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The Pakistan Credit Rating Agency Limited
Press Release

Date
29-Sep-21

Analyst
Sohail Ahmed Qureshi
sohail.ahmed@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Ravi Automobile (Pvt.) Limited

Rating Type Entity
Current
(29-Sep-21)
Previous
(29-Sep-20)
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 and auto parts for major automotive companies, OEM automotive suppliers, motorcycles & agricultural machinery ii) assembling & distribution of complete motorcycles under the brand name, “Ravi”. The ratings take comfort from Ravi's diversified product line and the sponsor’s active management and deep-rooted connections with key industry players. This is asserted through the group's expansion into multiple standalone entities which include Infinity Engineering (Private) Limited and Ravi Spherocast (a registered partnership), both sizeable enterprises, which augment the group’s presence in the sector. Ravi Automobile witnessed a decline in profit margins due to persistent inflationary pressures. The rising input costs of imported raw materials suppressed the profitability for all segments of the automotive industry. An economic recuperation is expected in the outgoing fiscal period creating a sustainable sectoral recovery and new market models. Ratings tend to gain support from the company’s established position as a source of potential supplier of auto parts for major automotive companies. Business risk profile of the company is supported by healthy demand outlook. Further, the Company has committed approximately PKR 250 mln for an expansion project that would allow capitalisation of localization / import substitution by exploiting its in-house capabilities developed over time. To achieve aforesaid and improve its governance standard, Ravi has successfully partnered up with Ithaca Capital for private equity injections. With the addition of capital and expertise, the company look forward to reliable ownership structure, business expansion, optimal stability and controlled environment. The sales reflect top party concentration. The sponsors are of the view that the concentration is acceptable since decades-long relationships exist. Working capital cycle is longer, which the management represents, tends to be shortened owing to increasing focus on the component business. Comfort is drawn from the need driven nature of the business, backward integration and synergies in the overall group.
Ratings are dependent on Ravi's ability to achieve projected revenue growth in key business segment and sustain its business profile amidst changing operating environment. Meanwhile, improvements can be made in terms of financial discipline. Any dilution in profit margins, cash flow and/or increase in leverage would be considered negative.

About the Entity
Ravi Automobile (Pvt.) Limited was incorporated, on May 19, 1998, as a private limited company. It specializes in manufacturing of components (parts) for major automotive companies & OEM suppliers. The parts manufacturing division is equipped with pressure die-casting & CNC machining lines. It also assembles & distributes its own brand of motorcycles under brand name, Ravi. Production of parts started in 1998, while bikes assembly operations initiated in 2004.
Ravi is part of a group of multiple companies serving automotive industry, with various core competencies, all owned by Mr. Iqbal Khalid, his son Mr. Fahad Iqbal and family members. In 2021, ownership structure of company changed following private equity investment from Ithaca Capital, which now holds 51% stake in the company.

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.