PACRA assigns Initial Entity Ratings to Pakistan Oxygen Limited

The ratings recognize Pakistan Oxygen’s eminent position in the industrial and medical gases, pipeline services and welding solutions. The industry largely possesses oligopolistic structure, benefiting the players. Growth in demand is driven primarily by increased economic activity, booming population, and industrialization. The ratings take comfort from the rich heritage on account of previous ownership of international group with a solid name in the chemical and gases industries globally. Pakistan Oxygen services customers across a wide spectrum of industries ranging from chemical and petrochemical to steel, food and healthcare. Going forward Pakistan Oxygen, with its experienced and professional team and largest footprint across Pakistan, has approved an investment plan to set-up largest air separation unit in Pakistan. The incumbent sponsors have added energy to the company and are eyeing expansion, of which the related modalities including funding requirement and mix are being decided.
The ratings are dependent on the company's ability to effectively utilize enhanced capacities. At the same time, management of financial risk particularly debt coverages, remains important, wherein any significant dilution would have negative implications for the ratings. Debt-Equity mix and repayment plan for the investment would play a pivotal role in determining financial risk profile. The management is deploying a conservative expansion plan with borrowings carrying terms and conditions that the company can conveniently manage. The entity is already catering to a market more than its production capacity. Sustained market share and, in turn, better margins would support ratings.

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 and its Affiliates consisting of Hilton Pharma (Private) Limited, Soorty Enterprises (Private) Limited, Al- Karam Textile Mills (Private) Limited, Mr. Fawad Anwar and Mr. Siraj Dadabhoy are the major shareholders of the company, together holding ~ 76% of the total shareholding. The company has geographical presence across Pakistan with multiple sale offices and sale depots to serve customers from South to North.
Pakistan Oxygen’s nine members board is majorly represented by members of sponsoring group (seven), and two independent. 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 highest level of independence, the Internal Audit has been outsourced to M/s EY Ford Rhodes, Chartered Accountants, which has a functional reporting relationship directly to the Board Audit Committee (BAC). Management of the company comprises of qualified and experienced professionals with a wide range of skills and diversified experience.