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Debt-equity combination: Rickshaw maker plans Rs330m investment for expansion

KARACHI: Sazgar Engineering Works Limited, the makers of Sazgar CNG auto rickshaws, has announced that it is going to invest Rs330 million in expanding its production capacity from 20,000 units to 30,000 units per year.

The project would be financed through 80% equity and 20% debt and the equity would be arranged through internal cash generation by the company, according to a notice sent by the Lahore-based firm to the Pakistan Stock Exchange (PSX) on Monday.

It expects that the project will be completed by June 30, 2018. It wants to benefit from the rising market demand for auto rickshaws and the future growth in the automobile sector.

The expansion plan will be implemented on the pre-owned land located near Raiwind, Lahore. At present, the company’s production facilities are spread over five acres of land.

According to the company website, it has already acquired a piece of land measuring 27 acres for future expansion.

The company posted a net profit of Rs108 million in the year ended June 30, 2016, up 46% compared to Rs74 million in the previous year, according to another notice sent to the PSX.

Sales revenue increased 16% year-on-year while gross profit margins remained flat at 10%. Finance costs showed a decline of 63% during FY16, reaching Rs2.8 million, according to Topline Securities.

Analysts say the absence or limitation of public transport facilities in big cities has provided a wider space for auto rickshaws. Over the years, compressed natural gas (CNG) auto rickshaws have gradually replaced taxis in major cities, especially in Lahore and Karachi.

Sazgar makes CNG four-stroke auto rickshaw (three wheelers) and automotive wheel rims. The company also exports its products to international markets. It is capable of designing and developing molds, tools, jigs and fixtures of all types for sheet metal components.

It was incorporated in September 1991 as a private limited company but later converted into a public limited company in November 1994.

Courtesy : Express Tribune



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