The Pakistan Credit Rating Agency Limited
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Muhammad Harris Ghaffar

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PACRA Maintains Entity Ratings of Diamond Tyres Limited

Rating Type Entity
(22-Apr-22 )
(22-Apr-21 )
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Diamond Tyres Limited ("Diamond Tyres" or the "Company") has a reputable presence in 2 & 3 wheelers industry since long. Being a volume driven plus price sensitive industry, the competition is tough. Diamond Tyres has demonstrated resilience in the competitive environment and achieved footprint as a prominent player in its respective niche. Over the years the company has progressed both in terms of financial aspects and operational level, by enhancing its product range of offering within the tyre & tubes domains. Given the industry dynamics, innovation and advancement has become inevitable. Aiming for growth, the Company is eyeing to increase its market share in replacement market by adding more flares to its existing product palette. Capacity utilization is gradually pacing up and this will reap benefits in the future and shall boost up revenues and margins, deriving strength to the financial matrices. Revenue stream is dominated towards replacement market (RM) followed by sales to OEM’s and exports. Going forward the Company has plans to beef up their export sales stay more competitive and diversified in the market owing to the situation where local 2 & 3 Wheelers tyres segment is saturated. Currently company’s profitability has been restricted on account of continuous increase in input costs on the back of rupee depreciation and global inflationary pressure. The Company has implemented sound system of internal controls along with recently developed internal audit function. Financial risk profile of the Company appears adequate with comfortable coverages and cashflows, working capital cycle of the Company is stretched and depicts industry norms. Capital structure is leveraged where borrowings are comprising of long-term and short-term to support BMR and working capital requirement. The Company operates under the umbrella of Diamond Group of Industries, which comprises five other companies and constitutes renowned names; Diamond Supreme Foam, Dolce’ Vita and Diamond Jumbolon, reflecting good financial backing. Both businesses (foam & tyre) are cyclical in nature hence, corroborating continuous inflows at group level. The subsequent generations of sponsoring family are the joint owners of the business. The group entails a central treasury & financial management system where decision making is held mutually. Company’s corporate governance framework needs to be strengthened. The management is mindful of the essence of corporate structure and is keen towards change for the better. This lends support to ratings.
The ratings are dependent on management’s ability to sustain its growth in revenues, margins and profitability. Prudent management of the working capital, maintaining sufficient cash flows and coverages is imperative. Improvement in governance structure remains important for the ratings.

About the Entity
Diamond Tyres Limited is a public unlisted company incorporated in 2004 under the Companies Ordinance, 1984 (now “Companies Act, 2017”). It is a family-owned business who are the owners of Diamond Group. The company has classified its business operation into one main division called "Tyre & Tubes Division". It deals in 2 & 3 wheelers tyre industry, with an installed capacity of 8mln units of tyres and 26mln units of tubes. It is owned and governed by the sponsoring family members, decedents of Mr S.M Shaffi, the founder of Diamond Rubber Mills. Mr Muzammil Shaffi, Mr Bilal Shaffi, Mr Shariq Shaffi and Mr Mudassir Shaffi , grand sons of Mr S.M Shaffi, comprises the Board of Diamond Tyres Limited. Mr Shariq Iftikhar is the CEO of the company. All members of the board are involved in the executive roles of 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.