Loads Limited intending to go for an IPO to partially finance its new project: PACRA

February 10, 2020 (MLN): Pakistan Credit Rating Agency (PACRA) has maintained the Entity Ratings of Loads Limited at ‘A’ for long-term and ‘A1’ for short-term. The outlook on the assigned ratings is ‘stable’.

According to the press release issued by PACRA, the ratings reflect the niche industry positioning of Loads Limited. With a presence of up to four decades in the automotive industry, the company has established a considerable forte in the domestic market along with a committed client base. The current economic slowdown and rupee devaluation has led to a dilution in the automobile industry thereby impacting the business volumes of the company.

The company employs its specific business model i.e. working through subsidiaries catering to the current product suite, Multiple Auto parts Industries (Private) Limited, Specialized Auto parts Industries (Private) Limited and Hi-Tech Alloy Wheels. The company has an admirable market share (~95%) in the sales of exhaust system, strength in this segment emanates from exclusive agreements signed with the leading OEM’s (Suzuki, Toyota and Honda) in the country and technical collaborations with international players.

Loads Limited is gearing towards further diversification and is in the process of completing an Alloy Wheels plant. Commercial production is yet to commence and is expected towards the end of the financial year. The company intends to go for an IPO to finance the remaining portion of the new project while different options are being considered to supplement the working capital needs.

Loads Limited has witnessed reduction in the coverages and has seen a surge in financing costs, which the sponsor may like to beef up. Short term borrowings have inflated, an outcome of its need to fund its initiatives. The company is engaging new automotive players emerging in the industry to increase its business volumes.

The ratings are dependent on the management's ability to sustain the financial risk profile while embarking into the new business venture. Maintaining market share in all segments remain crucial. The sustained uptick in recent topline and size of gross profit is crucial, while buffering cash flow position from internal and external income. Timely and seamless COD, followed by envisaged pattern of sale, at the new project is important.

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