PACRA Maintains the Entity Ratings of Panther Tyres Limited

Panther Tyres Limited (‘PTL’ or ‘the Company’) is primarily engaged in the manufacturing and sale of bias tyres & tubes for vehicles augmented by the sale of auto parts & lubricants. The ratings reflect the Company’s prominent position and brand equity to serve OEMs and the replacement market. PTL has been able to improve its market share in a price-sensitive and volume-driven segment of 2 wheelers and tractors, owing to its broad product range that caters to the needs of a wide range of users. Pakistan’s tyre industry faced operational challenges resulting from the import restrictions during the past couple of years. Moreover, the profitability matrix of the industry also remained under pressure on the back of increased production costs triggered by high energy prices and elevated interest rates. Additionally, the OEMs’ sales have substantially declined as a consequence of massive price increases due to PKR depreciation and decreased purchasing power of the consumers on the back of high inflation. However, the demand for tyres remains intact as the industry derives ~80% of its demand from the replacement market. Moreover, the high prices of cars and the increase in associated fuel and maintenance costs have resulted in the rise in the usage of 2-wheelers, which has created an opportunity for players like PTL who specialize in the 2-wheeler and tractor tyres segment. During 3QFY24, the company’s topline grew by ~33% YoY, attributable to increased volumes and price hikes. The gross margin of the company marginally improved to ~15% during 3QFY24 (FY23, 14.5%: FY22, 11%) that also trickled down to an improved net margin of ~2.6% during 3QFY24 (FY23, 2%: FY22, 2.1%), primarily triggered by price adjustments to pass on the impact of elevated costs. The governance structure of the company is dominated by independent directors, reflecting the company’s adherence to the code of corporate governance. The capital structure of the Company is considered leveraged. The debt book is dominated by short-term borrowings to fund working capital needs. The financial risk profile of the Company is characterized by an adequate working capital cycle and reduced coverages owing to a substantial increase of ~38% in the finance costs of the company. Going forward, growth in sales volume is substantial to attain a high market share and maximize the profitability matrix. The Company must intend to materialize the envisaged strategies by strong oversight of risk, compliance and code of corporate governance while maintaining leverage at an adequate level.
The ratings are dependent on the Company's ability to retain its position amidst a competitive business environment, improvement in the profitability matrix, and increase in international outreach. Prudent financial performance like healthy coverages and effective liquidity profile shall remain vital for the business.

About the Entity
Panther Tyres Limited is a listed entity, incorporated in 1983. The Company is primarily engaged in the production of bias tyres & tubes for vehicles and the trading business of automobile lubricants & motorcycle spare parts. Panther is the pioneer in the motorcycle, TBB, & OTR tyre manufacturing industry of Pakistan.
Mian Iftikhar Ahmed, a renowned businessman, with his family, owns a majority stake in the Company. The overall control of the Company vests in the 7-member board of directors. Mian Faisal Iftikhar (son of the Chairman) is the CEO and is supported by a team of qualified professionals.