Press Release

VIS Reaffirms Ratings of Master Motor Corporation (Private) Limited

Karachi, August 26, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings assigned entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Master Motor Corporation (Private) Limited (MMCL). Outlook on the assigned rating is ‘Stable’. The long term rating of ‘A-’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating was announced on 6th April 2018.

The assigned ratings to MMCL incorporate strong financial profile and demonstrated track record of support of the company’s sponsor, diversified product portfolio and adequate business and financial risk profile. Financial profile is supported by sound debt servicing ability and gearing level remaining within manageable levels. However, cash flow coverage of outstanding debt has declined given increase in debt levels due to higher working capital requirements. Ratings remain dependent on maintaining financial indicators in line with rating benchmarks.

Over the past 5 years, sales of trucks and buses by local assemblers’ have grown at CAGR of 17.0% and 10.1%, respectively. While industry sales of buses continued growth trajectory, truck sales witnessed a sharp decline of 37.5% in FY19 as compared to preceding year. While imposition of axle load restrictions in the recent budget is expected to bode well for truck sales, effective implementation of the same remains to be seen. Going forward, VIS expects industry off-take to remain under pressure given slowdown in GDP growth, significant hike in interest rates and continued decline in imports.

MMCL is a part of the Master Group of Companies. Amongst others, the group has diversified presence in mattresses & upholstery, home fashion, textile, chemical, power, automobile and auto part sectors. MMCL is involved in the assembly of trucks and buses with manufacturing facility at Port Qasim, Karachi. The company is ISO9001 certified for both its assembly plant & after sales services & marketing, hence meeting international quality standards. MMCL has made investment in a subsidiary company Master Motors Limited (MML). MML is a joint venture between MMCL and Changan Automobile Investment (Shenzhen) Corporation Limited (Changan). MML has a design capacity to assemble/manufacture 10,000 units annually on a single shift basis with commercial operations targeted in the ongoing calendar year. MMCL also expects to assemble IVECO (Italian Automotive Manufacturing Company) trucks in Pakistan.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Mr. Talha Iqbal (Ext: 213) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2019)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited