Loads Limited CEO more than just bullish on Pakistan’s auto sector

Bana says CPEC and new policy are key triggers for auto part makers

ISLAMABAD: Munir Bana advised many of his employees to buy the company’s shares as date of the book-building portion of the IPO neared. Many of them hesitated, but some of them opted to buy a personal stake in the auto part maker’s expansion plan.

Weeks later, many regretted their decision and those who bought the shares wished they had invested more.

After all, the share price of Loads Limited – the last listing on the Pakistan Stock Exchange in 2016 – jumped over 100% within a few weeks of trading. It is currently priced at Rs56.76 after starting on Rs34 and has also handed out 10% bonus shares and Rs1 as dividend to its shareholders.



“Our employees were hesitant to enter the stock market, but when I insisted many of them bought the company’s shares,” said Bana, the CEO of Loads Limited, one of the leading auto part makers in the country.

“Those who did not buy or purchase just a few shares now regret (their decision).”

Before offering 50 million shares through the IPO, the company first offered 2.5 million shares to its employees to engage them in the company’s future aggressive investment plans. The company eventually managed to raise Rs1.7 billion, an amount the company is now using for expansion of its production capacity.

Loads makes radiators, exhaust systems, mufflers, sheet metal components among other parts, and its clients include more than a dozen national and multinational companies engaged in the production of motorcycles, cars and heavy vehicles manufacturers.

Bullish on future growth

Bana, a Chartered Accountant, believes two developments have been positive triggers for the local auto industry — the China-Pakistan Economic Corridor (CPEC), a $55-billion investment and loan package that envisages changing the way China conducts trade, and the Automotive Development Policy (ADP) 2016-21 announced in March 2016.

Industry experts believe the auto sector would be a major beneficiary of CPEC, given the corridor’s vision of upgrading Pakistan’s road and highways network.

Officials say the country would need heavy vehicles not only during the construction phase, but also after the infrastructure projects are completed.

“New entrants and new models, as well as the increase in heavy vehicles, all speak for themselves,” he said.

The auto policy, on the other hand, that includes incentives for new entrants has already sparked investment interest.

“The growth in the heavy vehicle segment is faster than in the passenger cars — and both groups are part of our customer base. Therefore, I am quite optimistic about the auto part making industry,” said Bana.

The size of Pakistan’s auto part making industry now exceeds $1.5 billion. Out of over 1,200 small- and medium-sized industries, there are about 278 tier-one part manufacturers. Although Pakistan exports to more than 56 countries, annual receipts remain in the range of $100-$150 million mainly only because only a dozen players are able to penetrate the foreign markets.

After a long period of subdued growth – owing to a number of factors including the flood of imported vehicles – the auto part making industry is gearing up for increased sales. Its focus will now move from just motorcycles and tractors to catering to heavy vehicles and passenger cars as well.

Loads’ primary customers are Original Equipment Manufacturers (OEMs) like Suzuki and Honda, but it does sell to the secondary market through OEMs’ sales and service outlets, which approximately makes 5% of its total revenues.

“Our own business is growing well at the moment through increased volumes on the back of new models launched by existing OEMs,” he said, adding that his company is also busy preparing for the launch of new models planned next year.

He said that he has received a few visitors and enquiries, but it’s still “early days” because Renault, KIA, Hyundai etc. are still at a planning stage.

New entrants

Big names like Renault, Kia, Hyundai and Audi have recently announced their intention to assemble vehicles in Pakistan..

This could be a potential bonanza for companies like Loads Limited as car sales are already growing and new players are likely to count on well-established players in the auto part making industry.

“The intentions of new entrants look good, because they have picked reputable and reliable local partners,” he said.

“But compared to luxury brands like BMW and Audi, I am more excited about those players that have economical cars because they will give me more volume. But because of the long gestation period, especially for setting up brand new plants, I am not counting my eggs before they hatch,” said Bana.



Duty-free imports under new FTAs to hit industry

Pakistan is currently negotiating Free Trade Agreements (FTAs) with Thailand and Turkey while renegotiating its FTA with China. Since all these nations have strong automobile industries, Pakistani auto part makers fear imports would badly hurt their business.

“There is pressure on us to open the auto sector for duty-free imports; literally, these countries want to replace the auto policy tariffs with concessionary duties. This would destroy our industry.”

The industry feels the government should stick to the policies it prescribed in the ADP 2016-21 so that players can execute investment plans accordingly.

“The most important thing the government can do is to remain consistent,” he stressed.

The writer is a staff correspondent

Published in The Express Tribune, January 30^th, 2017.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.