PACRA maintains the rating of Gas & Oil Pakistan Limited | PP Sukuk

The ratings incorporate Gas & Oil Pakistan Limited ('GO' or the 'Company'), strong presence in the oil marketing segment. 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 a Privately Placed Sukuk of PKR 2.5bln issue on Dec-21. 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, 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.
In 6MCY23 decline in topline by 13% from ~PKR 171,026mln(6MCY22) to ~PKR 148,843mln(6MCY23). Conversely, in CY22 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 6MCY23 considering i) PKR depreciation ii) foreign exchange losses, and iii) finance cost, the bottom line of the Company reduced to ~PKR 410mln (6MCY22: ~PKR 1,958mln), depicting a decrease of ~79%. The increase in prices of petroleum products has impacted demand and deterioration in volumes has been witnessed, across the industry, albeit, the increase in prices has absorbed the impact. However, the demand is expected to come in full circle once the macro-level fundamentals improve.
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.

About the Entity
GO incorporated in 2012, was granted the license as an OMC in 2012. GO started its operation in 2014 in the Punjab region and later expanded 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.

About the Instrument
Gas & Oil Pakistan issued a rated, secured, privately placed sukuk in Dec-21. 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. Sukuk’s redemption is scheduled in sixteen equal quarterly payments. The DPA is being funded 100% of upcoming coupon payment 30 days before upcoming coupon payment date through proceeds from a designated account. The account will be under lien on the Investment Agent; however, the funds being routed through the account are being released to the Company except as required to fund the DPA.