PACRA Maintains Entity Ratings of Jinn Petroleum (Pvt.) Limited

Pakistan heavily depends on imports for its energy requirements due to limited domestic POL production. A substantial increase in POL import costs was witnessed due to global oil production cuts. This along with rupee depreciation further impacted the overall sector's dynamics. However, the local demand remains stable. While, during FY23, the demand for POL products - furnace oil (FO), high-speed diesel (HSD), motor spirit (MS), and high octane blended component (HOBC) - which make up ~95% of the total sales, declined by ~15% due to macroeconomic pressures. Transportation and Power sectors remain the main consumers, accounting for ~89% of the total demand. Despite having fixed margins, operating on suppliers credit, OMCs bears the impact of exchange loss; thus, challenges remain prevalent. However, the sector's overall outlook - cashflows and liquidity - is expected to remain stable.
Jinn Petroleum (Pvt.) Ltd. ('Jinn Petroleum' or 'the Company') has been evolving in the local OMC industry by making efforts to establish itself through strategic alliances. Moreover, the Sponsors hold significant footing in the oil procurement and distribution arena in the local market, along with substantial knowledge of local and international oil market dynamics. This bodes well for the Company. Jinn Petroleum aims to expand the retail network all across Pakistan. Currently, the Company has two storage facilities located at HUB and Sahiwal, along with hospitality arrangements at Kemari, Port Qasim, MehmoodKot, Shikarpur, Machike and Gatti. The planned expansion of Sahiwal's storage capacity is expected to be commissioned by Jun-24. Moreover, successful and timely commissioning of new storage terminals at Daulatpur and Sara-e-Norang remains imperative. The Business risk profile remains adequate and is characterized by limited market share. Revenue shows growth by ~58%; supported by both, volumes and pricing of the POL products. The Company primarily generates revenue from the marketing business of POL products. Business margins remain on the conservative end. The Company primarily relies on local refineries; while, fortifying on imports as per its requirements, wherein the financial constraints trickle in. On the financial risk front, coverages and working capital management remain adequate. While, the capital structure gathers support from internal capital generation. Going forward, the Company needs to sustain a sound risk profile. Moreover, support from sponsors as and when required remains imperative for the ratings.
The rating captures the Company’s ability to sustain its business operation while enduring its expansionary business plan. Rollout of the planned business strategy and sustainable profitability is essential. In the meantime, financial metrics needs to be upheld in terms of working capital ratios, coverages and capital structure.

About the Entity
Jinn Petroleum (Pvt.) Limited ('Jinn Petroleum' or 'the Company') was incorporated in 2016. The Company primarily generates revenue from the marketing business of POL products. The Company operates with a retail network of 98 pumps and a storage capacity of 6,475 MT.
Major stake of the Company (~42.3%) resides with Mr. Ashar Siddiqui, followed by Ms Saima Agha (11.47%). The remaining stake is fragmented among the sponsoring family. The Board is chaired by Ms. Saima Agha. While, Mr. Ashar Siddiqui heads as the CEO. He is assisted by an experienced management team.