VIS Reaffirms Entity Ratings of OBS Pakistan (Private) Limited

Karachi, September 25, 2023 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of ‘A/A-2’ (Single A/A-Two) of OBS Pakistan (Private) Limited (‘OBS-Pak’ or ‘the Company’). Medium to long term rating of ‘A’ signifies good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short term ratings of ‘A-2’ denotes good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned rating is ‘Stable’. Previous ratings action was announced on September 23, 2022.

OBS-Pak, a subsidiary of AGP Limited (AGP), was established as a Special Purpose Company (SPC) to acquire a portfolio of pharmaceutical products from Viatris Inc. and Pfizer Inc. The Company has acquired 17 pharmaceutical brands at an estimated cost of Rs. 9.3b. The acquisition is being funded through a debt equity ratio of 75:25. The Company has already raised Rs. 3.6b through a Sukuk issuance, while an additional Rs. 3.3b is being raised through the issuance of a second Sukuk.

Assigned rating take comfort from the Parent Company’s (AGP Limited) established market position, long track record in the pharmaceutical industry and the resulting operational, managerial and financial support available to OBS Pakistan (Both from AGP and from the overall group strength). Furthermore, business risk profile is supported by non-cyclical nature of the industry and steady demand growth.

Ratings take into account the Company's strong market positioning with its top products, holding substantial market share across various therapeutic areas. While the concentration risk in the portfolio is acknowledged, their established market presence mitigates concerns. Furthermore, despite early challenges in the first five months of operation the management expects recovery through price adjustments, increased volumes, and supply chain stabilization going forward. With regards to liquidity, capitalization and coverage profile, the Company's performance is projected to improve as revenue generation from the acquired portfolio gains momentum and cash flows strengthen. Going forward, ratings will remain sensitive to achievement of projected plans, including effective liquidity management, leverage reduction, and enhanced debt servicing capacity. Ratings remain underpinned on corporate guarantee provided by the parent AGP Limited.

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/

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