The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Harris Ghaffar

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Pakistan Oxygen Limited

Rating Type Entity
(26-Jul-22 )
(29-Jul-21 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect the eminent position of Pakistan Oxygen Limited (“the Company” or “POL”) in the industrial, medical gases, healthcare solutions, hardgoods & welding segments. The industry largely possesses an oligopolistic structure, benefiting the players. Multiple global pandemic waves caused the use of medical gas consumption to its peak, and to serve the local demand, the Company diverted its production to the health sector on a very nominal margin, that is why the Company’s profitability did not reflect the incremental effect of revenues. The demand for medical gases in the health sector has now stabilized as the Covid-19 pandemic is eased off. On the other side, the large-scale manufacturing (LSM) index has shown a recovery which led to an improvement in demand for industrial gases. POL serves customers across a wide spectrum of industries and to capitalize on the growth POL is now doubling its production capacity in the electrode manufacturing segment and also setting up the largest 270TPD air separation unit (ASU) for further expansion in the industrial/medical gases segment. The Company has benefited from a strong governing board and has skilled and professional management. The financial risk profile of the Company is considered adequate with comfortable coverages, cashflows, and working capital cycle. Capital structure is moderately leveraged where borrowings are comprised of short-term and long-term. To support ongoing capacity expansions and BMR the Company has availed subsidized long-term borrowing facility (TERF) and has made a drawdown of PKR 1.3bln.
The ratings are dependent on the company's ability to sustain its market share by effectively utilizing its production capacity. At the same time, management of financial risk, particularly debt coverages, remains important.

About the Entity
Pakistan Oxygen Limited, incorporated in 1949 and listed on Pakistan Stock Exchange in 1958, is engaged in the manufacturing of industrial and medical gases, welding electrodes and marketing of medical equipment. Adira Capital Holdings (Private) Limited, Members of Hilton Pharma (Private) Limited, Soorty Enterprises (Private) Limited and Mr. Shahid Umerani are the major shareholders of the company, together holding ~ 76% of the total shareholding. Mr. Siraj Dadabhoy is the major beneficial shareholder. POL’s eleven members board is majorly represented by members of sponsoring group (seven), and four independents. All members are non-executive. Mr. Waqar A. Malik is Chairman of the board and Mr. Matin Amjad holds the office of CEO. To maintain the highest level of independence, the Internal Audit has been outsourced to M/s EY Ford Rhodes, Chartered Accountants.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.