The Pakistan Credit Rating Agency Limited
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Raniya Tanawar

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PACRA Assigns Preliminary Rating to TPL Trakker Limited | Sukuk

Rating Type Debt Instrument
(23-Dec-20 )
Action Preliminary
Long Term A+
Short Term -
Outlook Stable
Rating Watch -

The ratings incorporate TPL Trakker's prominent position in Pakistan’s tracking industry, emanating from its multifaceted product portfolio and sanguine technology infrastructure. As diversity becomes inevitable to sustain in its operating segment, the Company is gradually shifting towards business avenues that are more beneficial for company’s growth; the new segments have started to play their role however, incremental yet consistent cash flows remain pivotal. Recent developments precisely include acquisition of majority stake of Trakker Middle East LLC, and merger of TPL Maps & TPL Rupiya into TPL Trakker. Post-merger, the mapping division and locations based Services (LBS) have already started achieving above-par results. Moreover, as per the Company's plan, the process of going listed has been successfully completed – oversubscribed by 14.6% - hence, now stands as a public listed company from Aug’20. Underpinning the IPO, which got slightly delayed from its planned timeline, is the Privately Placed Commercial Paper (PPCP) which is providently redeemed and 20% remaining is deferred till Jan'21 under the SECP's Relief Package. The Company will soon be adding another Sukuk to its liquid profile, however, most of the Company's financial obligations have been deferred, including Sukuk (PKR 600mln), therefore diluting the pressure in the shorter horizon. The Company still faces the pressure of high finance cost on account of its leveraged book, resulting in persistent bottomline losses in 3MFY21. The situation accumulates the impact of COVID-19 pandemic in the country which has led to severe economic disruption and demand deceleration. Currently, the Company’s financial risk profile exhibits a sigh of relief at all fronts; interest and debt coverages alongside capital structure and cash conversion cycles, endurance of which is necessitated.
The ratings are dependent upon the strength of the underlying security of the instrument. The instrument is secured through a tiered security structure. Apart from the ‘Hypo’ charges, additional charge is placed on the TPL Corp Limited’s long term investment of upto PKR 1500mln(~17M ordinary shares of TPL Insurance Limited and 100M ordinary shares of TPL Life Insurance Limited). In addition to this, specific comfort to the assigned ratings is being drawn from the inclusion of pre default mechanism, comprising a facility payment account and facility service reserve account in which one instalment will be maintained though out the term.

About the Entity
TPL Trakker Limited (TPLT) – is now a Public Listed Company - since it got listed on the PSX in the month of Aug’20. Previously it was a wholly owned subsidiary of TPL Corp Limited. TPL Trakker is a telematics solution provider and the core business mainly comprises vehicle tracking, fleet management, Internet of things (IoT) and Digital mapping services. TPL Corp is a ~62.41% subsidiary of TPL Holdings. Post IPO, TPL Corp Limited is the major shareholder of TPL Trakker Limited with ~64% holding. BoD of the Company comprises eight members, headed by the Chairman Mr Jameel Yusuf. Mr. Sarwar Ali Khan is the CEO of the Company, having more than a decade of experience and has been associated with the Company for the last three years.

About the Instrument
TPL Trakker Limited intends to issue a secured, listed & Privately placed Sukuk of amount PKR 1.4bln at an offer rate of 3 Month KIBOR + 3.00% p.a with a tenor of five (5) years, inclusive of 6months grace period. Sukuk will be redeemed in eighteen (18) equal quarterly payments.

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.