PACRA Revises Entity Ratings of EXIDE Pakistan Limited

Lahore, March 06, 2019 (PPI-OT): The ratings reflect the squeeze in the profitability of the company – both at the gross and net level. This is an industry wide phenomenon. The competition is intense in the backdrop of reduced demand and high cost of doing business. With a considerable improvement in the power sector, demand of UPS batteries is diminishing. Decreased demand coupled with entry of new players has intensified the competition. Rationalization in the price – upward trend – is needed to ensure sustainability in future. Demand may positively benefit when CPEC related projects pick up.

The big three players hold about ~75% of the market while the remaining is held by numerous smaller ones. Success is pivotal on maintaining market share. The sponsors have a good understanding of the business. EXIDE’s leveraging has peaked and the company does not intend to raise long term debt. Debt servicing capacity is deteriorated on the backdrop of eroded margins. EXIDE is a pioneer in the battery industry; it has a presence in Pakistan since 1968. Demand for batteries is generated through two segments (i) OEMs and (ii) replacement market.

The negative outlook captures the deteriorated business condition of the sector having negative impact on the players operating in this industry. The ratings are dependent on the revival of subdued business volumes and impacted profitability. Prolonged downturn amidst market oversupply can have a detrimental effect.

For more information, contact:
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