The Pakistan Credit Rating Agency Limited
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Uswa Sikandar

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PACRA Maintains Entity Ratings of KSB Pumps Company Limited

Rating Type Entity
(08-Dec-22 )
(17-Dec-21 )
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch Yes Yes

The ratings reflect leading position of KSB Pumps Company Limited ("KSB Pumps" or "the Company") as a premier manufacturer of pumps, valves and related services in Pakistan. Ratings incorporate KSB Pumps’ association with KSB SE & Co. KGaA, Germany (KSB Germany), which is one of the top 5 pump manufactures of the world. The Company has a state-of-the-art manufacturing facility certified by KSB Germany as MBK – Made by KSB . This is supplemented by robust systems and controls with access to KSB Germany for licensing and technical knowledge. Resultantly, the Company enjoys competitive advantage in domestic market as well as for exporting to other companies across the world including group companies. The Company has substantial market share in the pump industry. Sale of pumps to industrial customers and raw components exports to KSB group companies make up a significant part of revenues. The Company has increased its exports by leveraging its MBK certification and strong expertise. The Company takes the advantage of private and foreign funded projects which ease the fiscal pressure on its Balance Sheet. Additionally, the Company’s revenues are supported through project sales to public and private sectors; however, public sector proportion has decreased as company has now opted for an indirect model via partnering up with private players for these projects for better cash management. KSB Pumps margins have taken a hit at the gross level due to increase in raw material prices which is mostly imported keeping the company susceptible to currency risk. Higher exports will mitigate this to a large extent. KSB has booked humbled profitability of of PKR 26mln in 9MCY22 (FY21: PKR 27mln; FY20: PKR 16mln) and has an adequate financial profile characterized by moderately leveraged capital structure. The working capital of the Company is stretched due to long overdue receivables, mainly from the government. Strategic shift of transitioning to private customers from government clients will provide relief to cashflows and, in turn, coverages which has also been reflected in the projections shared by management. Company's association with KSB Group is considered positive. Ratings also take comfort from strong group support, technically and financially, and from its eligibility, under KSB group guidelines, to obtain intercompany loans and utilize umbrella credit facilities created by the parent company. However, during its entire history, the company never resorted to borrowing from Germany.
The ratings are dependent on the Company's ability to improve its core margins and profitability through execution of better margin projects and exports to group companies. Prudent working capital management and maintaining strong coverages with improved capacity utilization are imperative for the ratings going forward.

About the Entity
KSB Pumps is a public limited company, incorporated in July 1959 and got listed in 1971 on PSX. KSB Pumps is a subsidiary of KSB SE & Co. KGaA, Germany with ~58.89% of the shareholding. KSB SE & Co. KGaA, Germany is a leading international supplier of pumps, valves and related systems for the Industrial applications. Rest of the shareholding is divided among NIT, Corporates, Financial Institutions and General public. KSB Pumps manufacturing facility is located at Hassanabadal. The board comprises 8 members and is chaired by Dr. Sven Baumgarten. Mr. Imran Ghani, a mechanical engineer by profession is the CEO of company whereas Mr. Imran Ahmad is the CFO with 20+ years of diversified financial experience.

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.