The Pakistan Credit Rating Agency Limited
Press Release


Sohail Ahmed Qureshi

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PACRA Assigns Initial Entity Ratings to Suzuki Islamabad Motors

Rating Type Entity
(29-Jun-22 )
Action Initial
Long Term BBB-
Short Term A3
Outlook Stable
Rating Watch -

Car dealership (authorized) rides on the strength of the principal (auto manufacturer/assembler). The stronger the principal in the respective market, the higher is the standing of the car dealer. There is a pre-defined set of criteria – qualitative & quantitative – that are the principal demands of the dealer network. The rating takes comfort from Suzuki Islamabad Motors’ alliance to Pak Suzuki Motor Company Limited – owned by Suzuki Motor Corporation, Japan. Suzuki Islamabad ad Motors (SIM) is among the largest authorized dealerships in country, nevertheless, these dealerships are fragmented where each dealership possesses thin market share. Suzuki Islamabad Motors (SIM) is a sole proprietor and requires improvement in legal status. SIM’s income stream is derived from commission on sales of new vehicles. The profitability is being supplemented by the “After sale” segment reporting net profitability for dealership and covering its operational costs, hence limiting and/or cushioning the unforeseen drag on risk absorption capacity. The overall auto sector business is dependent on economic indicators and demand led by businesses and consumers. During 1HFY22, Pakistan Automotive Manufacturers Association report represents ~71% growth in passenger car sales volumes as compared to the same period last year which is a positive sign. SIM has implemented an appropriate level of internal controls across the business, however having an internal audit function will bring further improvements. Financial risk profile of the company appears adequate with comfortable coverages, working capital cycle, and cashflows. Capital structure is leveraged due to modest equity which is also diluting over the years and representing a mix of short-term and long-term borrowings.
The ratings are dependent on sustaining a steady revenue stream and financial risk profile. Any prolonged downturn in subdued business volume can have a detrimental effect on the rating. Good corporate governance practice is considered pivotal for a growing business concern.

About the Entity
Suzuki Islamabad Motors was established as a sole proprietor in 2007. SIM is certified as a 3S authorized dealership (Sales, Service, and Parts) of Pak Suzuki Motors Limited, the partner of Suzuki Motors Japan. The registered office of the Company is situated at Potohar Road, I-9 Industrial Area, Islamabad. The dealership is owned by Mr. Iftikhar Hussain (Chairman).

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.