The Pakistan Credit Rating Agency Limited
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Muhammad Harris Ghaffar

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PACRA Maintains Entity Ratings of AGP Limited

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

AGP Limited (herein referred to as "AGP" or the "Company"), is an operating and holding Company that operates under the umbrella of AGP group. The group Company OBS is one of the leading pharmaceutical Companies in the Pakistan pharma industry and is currently ranked at No. 11 according to the latest IQVIA report. The Company entered the pharmaceutical business in 1989. AGP is mainly owned by OBS Group (OBS) through Aitken Stuart Pakistan (Pvt) Ltd and a strategic and distribution alliance with international partner Muller & Phipps. AGP has a pharma products portfolio more focused towards acute therapeutic segments, however, recent and future planned brand acquisitions will enable its presence in the chronic therapeutic segments as well. The business growth is driven through organic portfolio growth and new brand acquisitions in the chronic disease segment. The Company has a strong corporate governance structure with oversight of BOD and pertaining to decision-making of the Company. AGP is managed by the team of professionals having diversified and industry-specific exposure. The healthcare services industry is considered a low-risk industry in view of limited demand cyclicality. CPI-linked pricing criteria have allowed an increase in prices with respect to inflation and indicated a positive sign for the sector. However, recent depreciation of Pak Rupee against USD will put some pressure on the sector’s profitability. The Company has achieved impressive growth in their topline mainly on the back of the recent twenty-one Sandoz brands acquisition which includes a PKR 2.0bln brand named Azomax. Ratings incorporate AGP's strong and sustainable margins over the last three year along with sizeable cash flows to service their debt and meet the working capital requirements of the Company.. AGP has planned its future diversification by participating in the acquisition of some brands from Viatris Inc., previously known as Pfizer. The acquisition is expected to add ~ PKR 4bln in the Company's consolidated topline. and enhancing existing products range Currently ~86% of business is through sole distributor Muller & Phipps Pakistan (Pvt) Limited (M&P); going forward this concentration risk may pose challenges. However, the comfort can be taken from the presence of M&P's shareholding in AGP. Capital structure is low leveraged where borrowings are comprised of long-term and short-term to support brand acquisitions and working capital requirements. The financial risk profile is expected to improve further as the company enters the consolidation phase in future after acquisitions. The benefits of consolidation are yet to be seen.
The ratings are dependent on the continued sustainability of profits and market share. Adequacy of cash flows and availability of alternative resources to make debt-related payment remains critical. Meanwhile, compliance with internally-defined leveraging metrics is a prerequisite. Moreover, the Instrument rating is dependent upon upholding of all major covenants.

About the Entity
AGP Limited (AGP) is a listed pharmaceutical company; the operations of entity have been in Pakistan since 1989. It is majority owned by Aitken Stuart Pakistan (Private) Limited with shareholding previously held by OBS Pakistan (Private) Limited; although the sponsor remains the same, followed by strategic partners: Muller & Phipps (M&P), Baltoro Growth Fund (BGF), Bank Alfalah, High Q Pharmaceuticals and Aspin Pharma. The seven-member BoD comprises three representatives of OBS Group, and one each of M&P and BGF and two independent directors. The Chairman, Mr. Tariq Moinuddin Khan, is the sole brain behind OBS Group. Mr. Khan, CPA from Canada, carries over three decades of domestic and international professional experience. The MD & CEO, Ms. Nusrat Munshi, ~30 years of experience, in the pharmaceutical industry.

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.