PACRA Maintains Entity Ratings of Awan Trading Company (Pvt.) Limited

The ratings of the Company’s depict notable operating history along with its ability and commitment to perform. Awan Trading Company holds a significant market share in providing imported coal to local players in the cement, textile, steel and power sector. The Company has arrangements with various global suppliers of Indonesian, South African and Russian coal. During FY24, due to recovery in international coal prices the rising trend of using Afghan coal plummeted. During the first half of FY23, the average international coal prices surged to USD 301 per ton. Prices then began to recover, with the average closing price for FY23 falling to USD 218 per ton. By FY24, the average international coal price had recuperated further to USD 114 per ton, encouraging consumers to return to using high-quality international coal. The Company maintains adequate stock of coal in rented/custom bonded warehouses to meet the demand of the consumers. Currency fluctuation and pricing of coal in the international market impact the Company’s risk profile which is mitigated through passing on the price impact to the consumers. The local economy reported an ~49% decline in coal imports (9MFY24: 3.4mln MT, 9MFY23: 6.6mln MT, 9MFY22: 12mln MT) however, the coal consumption of the country increased by ~12% with inclination towards local coal. Alternatively, the Company’s coal imports increased exponentially by ~132% from ~0.56mln MT during 9MFY23 to ~1.3mln MT during 9MFY24 due to new customer base added. There has been a stable rise in sales volume of the Company (9MFY24: 1.264mln MT, FY23: 1.035mln MT, FY22: 0.905mln). Despite a significant increase in the volumetric sales of the Company, net revenues of the Company only witnessed an increase of ~8% (9MFY24: PKR 50,210mln, 9MFY23: PKR 46,339mln) as a result of price decline in the global market of the commodity. Consequently, the inventory held by the Company resulted in the decline of margins. The company has moderately utilized sizable lines (funded and un-funded) available from different banks to cater to suppliers’ demand. To further support the liquidity position, the Company has made short term and long term investments in TDRs with the intention to enhance it in the future. Short term investments increased to ~PKR 880mln in Mar-24 (Mar-23: PKR 532mln) whereas, the long term investments stood at ~PKR 200mln (Mar-23: PKR 0). Further, The Company has entered into diversification slate of its product line at an initial phase, the impact of which is yet to be unfolded.
Stable growth in sale volumes of the Company over the years have backed the ratings. Furthermore, with the recovery of the global commodity prices, it is imperative to maintain the margins. Going forward, recovery in margins will further enhance the Company’s standing.

About the Entity
Awan Trading Company (Pvt.) Limited was established in October 1992. However, it remained dormant for several years till 2002. The company is engaged in import and trading of coal. The overall control of the company vests in four-member board of directors (BoD) including the Chief Executive – Mr. Govind Ram. He is associated with the company since its inception and is accompanied by management having long association with the company.