The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Harris Ghaffar

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PACRA Maintains Entity Ratings of Pakistan Oxygen Limited

Rating Type Entity
(25-Jul-23 )
(26-Jul-22 )
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, welding, hard goods & Medical Engineering Services (MES) segments. The industrial & medical gases industry largely possesses an oligopolistic structure and the electrodes market comprises of Tier-I, Tier-II & Tier-III segments and POL is the leader in the Tier-I category and prominent presence in the other two segments which are primarily unorganized. OXYMED was launched as an indigenous product line for their MES business vertical. The OXYMED core business is installing the supply sources of medical gases, and pipeline distribution systems with complete associated equipment installation. During Covid-19, the installation of dedicated medical gas capacities in hospitals resulted in a change in the revenue mix and showed considerable growth in the healthcare segment. As of now, the product portfolio has stabilized along the demand yield curve, indicating a more balanced and consistent state in the industry. The demand from the steel, automotive, and shipbreaking industries remained weak due to the country’s macroeconomic challenges. The Company planned to regain their customer base in the industrial gases segment through geographical expansion. POL serves customers across a wide spectrum of industries. The massive hike in energy prices is one of the key challenges to the industry as it constitutes a significant portion of COGS. To cater this, the Company is soon expected to successfully commission its new state of the art 270TPD Air Separation Unit (ASU) and the electrode plant to meet the demand for industrial/medical gases and all tiers of the electrode market segment, respectively with better specific power consumption technology. The top line of the Company has shown a growth of 4.2% YoY basis with an optimal mix of medical and industrial gases. The margins of the Company remained at an adequate level despite a considerable surge in KIBOR, and electricity prices followed by massive PKR devaluation and revoke of sales tax exemption on the sale of medical gases to hospitals. 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 leveraged where borrowings are comprised of short-term and long-term. To facilitate capacity expansions and BMR the Company has a subsidized long-term borrowing facility (TERF).
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. Mr. Siraj Dadabhoy is the major beneficial shareholder. POL’s ten members board consists of six non-executive and four independent directors. Mr. Waqar A. Malik is Chairman of the board and Mr. Matin Amjad holds the office of CEO.

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.