The Pakistan Credit Rating Agency Limited
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Muhammad Harris Ghaffar

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PACRA Assigns Initial Entity Ratings to Hyundai Nishat Motor (Pvt.) Limited

Rating Type Entity
(21-Feb-23 )
Action Initial
Long Term A+
Short Term A1
Outlook Stable
Rating Watch -

Hyundai Nishat Motor (Pvt.) Limited (“the Company” or “HNMPL”) ratings reflect a sponsor’s strong financial strength and business profile. The Company is considered inceptive among the other three established auto OEMs (Honda, Toyota & Suzuki) operating in Pakistan. The Company is a joint venture among three leading national and international business groups; Nishat Group, Sojitz Corporation (Japan) and Millat Tractors Ltd. The presence of Japan’s leading general trading Company- Sojitz Corporation (trading partner of Hyundai in Pakistan) having expertise in auto parts assembling and trading as one of the major shareholders provide comfort to the ownership of the HNMPL. The Company’s core operations are to carry out the assembly and distribution of the Hyundai brand vehicles in Pakistan including passenger cars, light commercial vehicles, vans and others.
The Company operates in the premium segment of cars which consists of the C-segment (Hyundai Elantra, Hyundai Tucson), D-segment (Hyundai Sonata) and Pickups (Hyundai Porter) in terms of CKDs and Light commercial vehicles (Hyundai Staria ) in terms of CBU. Hyundai offers a passenger car product power range starting from 1600CC to 3500CC. The board of HNMPL is more of an advisory nature as all members are well-experienced and possess technical expertise along with strapping industry-specific experience. A team of professionals and industry specialists augments the Company's operations.
Currently, the automotive industry is facing a downturn due to various challenges such as overall economic contraction, consistent hikes in policy rates, massive rupee devaluation resulting in higher raw material costs and frequent price escalations, and import restrictions on CKD kits triggered non-production days. Pakistan Automotive Manufacturers Association (PAMA) recent statistical data revealed a ~40% decline in the sales of passenger cars during 1HFY23 (68,900 units sold) as compared to the same period last year (114,774 units sold). In 2 years, the Company has produced 04 variants in terms of CKDs. In terms of volume, Tucson is their prime selling product followed by Elantra, Hyundai Porter, Sonata and Staria. In the recent quarter, the margins of the Company have shown a slight decline mainly on the back of under-stress volumetric growth and higher finance cost.
As per the financial information shared by HNMPL management, fresh equity of PKR 9.0bln was injected in December-22 to unload short-term debt from its balance sheet and optimize the finance cost and capital structure. As of January 2023, HNMPL has paid off all of its short-term loans and has partly cleared long-term loans as well. The Company’s financial risk profile is considered adequate with comfortable coverages, cashflows and a working capital cycle. Capital structure is moderately leveraged where borrowings are only comprised of long-term to support BMR.
The ratings are dependent upon sustainability in Company’s revenue growth, margins, profitability and vigorous financial matrix. The ability of the Company’s Cashflows to meet the operating expenses of the Company is considered pivotal. Sponsors’ support remains imperative for the ratings.

About the Entity
HNMPL is a private limited company incorporated on March 03, 2017 under the Companies Act, 2017). The shareholding consists of Nishat group 44.14%, SOJITZ Corporation 40.0% and 15.86% by Millat Tractors Ltd. The board consists of eight members, two executive and six non-executive directors. Mr. Mian Raza Mansha is the board chairman and Mr. Mian Hassan Mansha is the CEO.

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.