Muhammad Harris Ghaffar
PACRA Maintains Entity Ratings of EXIDE Pakistan Limited
EXIDE Pakistan Limited (“EXIDE” or “the Company”) is a pioneer in the battery industry; it has presence in Pakistan since 1953. EXIDE offers a wide range of batteries, catering to the demand for automotive, industrial, and household portable energy backup. The strength of local lead acid battery industry preliminary derived from (i) Replacement market related to automotive and power backup solutions (ii) Electricity shortfall situation during summer season (load-shedding) (iii) Automobile (OEMs) sales. Pakistan Automotive Manufacturers Association (PAMA) recent statistical data revealed ~39% decline in the sales of passenger cars, trucks & buses, and Jeeps & pickups whereas tractors sales dropped to ~50% and two-three wheelers sales declined to ~34% from the period covered July to November 2022 as compared to the same period last year. Deterioration in demand was mainly attributable to rupee depreciation and frequent hikes in policy rates which will resultantly slow down vehicle financing. During the period under review, revenue recorded growth of ~29% from the corresponding period last year, mainly because of the inflationary effect on prices and slightly impacted by volumes. Margins also posted some recovery as the company was able to pass on the cost escalation, but there is still room for improvement. The market share is expected to stand around ~ 20%. On the flip side challenges like stiff competition, low margins are expected to sustain in future. The Company is well aware of any technological shift and associated demand within battery sector and have appropriate plans intact for its adoption. As a part of product diversification EXIDE is also offering end-to-end solar power backup solution for industrial/household customers and will build its market share gradually. The sponsors have a good understanding of the business and the Company is led by experienced management. Financial profile of the Company is demonstrated by stretched working capital cycle, and comfortable cash flows & coverages. Capital structure is leveraged where borrowings are mainly comprised of short-term for working capital requirements.
Ratings are dependent on upheld market share with improvements in profits and margins while retaining sufficient cash flows and coverages. However, adherence to maintaining its debt metrics at an adequate level is a prerequisite.
EXIDE Pakistan Limited was incorporated in Pakistan in 1953 as a private limited company in association with Chloride Group PLC of United Kingdom and got listed on the Karachi Stock Exchange in 1982. EXIDE is majority owned by the Hashwani Family (75%) while the financial institutions and the general public hold approximately 25% of the company shares. Over the years, no major change has been observed in the shareholding structure. Mr. Altaf Hashwani is the Chairman of the Board. Mr. Arshad Shahzada is the managing Director/CEO of the company.