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PACRA Maintains Entity Ratings of Panther Tyres Limited

Rating Type Entity
(29-May-23 )
(01-Jun-22 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Panther Tyres Limited (‘PTL’ or ‘the Company’) is primarily engaged in the manufacturing and sale of tyres & tubes for vehicles followed by the sale of auto parts & lubricants. The ratings reflect Company’s prominent position and brand equity to serve OEMs and replacement market. In an industry, which is volume driven and price sensitive, PTL sustains its market share underpinned by product diversification in respective niches. Tyre demand is primarily governed by replacement market followed by automobile production. Intense competition between tyre manufacturers necessitates high quality products at affordable prices. Adoption of advanced technology is indispensable to drive the growth of rubber tyre & tube industry in Pakistan. Fluctuating prices of raw materials can hinder the growth of rubber tyre & tube sector. With ongoing challenges for the economy of Pakistan, numerous factors have put pressure on the players in auto & allied sectors, affecting businesses both directly and indirectly. The economy has been slowing down in recent months, which has led to reduced demand for new vehicles and replacement tyres. Conventionally, the demand for 2- & 3-wheel segments is served by local market players. Accordingly, PTL captures formidable market share in motorcycle tyres, tractor tyres, rickshaw/loader tyres. Besides, PTL opened new chapter by manufacturing OTR tyres in Pakistan – a step towards import substitution. Nevertheless, policy rate hike, exchange rate volatility, & imports through grey channels can pose serious business risks (specifically in terms of volume & margins). As at end Mar-23, topline of the Company experienced negative growth of ~7.5% on a year-on-year basis and positive growth of ~2.0% on a quarter-over-quarter basis. During review period, gross margin stood at ~12.6% while net margin stood at only ~0.7% owing to increased materials prices, exponential rise in exchange rates, energy cost, and high financial charges. With its legal status converted into a Public Listed Entity, quality of governance structure improved through independent oversight. Capital structure of the Company is considered leveraged as PTL funds its expansion by means of debt availed at concessionary rates, making the debt book adequate. Financial risk profile of the Company is characterized by slightly stretched working capital cycle and reduced coverages. Going forward, growth in sales volume is substantial to attain high market share and maximize profitability matrix. The management needs to devise an effective pricing strategy to cope with rising competition and current economic challenges. The Company must intend to materialize the envisaged strategies by strong oversight of risk, compliance and code of corporate governance.
The ratings are dependent on the Company's ability to retain its position amidst competitive business environment, management of market risks, and increase in international outreach. Prudent financial performance like healthy coverages and effective liquidity profile shall remain vital for the business.

About the Entity
Panther Tyres Limited is a listed entity, incorporated in 1983. The Company is primarily engaged in the production of tyres & tubes of vehicles and trading business of automobile lubricants & motorcycle spare parts. Panther is the pioneer in the motorcycle, TBB, & OTR tyres manufacturing industry of Pakistan. Mian Iftikhar Ahmed, a renowned businessman, with his family owns majority stake of the Company. He has served as the chairman of All Pakistan Tyres & Tubes Manufacturers Association. The overall control of the Company vests in 7-members board of directors. Mian Faisal Iftikhar (son of Chairman) is the CEO and is supported by a team of qualified professionals.

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.