PACRA upgrades entity ratings of Panther Tires Limited

December 3, 2020: Pakistan Credit Rating Agency (PACRA) has upgraded the Entity ratings of Panther Tires Limited, with a stable outlook forecast.

The company’s Long-Term Entity Rating was said to be upgraded to “A” from the previous rating of A- (A minus), while its Short-Term Rating was upgraded to A1 (A one) from the previous rating of A2 (A two).

As per the rating agency, Panther Tyres Limited has built strong brand equity. In an industry, which is volume driven and price sensitive, brand name provides inherent strength. This has enabled the company to sustain its market share.

Panther Tyres has strong positioning in its respective niches. The company has a formidable market share in 2 & 3-wheeler tyres, tractor tyres, and tubes segments.

The company has recently expanded its product range and introduced two new types of tyres which are related to trucks and buses and earth movers (caterpillar). The company has received favorable market response in these new segments.

The distribution network designed along product lines and nature of segment plus longstanding relationships with Original Equipment Manufacturers (OEMs) are of crucial help. The sponsors have built a strong management team with a wholesome mandate: roles are clearly demarcated with high degree of delegation. The new leadership from the sponsor side is in full control.

The company has improved its overall organization structure and is inculcating financial transparency as per Code of Corporate Governance. Further, role of chairman and CEO has been segregated and four new directors including 3 independent directors have been elected on the board to strengthen the governance of the company.  

All in all, the company is poised for listing. Revenue stream is segmented into OEMs and Replacement Markets (RM), wherein (RM) has a higher inclination. The company's financial risk profile is demonstrated by stable margins, healthy coverages and adequate capital structure.

Despite Covid19 outbreak with associated lockdown period the company managed to sustain its growth in revenues and margins during FY20 and 1QFY21 which show consistency in growth.

Export side of the company is gradually escalating, currently the company exports 2, 3 & 4 wheeler tyres to 12 countries in the world. The management believed that grey channels are curtailed thus demand from replacement market is expected to rise in future which will be complemented through planned capacity expansion, whereas the OEMs demand will be subject to multiple challenges.
The ratings are dependent on the management's ability to sustain its business profile with cautious management of market risks, increase in international outreach and improvement in governance structure.

PACRA