Karachi, VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of Agriauto Industries Limited (AGIL) as ‘A-/A-1’. The reaffirmation of the medium to long-term rating of ‘A-’ reflects the company’s good credit quality and adequate protection factors, while the short-term rating of ‘A-1’ indicates a high certainty of timely payment and excellent liquidity factors supported by strong fundamental protection factors. The outlook on the assigned ratings is stable, as per the announcement made previously on August 10, 2022.
According to VIS Credit Rating Company Ltd, a part of the House of Habib (HoH) conglomerate, specializes in manufacturing and selling automotive vehicle components, motorcycles, and agricultural tractors. The company’s long-standing experience and exclusive technological collaborations with international parts manufacturers underpin its rating. AGIL’s position as the sole local producer of car shock absorbers and struts also supports its risk profile, despite historical volatility in gross margins and the impact of exchange rate fluctuations on the cost of imported raw materials.
The company faced a loss in FY23 due to lower sales and stressed gross margins; however, a recovery in margins was observed in the first quarter of FY24. This recovery led to improvements in funds from operations (FFO) and coverages, with the company maintaining a low leveraged capital structure. The VIS report emphasizes that continued improvement in financial performance and debt service coverages are crucial for maintaining the assigned ratings.
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