The Pakistan Credit Rating Agency Limited
30-Jun-18
Analyst
Farhan Ali
farhan.ali@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
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PACRA Maintains Entity Ratings of Gas & Oil Pakistan Limited
| Rating Type | Entity | |
|
Current (30-Jun-18 ) |
Previous (17-Oct-17 ) |
|
| Action | Maintain | Initial |
| Long Term | A | A |
| Short Term | A1 | A1 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings incorporate Gas & Oil Pakistan Limited's (GO) growing presence in the oil marketing (OMC) segment. The company has attained ~3% market share in a competitive market over 4 years of operations and has 379 outlets. The company aims to carry on its expansion strategy to further penetrate the retail segment by targeting semi-urban and rural areas. The ratings drive strength from a well-structured organisation and experienced management team. GO capitalises on strong managerial support from its sponsors who have significant knowledge in oil procurement and distribution. The company is in the midst of large-scale capex programme to increase its storage capacity to support expansion initiatives. GO aims to finance the capex via debt, sale of an equity stake to a strategic investor and via IPO. During 9MFY18, GO's leveraging has increased significantly to 61% due to higher short-term borrowing. The company maintains strong coverage ratios though they have diluted on YoY basis.
The rating recognizes ongoing developments in the business to improve the overall profile of the company including i) a change in the company CEO and new inductions in the BoD, ii) bringing in a strategic investor, iii) planned listing iv) improved transparency and iv) lower leverage. Timely implementation of these initiatives and GO's ability to achieve the desired market penetration, healthy margins and better supply chain management are critical for rating.
About
the Entity
Gas & Oil Pakistan Limited incorporated in 2012, was granted the license as an OMC in 2012. GO started its operation in 2014 in Punjab region and later expanded its sales and marketing network into Sindh in 2016 and KPK in 2017. With a network of 379 retail outlets (May 18), GO has a storage infrastructure of 42,750Mts spread all across the country.
The company is owned by three individuals. Mr. Khalid Riaz (current CEO and Chairman) has 64.4% stake in the company followed Mr. Shahzad Mubeen 23.7% stake and Mr. Bilal Ansari has 11.8% stake in the company respectively. The Board of Directors comprises nine experienced professionals with four independent members.