PACRA Maintain Entity Ratings of My Petroleum (Pvt.) Limited

Pakistan heavily depends on imports for its energy requirements due to its limited domestic POL production. A substantial increase in POL import costs was witnessed supported by rupee depreciation (FY22: US$17bln, FY21: US$8bln); however, the demand remains stable. While, during FY23, the demand for POL products - furnace oil (FO), high-speed diesel (HSD), motor spirit (MS), and high octane blended component (HOBC) - which make up ~95% of the total sales, declined by ~15% due to macroeconomic pressures. The transportation and power sectors remain the main consumers, accounting for ~89% of total demand. Global oil production cuts has inflated the overall input costs. Challenges remain prevalent, however, the sector's overall outlook - cashflows and liquidity - is expected to remain stable.
My Petroleum (Pvt.) Ltd.'s ('My Petroleum' or 'the Company') ratings drive strength from considerable footing of the sponsors in logistics, trading, energy - downstream and upstream, and steel sectors. Moreover, the Company has evolved through retail enhancement (~78 pumps across Punjab). The Company gathers support from marketing & distribution arrangement with LUKOIL, a Russian lubricant brand, across Pakistan. The Company generates revenue mainly from PMG (~60%), followed by HSD (~40%) sales. The revenue posts growth supported by increased price; while margins remain regulated. However, relying mainly on imports (i.e. ~60% of the total procurement) along with rupee devaluation exposes the Company to exchange risk. This impacts the profitability and elevates the risk profile of the Company. At present, the market share seems stable. While, going forward, planned penetration into the retail segment across semi-urban and rural areas may adds to the market share of the Company and benefits the overall business risk. The Group further plans to consolidate My Logistics (Pvt.) Ltd., an associated company operating a fleet of oil tanker, with and into My Petroleum. The timeline and modalities of this transaction remains imperative for the overall performance of Company, going forward. My Petroleum has a healthy financial risk profile as the working capital is managed through a combination of debt and suppliers' credit. Thus, leveraging and coverages remains considerably intact, however has subdued lately, due to aggressive expansion. This keeps the borrowing cushion weak at all times. The management intends to keep the leveraging indicators aligned to the Company's overall risk profile. The Company's financial flexibility is high and drives support from sponsors in terms of equity injection coupled with non-funded bank limits.
The rating captures the Company’s ability to sustain its business operations while achieving the aforementioned plans. The rating particularly recognizes ongoing developments including: i) equity injection by the Sponsor and ii) expansion of retail network. In addition to the timely implementation of these initiatives, the ratings are dependent on Company's ability to achieve desired market penetration. Sustainable profits and other key financial metrics, in terms of working capital and coverages remain crucial to the rating.

About the Entity
My Petroleum (Pvt.) Ltd was incorporated in Jan-16 and became commercially operational in Sep-19. The Company is engaged in procurement, import, storage, distribution and marketing of POL products and lubricants. It is operating all over Punjab with a total storage capacity of ~5,230MT, located at Habibabad and MirpurKhas.
My Petroleum is a family-owned business, with a major stake held by Mr. Tariq Wazir Ali (~94%) and his wife (~6%). The Company has a family dominated Board, chaired by Mr. Tariq Wazir Ali. He is also the CEO of the Company and is aided by experienced professionals.