PACRA Maintains Entity Ratings of Ghandhara Automobiles Limited

Ghandhara Automobiles Limited (‘GAL’ or ‘the Company’) is an authorized automobile assembler of multiple automobile brands in Pakistan. The assigned ratings are supported by the Company’s strong ownership structure, solid business profile, and established presence in Pakistan's automobile sector. GAL maintains partnerships with leading Chinese multinational manufacturers, including JAC Motors, China Dongfeng Motor Industry Import & Export Company Limited, and Dongfeng Motor Corporation, for the local assembly of light, medium, and heavy-duty commercial vehicles, and with Chery Automobile Co. Ltd. for the local assembly of Chery passenger vehicles, such as the Chery Tiggo 4/8 Pro SUV (sport utility vehicle). Additionally, GAL is the authorized distributor of Renault trucks, providing complete built-up units from the French commercial vehicle manufacturer. The company also undertakes the assembly of other commercial motor vehicles through contract agreements with Ghandhara Industries Limited, Ghandhara DF (Pvt.) Limited, and Bibojee Services (Pvt.) Limited. In FY24, growth in Pakistan's trucks and buses sector remained subdued, closely linked to overall economic activity. Local bus assembly saw a significant decline of ~40.23% year-on-year (YoY), while local truck assembly decreased by ~28.30% compared to the previous year. This downturn was primarily driven by the challenging state of foreign exchange reserves, higher policy interest rates aimed at curbing inflation, delays in the establishment of letters of credit (L/Cs) for importing CKD (Complete Knock Down) kits, and the impact of the Red Sea crisis. During the period under review, the sector's performance remained uncertain due to fluctuations in product demand, and the prevailing macroeconomic challenges increased the cost of doing business. GAL's consolidated revenue for FY24 contracted to ~PKR 9,413mln, compared to ~PKR 13,104mln in FY23. This decline was largely attributable to a significant YoY reduction of ~80.7% in Chery Tiggo sales. However, the period saw a notable growth in sales of Dongfeng (DF) light and heavy-duty trucks, as well as JAC light commercial vehicles. DF trucks accounted for ~42% of total revenue, while JAC vehicles contributed ~36%. Backed by a highly experienced management team with a diverse skill set, the company has established strong internal controls and consistently upholds corporate governance standards. Financial risk profile is characterized by modest coverages and cashflows. The working capital cycle is stretched and depicts industry norms. Capital structure is moderately leveraged, where borrowings are majorly comprised of short-term borrowings for working capital management.
The ratings are dependent on upholding the Company’s consolidated and standalone business profiles amidst the unfavorable macroeconomic challenges in the automobile and allied industries. Enhancing coverages, cash flows, and working capital management will remain imperative. Moreover, the Company's stance on timely execution of strategic projects is crucial for expanding revenue streams. Improvement in GAL’s standalone profitability and growth remains crucial.

About the Entity
Ghandhara Automobiles Limited (GAL), established in 1981, operates under Bibojee Services (Pvt.) Limited, founded by the late Gen. Habibullah Khattak in the 1960s. Bibojee has diverse interests in Textile, Auto, Tyres & Rubber, Insurance, and Construction sectors. GAL assembles and progressively manufactures vehicles, including JAC & DF trucks and Chery SUVs, and imports parts and CBU vehicles from Dongfeng and Renault. It has an annual capacity of ~4,800 units per shift for trucks & buses and ~6,000 units for cars. The board comprises ten members, with Mr. Ali Kuli Khan Khattak as Chairman and Mr. Ahmad Kuli Khan Khattak as CEO.