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Pak Elektron Limited issuing Privately Placed Sukuk; Pakistan Credit Rating Agency Limited assigns preliminary ratings

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by March 25, 2016 General

Lahore, March 25, 2016 (PPI-OT):The Pakistan Credit Rating Agency Limited (PACRA) has assigned a preliminary rating of “A” (Single A) to Privately Placed Sukuk (PPS) being issued by Pak Elektron Limited (PEL). The rating denotes low expectation of credit risk.

PEL intends to issue secured PPS of PKR 1,200mln to finance its working capital requirements. The assigned rating is equivalent to long-term entity rating of PEL. This reflects PEL’s improving position in its respective markets – Appliances and Power – supplemented by its strong brand. The company, while expanding its product slate, has continued its focus on improving quality and cost efficiency in its key revenue generating products. This resulted in higher sales volumes and enhanced business margins. Improved profitability, in turn cash flows strengthened the company’s debt servicing ability; thus risk absorption capacity has beefed up.

Increasing working capital needs emanating from long inventory and receivable cycle expose the company to financial risk. However, comfort is drawn from the sponsors’ support to manage these needs (equity injection and advance against equity). Meanwhile, the company has articulated on adequate debt management policy a) total debt would be restricted to 2.5 times of free cashflows and b) short term borrowings would not exceed 50% of net working capital needs.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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