Muhammad Atif Chaudhry
PACRA maintains the rating of Gas & Oil Pakistan Limited | PP Sukuk
The ratings incorporate Gas & Oil Pakistan Limited (GO), strong presence in the oil marketing segment. The Company has augmented its market share in a competitive market, benefiting from the strategic positioning of the stations that it feeds. GO aims to carry out its expansion strategy by further penetrating the retail segment of semi-urban and rural areas, for that purpose the Company has issued Privately Placed Sukuk of PKR 2.5bln. The Company has increased its storage capacity, consolidated from 197,038 MTs to 205,200 MTs out of which 36,300 MTs storage is leased from Fauji Trans Terminal Limited (FTTL). GO further aims to inaugurate more company-owned and operated sites, with an aim to enhance the margins. GO has traditionally capitalized on strong managerial, support from its sponsors who have significant knowledge in oil procurement and distribution. The equity base of the Company has taken support from internal capital generation and higher accumulated profitability.
A rise of ~55% is seen in the top line of the Company during CY22 amounting to ~PKR 324,617mln (CY21: ~PKR 209,102mln). However, during CY22 considering i) PKR depreciation ii) foreign exchange losses, and iii) finance cost, the bottom line of the Company reduced to ~PKR 2,242mln (CY21: ~PKR3,215mln), depicting a decrease of ~43%. The net profit margin has also reduced to ~0.7% for CY22 (CY21: 1.5%). The increase in prices of petroleum products has impacted demand. However, the demand is expected to come in the full circle once the macro-level fundamentals improve. Through, industry-wide volumetric decrease in sales has been reported but the selling prices have absorbed the impact too much extent. The management of imports given the current forex position in the country is also a challenge.
The rating captures the Company’s ability to sustain its business operations while enduring its expansionary business plan. The rollout of the planned business strategy and sustainable profitability is essential. In the meantime, financial metrics need to be upheld in terms of working capital ratios, coverages and capital structure.
Gas & Oil Pakistan Limited incorporated in 2012, was granted the license as an OMC in 2012. Gas & Oil started its operation in 2014 in the Punjab region and later expanded its sales and marketing network into Sindh in 2016, KPK in 2017, and also Balochistan in 2019. The majority shareholding of the Company is owned by three individuals. Mr. Khalid Riaz (CEO and Chairman) has a 58% stake in the Company followed by Mr. Shahzad Mubeen (21%), Mr. Bilal Ansari (11%), and VITOL Dubai Limited (10%). The Board of Directors comprises a total of nine experienced professionals, four members are representatives of GO. The other five members, including one female director, are serving as independent directors.
Gas & Oil Pakistan issued a rated, secured, privately placed sukuk in Dec-21, under chapter 5C PSX rule book. The issue amount of Sukuk is PKR 2.5bln at an offer rate of 3 Month KIBOR + 1.75% p.a with a tenor of five (5) years, inclusive of 1 year grace period. Sukuk’s redemption is scheduled in sixteen equal quarterly payments.