January 19, 2022: The Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Loads Limited (LOADS) at ‘A’ for the long term and ‘A1’ for the short term with a stable outlook, a press release issued by rating agency said.
The ratings reflect the niche industry positioning of Loads Limited in the auto parts industry. 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.
Post June-20, the auto sector has started to regain its momentum; currently, it is growing at a considerable pace. An increase in the discount rate is a concerning factor for auto financing, however, momentum is continuing especially in self-financial vehicles purchases.
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 Limited. Loads Limited has an admirable market share (~95%) in the sales of the exhaust systems, strength in this segment emanates from exclusive agreements signed with the leading OEMs (Suzuki, Toyota and Honda) in the country and technical collaborations with international players. The other prominent products include metal sheet components and radiators.
As per the press release, Loads Limited is gearing towards further diversification and is in the process of completing an Alloy Wheels plant under Hi-Tech Alloy Wheels Limited.
The plant completion is advancing but there are certain challenges on the way like COVID-19 and rupee devaluation have interrupted the momentum but management is committed to resolving all issues including the arrangement of the remaining portion of requisite funding.
The recent right issue of PKR 1,000mln in Mar-21 is pivotal; it provided the much-needed liquidity to pay off liabilities and supplement working capital needs. The IPO of Hi-Tech or strategic partnership could be resorted to, for further advancement on Alloy Wheels Plant completion.
The company is engaging new automotive players emerging in the industry to increase its business volumes, the focus remains to augment the business and financial profile of Loads Limited.
The ratings are dependent on the management's ability to sustain the financial risk profile while embarking on the new business venture. Maintaining market share in all segments and completing the new ventures remain crucial. The sustained uptick in recent topline and size of gross profit is essential while buffering cash flow position from internal and external income. Timely and seamless COD, followed by an envisaged pattern of sale, at the new project is important, it added.