PACRA Assigns Preliminary Rating to Gas and Oil Pakistan Limited – PP Sukuk

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Lahore, July 29, 2021 (PPI-OT): The rating reflects strength of the security structure. This strength primarily derives from a two-tiered liquid support structure. The first is a Reserve Account, which caters for one installment kept in advance throughout the tenor of the instrument. The second is that Debt Payment Account will be funded one month before the installment getting due. The instrument has also been secured by conventional charges on assets. The rating incorporates Gas and Oil Pakistan Limited, herein, referred to as GO’s, every increasing presence in the oil marketing (OMC) segment.

The company has augmented its market share in a competitive market, benefiting from the strategic positioning of the stations that it feeds. The growth spree continues. GO aims to carry out its expansion strategy by further penetrating the retail segment of semi-urban and rural areas. The company has increased its storage capacity, consolidated from 130,160 MTs to 197,038 MTs including 36,288MTs which is leased from FTTL. This complements its tenacity to keep the pace of growth with this existing storage capacity.

GO further aims to inaugurate more company owned and operated sites, which will further enhance the margins. GO has traditionally capitalized on strong managerial support from its sponsors who have significant knowledge in oil procurement and distribution. The equity base of the company has taken support from internal capital generation and higher accumulated profitability. The management intends to keep the leverage indicators aligned to its risk profile. The company aims to further improve their market share as it moves on its expansion drive, utilizing a mixture of internally generated equity and debt. Moving forward, GO aims to diversify its revenue streams, strengthening its business risk profile.

The rating captures the company’s ability to sustain its business despite challenges arising from outbreak of COVID-19. Rollout of the planned business strategy and sustainable profitability is essential. In the meantime, financial metrics needs to be upheld in terms of working capital ratios, coverages and capital structure.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com

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