Karachi, August 25, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has upgraded the medium to long-term entity rating of Orient Electronics (Pvt.) Limited (OEL) from ‘BBB+’ (Triple B Plus) to ‘A-’ (Single A Minus) while maintaining short-term rating at ‘A-2’ (A Two). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. The previous rating action was announced on June 26, 2020.
OEL is a reputed manufacturer of home appliances in Pakistan. Shareholding is vested with the sponsoring family who have over six decades of experience in the consumer electronics industry. The company has been able to maintain long-term relations with the vendors and dealers. Revision in rating takes into account growth in sales in the ongoing year with increase manifested in all major products led by higher volumetric sales and average selling prices. Liquidity is considered adequate in terms of cash flow coverages. Leverage indicators have remained comfortable on the back of augmentation in core equity. The ratings also factor in continued sponsors support in the form of interest free loans.
OEL, Orient Color Labs (OCL – Parent company) and Orient Electronic Appliances (Pvt.) Limited (OEAL – An associated company) has filed a joint application in the Court of Law for sanctioning scheme of Compromises, Arrangements and Reconstruction. The principal object of the scheme is to provide for the division of OEL by means of separation of the operations segment (all assets other than immoveable properties) as a going concern from OEL. The operations segment will be transferred to and vested in OEAL. Shareholding of OEL and OEAL will be then adjusted between two sponsoring families.
Following the approval of this scheme, OEL operations would include lease out of retained land and building to OEAL in the form of operating lease. In the backdrop of current uncertainty regarding financial and business risk profile of the company, ratings have been placed on ‘Rating Watch-Developing’ status. Meanwhile, in view of the impending demerger scheme, the effectiveness of these ratings will no longer remain valid upon materialization of the said scheme.
Ratings are dependent upon retention of historical market share by the company amid competitive environment in the peer group and continued maintenance of existing financial indicators, going forward.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/