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PACRA Maintains Entity Ratings of Ravi Automobile (Private) Limited

Rating Type Entity
(29-Sep-22 )
(29-Sep-21 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Ravi Automobile (Private) Limited (‘Ravi’ or ‘the Company’) operates in two segments of the automotive industry: i) manufacturing of components & auto parts for automotive companies, OEM suppliers, motorcycles and agricultural machinery ii) assembling & distribution of motorcycles under its own brand. The ratings reflect Ravi's diversified product line, long-lived presence in the domestic market, and sponsors’ deep-rooted connections with leading industry players. This is asserted through group's expansion into multiple standalone entities, including Infinity Engineering (Pvt.) Limited and Ravi Spherocast, both sizeable enterprises augmenting the group’s presence in the sector. Pakistan’s automotive & allied industry witnesses a dip owing to economic instability, persistent inflationary pressures, and policy hikes. The rising input costs of imported raw materials suppressed the profitability for all players of the automotive segment. There is reduction in custom duty on imports of prime materials to incentivize local players. Despite adverse industry challenges, the Company managed to record a revenue growth of ~29% during first nine months of FY22. The sales reflect top party concentration, but sponsors are of the view that concentration is acceptable as decades-long relationships exist. Margins are considerably dependent on improved topline; better prices and more volume. Business risk profile of the Company is demonstrated by expected revival, specifically in 2-Wheelers and Agri segments. Moreover, the Company availed long-term finance facility at concessionary rates to ensure timely expansion that would allow localization by exploiting its in-house capabilities developed over time. To achieve aforesaid and improve its governance standard, Ravi also partnered up with Ithaca Capital (Pvt.) Limited for private equity injection. Financial risk profile represents longer working capital cycle for which the management is of the view, tends to be shortened owing to strategic shift towards component business. Given the Company’s expansion phase, capital structure is leveraged for now. Comfort can be drawn from the need driven nature of the business, backward integration, and synergies in the overall group.
The ratings are dependent on Ravi's ability to achieve projected revenue growth in key business segment and sustain profitability matrix amidst challenging operating environment. Prudent financial discipline and implementation of a stringent control environment shall remain imperative.

About the Entity
Ravi Automobile (Private) Limited, incorporated on May 19th, 1998, as a private limited concern. It specializes in the manufacturing of components and auto parts for automotive segment & major OEM suppliers. The parts manufacturing division is equipped with pressure die-casting & CNC machining lines. The Company also assembles & distributes its own brand of motorcycles under trademark of ‘Ravi’.
Ravi is part of a group of multiple legal entities serving automobile & allied sector, with various core competencies, all owned by Mr. Iqbal Khalid, his son Mr. Fahad Iqbal & family members. In 2021, the ownership structure of the Company was changed post equity injection from private firm “Ithaca Capital (Pvt.) Limited” which now holds ~51% stake in Ravi. The board is comprised of five directors: Mr. Iqbal Khalid (Chairman - Ravi), Mr. Fahad Iqbal (CEO - Ravi), Mr. Saad Saeed Faruqui (Chairman - Ithaca Capital (Pvt.) Limited), Mr. Haider Ali Hilaly (CEO - Ithaca Capital (Pvt.) Limited), and Muhammad Danish Hussain (CFO - Ithaca Capital (Pvt.) Limited).

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.