PACRA Maintains Entity Ratings of Pak Elektron Limited

Pak Elektron Limited ("PEL" or "the Company") is a leading engineering corporation in Pakistan, known for its extensive range of household appliances and electrical equipment. The ratings reflect PEL's diversified revenue base and established presence in both the Appliances and Power divisions. The Appliances division offers a broad product portfolio, including refrigerators, deep freezers, air conditioners, and microwave ovens, among others. The Power division covers a range of products such as transmission and distribution transformers, energy meters, and switchgear. This diversified mix, backed by an extensive manufacturing base and countrywide distribution network, underpins the Company's operational scale. The ratings also draw comfort from PEL's brand recognition, built over a long operating history. The operating environment during CY25 remained relatively supportive. Favorable interest rates, lower Inflation, and a largely stable exchange rate together supported purchasing power, business activity, and resumed consumer confidence. However, during 1QCY26, geopolitical tensions escalated, contributing to supply chain disruptions and elevated freight costs on imported inputs, while interest rates have begun edging upward again after reaching their recent lows. These developments introduce some uncertainty, though their impact so far remains manageable. Demand in the household appliances market is driven by technological advancements, rapid urbanization, growth in the housing sector, rising per capita income and improved living standards. The rapid adoption of rooftop solarization has further supported growth momentum, particularly for energy-intensive appliances. The Power division's performance, in turn, is linked with emerging consumption patterns, investment in transmission and distribution networks for grid stability, and urban development. During the period, the Company made tangible progress in streamlining its transformer exports, an initiative identified in the previous review as a strategic priority, which has now translated into execution. To strengthen its premium product offering in the Appliances segment, the Company entered into a licensing arrangement with Electrolux AB, which is expected to broaden the product portfolio. This adds depth to the revenue base, though the domestic market still accounts for the substantial majority of sales. PEL's Appliances division reported gross revenue growth of ~34% in CY25, driven primarily by a ~28% increase in sales volume. Revenue in the Power division remained largely stable, although volumes declined as compared to CY24. Despite the volume and revenue growth in the Appliances division, heightened competition from Chinese manufacturers led to moderation in PEL's market share across refrigerators, air conditioners, and microwave ovens. Similarly, market share in the Power division for power and distribution transformers declined amid increased local competition. In CY25, the Appliances division accounted for ~64% of gross sales, with the Power division contributing to the remaining ~36%. PEL recorded a net revenue growth of ~20% in CY25, and the momentum has continued into 1QCY26. Gross and operating margins remained largely stable during CY25, while net margins improved, supported by lower finance costs due to favorable interest rates. The Company's financial risk profile reflects modest coverages and cash flows, along with a stretched working capital cycle in both divisions that requires closer management. The capital structure remains leveraged, with borrowings comprising mainly short-term debt to meet working capital requirements.
The ratings are dependent upon sustained improvements in revenue, profitability, and market share, while ensuring sufficient cash flows and coverage ratios. Effective management of liquidity and financial risks remains critical for maintaining the ratings. Furthermore, alignment with shared financial projections will be essential.

About the Entity
PEL, incorporated in 1956, is a listed public limited. The Company is owned by the Saigol Group (~27.86%) through family members, with interests spanning power, textiles, and real estate. The eight-member Board is chaired by Mr. Naseem Saigol, with significant representation from the Saigol family. Mr. Murad Saigol, CEO, oversees the Company's strategic and operational affairs, supported by an experienced management team.