PACRA Maintain Entity Ratings of My Petroleum (Pvt.) Limited

Pakistan relies significantly on imports to meet its energy demand. During FY23, the consumption of 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 of the country - declined by ~25.5% reported at ~17.1mln MT (FY22: ~23.1mln MT). A decrease in total consumption was due to unstable economic conditions and government policy changes. The transportation and power sectors remain the main consumers, accounting for ~80% of total demand. Despite challenges, the sector's overall outlook - cashflows and liquidity - remains stable.
My Petroleum (Pvt.) Ltd. ('My Petroleum' or 'the Company') ratings drive strength from the adequate footing of the sponsors in the logistics, trading, energy, and steel sectors. The Company has evolved through expansion of retail network currently at ~74 pumps (~71 in Punjab, ~3 in Sindh). Being a small player, My Petroleum captures ~0.4% of the market share. While, going forward, planned penetration into the retail segment across semi-urban and rural areas may adds to the market share of the Company and benefit the overall business risk. The Company generates revenue from sales of POL products mainly PMG (~85%) and HSD (~14%), while the remaining is contributed by HSFO and lubricants. The revenue posts a decline due to a volumetric decrease of ~19% due to low HSD sales. While, margins improved as the Company was able to procure POL products at cheaper prices. However, relying mainly on imports along with rupee devaluation exposes the Company to exchange risk. This impacts the profitability and elevates the business risk profile of the Company. Consolidation of My Logistics (Pvt.) Ltd into My Petroleum remains crucial. The timeline and modalities of this transaction is imperative for the overall performance of the Company. My Petroleum has an adequate financial risk profile as the working capital is managed through a combination of debt and suppliers' credit. Leveraging and coverages have stretched lately due to aggressive expansion. Thus, strectching the overall borrowing cushion. The management intends to keep the leveraging indicators aligned to the Company's overall risk profile. The Company's financial flexibility is high and drives support from sponsors in terms of equity injection.
The rating captures the Company’s ability to sustain its business operations. The rating particularly recognizes ongoing developments - equity injection and expansion of retail network. Sustainable profits and other key financial metrics, in terms of working capital and coverages remain crucial to the rating.

About the Entity
My Petroleum (Pvt.) Ltd ('My Petroleum' or 'the Company') was incorporated in Jan-16 and became commercially operational in Sep-19. The Company is engaged in procurement, import, storage, distribution, and marketing of POL products and lubricants. It is operating all over Punjab and some areas of Sindh with a total storage capacity of ~5,500MT, located at Habibabad and MirpurKhas.
My Petroleum is a family owned business with major stake held by Mr. Tariq Wazir Ali (~95.3%) and his wife (~4.6%). The Company has a family dominated Board, chaired by Mr. Tariq Wazir Ali. He is also the CEO of the Company and is aided by experienced professionals.