The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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PACRA Assigns Initial Ratings to TPL Corp Limited | Privately Placed Commercial Paper ("PPCP") of PKR 900mln

Rating Type Debt Instrument
Action Initial Preliminary
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The rating reflects TPL Corp Limited's ("TPL Corp" or "the Company") diverse pool of investments and its evolving structure as a Holding Company. TPL Group entered the business arena through vehicle tracking and insurance business. The existing investment portfolio is still evolving. TPL Insurance remains a stable investment in the Company's book. Moreover, TPL Trakker Limited and TPL Properties Limited remain prominent players in their respective sectors. However, all the investments are yet to generate sizeable dividends for the Company. TPL Life Insurance Limited provides complete health and life insurance products. TPL Security Services provides security solutions. The merger of TPL Maps and TPL Rupiya into TPL Trakker is expected to bring in synergy at the Group level.
On a standalone basis, TPL Corp has yet to receive consistent dividends/payout from its investments. The Company has recently diluted its stake in TPL Insurance as DEG (Deutsche Investitions- und Entwicklungsgesellschaft), a wholly-owned subsidiary of KFW Group based in Germany, has acquired 19.9% stake through the issuance of ordinary shares other than a right issue. Meanwhile, the listing process of TPL Trakker on PSX concluded in Aug-20 while, shares remain oversubscribed. The sale transaction of Centrepoint from TPL Properties balance sheet, to Bank Al Habib, has been completed lately. These initiatives have been delayed amidst prevailing economic conditions, however, have generated sufficient funds for the Group. Lately, the Company has issued a Privately Placed Commercial Paper of ~ PKR 900mln (base issue of ~ PKR 700 with a greenshoe option of PKR 200mln) to meet financing requirements of its subsidiaries/associated companies. Coverages may remain constrained in the absence of material dividend income but a rate cut (625 bps) by SBP would provide the respite. The ratings take comfort from demonstrated support of sponsors to raise funds. Strong governance framework remains beneficial for the ratings.
The ratings depend on the projected performance of existing strategic investments. Timely and successful repayment of the PPCP is pre-eminent for the ratings.

About the Entity
TPL Corp Limited (formerly known as TPL Trakker Limited) is a public limited company, listed on PSX. The Company is principally engaged in making investments in Group and other companies. TPL Trakker Ltd. was incorporated in Pakistan on Dec-08, as a private ltd company. It got listed on PSX in Jul-12. The Company's name was changed to TPL Corp Limited w.e.f. Nov-17.TPL Corp is majorly owned by its parent company, TPL Holdings (Pvt.) Ltd. (~62%). While financial institutions hold ~ 6% shares. The remaining shares are owned by local and foreign individuals.

About the Instrument
The Company has issued a Privately Placed Commercial Paper of PKR 900mln (base issue of ~ PKR 700mln with a greenshoe option of ~ PKR 200mln) to bridge the investment in TPL Life Insurance and finance working capital requirement of its subsidiaries. The instrument carries markup at the rate of 6 months KIBOR plus 2.75 % per annum and will be redeemed as a bullet payment on the maturity date i.e., 180 days after the issuance of the instrument. TPL Corp plans to repay the issue through dividend income or may dilute investment in its underlying subsidiaries.

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.