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PACRA Maintains Entity Ratings of Toyota Jinnah Motors (Private) Limited

by August 26, 2019 General

Lahore, August 26, 2019 (PPI-OT): Car dealership (authorized) rides on the strength of the principal (auto manufacturer/assembler). The stronger the principal in the respective market, higher is the standing of the car dealer. There is a pre-defined set of criteria – qualitative and quantitative – that the principal imposes on the dealer’s network. The rating takes comfort from Toyota Jinnah’s alliance to Indus Motor Company – owned by Habib Group, Toyota Motor Corporation and Toyota Tsusho Corporation.

Toyota Jinnah Motors (TJM) operates as 4S car dealership. Toyota Jinnah has built a sustainable position in the competitive auto industry of Pakistan. Of late – massive rupee depreciation, rising interest rate environment and increasing inflationary pressures – overall demand for auto has plummeted with the local automakers seeing a considerable reduction in their capacity utilization and profitability.

Business volumes and in turn profitability have seen a decreasing trend due to slowing demand. It is important to sustain the growth while managing the rising competition, which is more of the principal’s domain. It is crucial for the overall demand to pick-up for the alleviation of related concerns. In the meantime the profitability is being supplemented by the ‘After Sale’ segment – reporting net profitability for the dealership and covering its operational cost.

Hence limiting and/or cushioning the unforeseen drag on the risk absorption capacity. The dealership also hails good position in the Customer Relationship. Foreign players are also taking interest in the local market. The financial risk profile of Toyota Jinnah Motors is adequate. The company intends not to raise any long term debt borrowing in future.

The ratings are dependent on the management’s ability to sustain its business profile while being cognizant of the changing demand fundamentals; financial discipline/transparency is crucial. Any prolonged downturn in subdued business activity can have negative effects. Moreover, strengthening of governance framework is pivotal for any growing business concern.

For more information, contact:
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