The Pakistan Credit Rating Agency Limited
19-Aug-22
Analyst
Anam Waqas Ghayour
anam.waqas@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Rating | Jun-22
- Methodology | Correlation Between Long-term & Short-term Rating Scales | Jun-22
- Methodology | Rating Modifiers | Jun-22
Related Research
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PACRA Maintains Entity Ratings of Awan Trading Company (Pvt.) Limited
| Rating Type | Entity | |
|
Current (19-Aug-22 ) |
Previous (20-Aug-21 ) |
|
| Action | Maintain | Maintain |
| Long Term | BBB+ | BBB+ |
| Short Term | A2 | A2 |
| Outlook | Positive | Stable |
| Rating Watch | - | - |
The ratings reflect adequate profile of Awan Trading Company (the Company) characterized by stable market share in imported coal, especially retail market. The Company imports its raw material, where currency fluctuations and pricing risk effect margins. The management intends to pass on the impact onto customers, though demand sensitivity is a consideration. Major demand vests in the domestic cement landscape followed by power producers and food processing companies that are dependent on coal for their operations. The Company has arrangements regarding supply of coal with various suppliers globally. Awan Trading Company follows strategy of keeping inventory in stock which is stored in rented/custom bonded warehouses. Topline of the company followed growth pattern over the last few years. During 9MFY22, revenue stood at PKR 23,005mln (FY21: PKR 16,027mln) with a substantial increase of 91.4%. The increase in revenues is attributed to the increase in volumes as well as manifold inclination in the international coal prices. Similarly, margins are expected to follow the same trend in coming years. The company has moderately utilized sizable lines (funded and un-funded) available from different banks to cater to suppliers’ demand. Positive Outlook captures retention of existing market share as well as increase in the company’s customers’ outreach. Such enduring steps shall propel the company towards business and financial sustainably and growth.
The ratings are dependent on the company’s ability to sustain its customer base. Proactive management of business affairs with improved margins and coverages is important. Meanwhile, strengthening in governance structure is needed to improve financial transparency and oversight.
About
the Entity
Awan Trading Company (Pvt.) Limited was established in October 1992. However, it remained dormant for several years till 2002. The company is engaged in import and trading of coal. The overall control of the company vests in four member board of directors (BoD) including the Chief Executive – Mr. Govind Ram. He is associated with the company since its inception and is accompanied by management having long association with the company.