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Untitled Document Final PR
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The Pakistan Credit Rating Agency Limited

Date
26-Apr-2017
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Sanna Khan
sanna.khan@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]
  • Correlation between Long-term and Short-term rating (Jun 16) [View]

Related Research

  • Sector Study | Household Appliances (Dec 16) [View]
  • Sector Study | Electrical Engineering (Dec 16) [View]
Disclaimer
This press release is being
transmitted for the sole purpose of
dissemination through print/electronic
media. The press release may be used
in full or in part without changing the
meaning or context thereof with
due credit to PACRA
PACRA Maintains Ratings of Pak Elektron Limited
 Rating Type Entity Sukuk-II Sukuk-III
Current
(26-Apr-2017)
Previous
(03-Dec-2016)
Current
(26-Apr-2017)
Previous
(03-Dec-2016)
Current
(26-Apr-2017)
Previous
(03-Dec-2016)
 Action Maintain Upgrade Maintain Upgrade Maintain Upgrade
 Long Term A+ A+ A+ A+ A+ A+
 Short Term A1 A1
 Outlook Stable Stable Stable Stable Stable Stable
 Rating Watch - - - - - -

The ratings reflect PEL's strong business profile in its respective markets - Appliances and Power - supplemented by its strong brand. The Company, while aiming to diversify its product base, has continued focus on improving quality and cost efficiency in its key revenue generating products. This resulted in higher sales volumes. The performance of the Company is well supported by healthy business margins. Improved profitability and stable cash flows strengthened the Company's debt servicing ability; thus risk absorption capacity has beefed up. High working capital needs emanating from long inventory and receivable cycle expose the Company to financial risk. While the management's focused efforts provided relief, comfort is drawn from sponsors' support to manage these needs (equity injection and retention of profits). Meanwhile, the Company has articulated an adequate debt management policy a) total debt would be restricted to 2.5 times of free cash flows [end-Dec16: 1.6] and b) short-term borrowings would not exceed 50% of net working capital needs [end-Dec16: 33%].

The ratings take in to account improving business dynamics in Appliances and Power segments apart from the Company's strengthening business risk profile. Increase in market share with sustainable cash flows have benefited the ratings. Meanwhile, close monitoring of working capital requirements and debt servicing capacity remain imperative to maintain the company's financial health; hence ratings.
About the Entity
PEL, incorporated in 1956, is listed on Pakistan Stock Exchange. The Company is principally engaged in manufacturing and sale of electrical equipment and home appliances. The Company is majorly owned (~51%) by Saigol Group. Other interests of the group include power, textile, and real estate. Mr. Naseem Saigol is the non-executive chairman of the eleven member board, which includes four members of Saigol family, four nominees of financial institutions, and one independent director. Mr. Murad Saigol, who has been with PEL since 2005, has been elevated as the Chief Executive Officer in 2015. He is supported by an experienced and stable management team.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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