The Pakistan Credit Rating Agency Limited
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Sohail Ahmed Qureshi

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PACRA Maintains Entity Ratings of Ghandhara Tyre & Rubber Company Limited

Rating Type Entity
(10-Aug-22 )
(10-Aug-21 )
Action Maintain Upgrade
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Ghandhara Tyre & Rubber Company Limited (formerly known as The General Tyre & Rubber Company of Pakistan Limited) is a prominent automotive tyre manufacturer in the country catering different market segments, including Original Equipment Manufacturers (OEMs), Replacement/After Market (RM), Institutions (Govt, Defense, etc.) The ratings reflect Company’s strong business profile and long-lasting presence in Pakistan’s tyre industry. The Company sustains its market share through product diversification in related niches. Tyre demand is primarily governed by replacement market followed by automobile OEMs. Intense competition from imported tyres necessitates high quality products at affordable prices. Pertinently, fluctuating prices of raw materials pose risk to profitability. Key threats also include high inflation and uncertain demand pattern of niche. The Company ramped up its topline by ~24% YoY basis through enhanced focus on RM coupled with better offtake by OEMs, particularly in passenger car and agriculture OEMs due to continuous demand rising & better crop prices. Profitability for the period was influenced by high material costs, freight charges, rupee devaluation and increase in other manufacturing costs, partially offset by better product mix, superior prices, and increased RM sales supplemented by plant efficiencies. The Company’s envisaged strategies are to hold strong foothold in its respective niche comprising 4-wheeler tyres for cars, LCVs, tractors, buses & trucks. To ensure business growth, management of the Company has always invested in modernization and capacity enhancement of plant. The Company is currently working on new sizes & designs for both OEM and RM segments. Going forward, the Company is expected to receive benefits from (a) Ban on complete built unit (CBU) cars (b) Government efforts to curb smuggling in replacement market (c) Entry of new OEMs in the market as the Company is already in close coordination with new auto players to materialize supply of new tyres for SUVs. A well-devised governance framework, close association with major sponsors alongside experienced management team are considered positive for the ratings. The Company's core competence lies in its technical collaboration with Continental AG; Germany (one of the world’s leading tyre manufacturers) which assures adherence to international quality standards.
The ratings are dependent on the Company’s ability to improve its business risk vis-à-vis financial risk profile along with sustainable margins. Cautious management strategies amidst challenging industry environment are pertinent. Moreover, prudent management of financial affairs remains important.

About the Entity
Ghandhara Tyre & Rubber Company Limited was incorporated in 1963 under the Companies Act, 1913 (now Companies Act, 2017) and got listed on the Karachi Stock Exchange in 1982. It is engaged in the manufacturing & marketing of a complete range of automotive radial tyres. At present, the Company operates with an annual production capacity of ~3.9mln tyres and ~4.4mln tubes. The Company is majorly owned by two sponsors - Bibojee Services (Pvt.) Limited and Pak Kuwait Investment Company Limited (PKIC), holding ~28% and ~30% shares, respectively. The CEO - Mr. Hussain Kuli Khan has an overall experience of ~25 years. An able management team assists him.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.