Lahore, September 30, 2019 (PPI-OT): Ravi Automobile (Pvt.) Limited (Ravi) operates in two segments of the automotive industry, i.e., manufacturing components (parts) for motorcycles and tractors, and assembly of complete motorcycles. The ratings draw comfort from the diversity in Ravi’s business streams and the historical association of its sponsors to the related business segments. This is asserted through the group’s expansion into eight separate entities on a timeline basis of which Infinity Engineering and Ravi Spherocast represent the major investments and the augmented strength of the group.
The ratings also incorporate the growth trajectory of Ravi in the components business, claiming the larger portion of the turnover. The company has built a formidable position therein, given its long standing history. Governance practices, as endorsed by the Code, desire improvement. Meanwhile, further refinement in management structure would be of benefit in the long horizon. The sales reflect top party concentration. The sponsors are of the view that the concentration is acceptable since decades-long relationships exist.
There is no major history of bad debts. The management has committed to certain steps which will be of benefit to the control environment and governance practices of the company. Ravi’s financial risk profile is reflected by strong coverages as debt profile remains low, majorly constituting short term borrowings. Working capital cycle is longer, which the management represents, has been shortened due to increasing focus on the component business. Challenging times are ahead. Comfort is drawn from the need driven nature of the business, backward integration and synergies in the overall group. The management does not intend to increase debt, post rating assignment.
The ratings are dependent on Ravi’s ability to sustain its business profile amidst changing operating environment. Meanwhile, improvements can be made in terms of financial discipline. Any dilution in profit margins, cash flow and/or increase in leverage would be considered negative.
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