets, liabilities, and obligations from ARM's rental business segment and logistic business segment to two separate companies. The demerged rental business segment's assets, liabilities, and obligations will be transferred to Allied Engineering Management Company (Private) Limited (AEMCL), which will subsequently change its name to Allied Rental Services (Private) Limited (ARSL). Similarly, the assets, liabilities, and obligations related to the demerged logistic business segment will be transferred to Allied Transport and Logistics (Private) Limited (ATL).

As part of this arrangement, shares of AEMCL and ATL will be issued to the certificate holders of ARM according to the swap ratio calculated for the purpose of this scheme. Principal sponsors, who indirectly hold more than 90% certificates of ARM, will be issued shares of AEMCL and ATL in proportion to their indirect investment in ARM. The ultimate objective of demerger of ARM is to carry on business economically and efficiently with main sponsors being able to reduce their tax burden by directly holding shares of the two companies. Upon finalization of the demerger scheme, VIS will review the ratings.

Assigned ratings take into account the Company being a subsidiary of Allied Engineering & Services (Pvt) Limited (AESL); the latter is the market leader in generator business. The implicit support available from AESL, the authorized dealer of Caterpillar (CAT) products in Pakistan, remains a key rating driver. The ratings are underpinned by sound financial risk profile of the Company emanating from relatively conservative capital structure, low leverage indicators, adequate liquidity and maintained asset quality.

For further information on this ratings announcement, please contact Mr. Saeb Muhammad Jafri (Ext: 202) or the undersigned (Ext: 207) at 021-35311861-64 or email at info@vis.com.pk.

Sara Ahmed
Director

Applicable rating criterion: Non-Bank Financial Companies (March 2020)
https://docs.vis.com.pk/docs/NBFCs202003.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 .