PACRA Maintains the Entity Ratings of AGP Limited

AGP Limited (herein referred to as "AGP" or “the Company"), operates with a dual profile, functioning both as an operating and holding Company within the umbrella of the AGP group. It ranks among the leading names in Pakistan’s pharmaceutical sector, standing at the 13th position in terms of consolidated revenue as per the latest IQVIA report. The Company commenced its pharmaceutical operations in 1989 and is primarily owned by OBS Group (OBS) through Aitken Stuart Pakistan (Pvt) Ltd in addition to a strategic and distribution alliance with Muller & Phipps Pakistan (Pvt.) Ltd (M&P). AGP’s product portfolio is focused on acute therapeutic segments, however, recent and planned brand acquisitions will strengthen the Company’s presence in the chronic therapeutic segments as well. The business growth is fueled by organic portfolio expansion and new acquisitions in the chronic therapeutic segment. AGP boasts a strong corporate governance framework with established policies and procedures that facilitate efficient oversight and decision-making of the Board of Directors. The executive team consists of professionals with diverse expertise and extensive experience in the sector. During FY24, the pharmaceutical sector grew by ~22% YoY and registered a revenue of ~PKR 918bln where the top 10 players enjoy a market share of ~49% as per the IQVIA Report. Approval of Price adjustment by DRAP and PKR stabilization during the year proved beneficial for the industry as it relies on imported APIs to fulfill its raw material needs. The Company has achieved a substantial growth of ~24.2% on an annualized basis in its topline during 6MCY24 primarily driven by increased volumes and supported by price adjustments. The revenues were augmented by the contribution from recently acquired brands of Viatris Inc from Pfizer which have enhanced the company’s product range. AGP's ratings reflect strong and sustained gross margins over the past three years along with sizeable cash flows to service debt and meet the working capital needs. However, a declining trajectory of the net profit margin has been observed, stemming from a notable increase in finance costs on the back of financing acquired for the acquisition of subsidiaries as well as elevated interest rates. Currently, 49% of business is through a sole distributor, M&P which may pose a concentration risk in the future. Nevertheless, M&P's shareholding in AGP provides some assurance. Capital structure is leveraged where borrowings are comprised of a mix of both long-term and short-term to support brand acquisitions and meet working capital requirements. Going forward, the financial risk profile is expected to improve as the Company is expected to benefit from the paradigm shift enabling deregulation of the prices of Non-Essential Medicines (NEMs), owing to the high concentration of NEMs in AGP’s product portfolio. Furthermore, declining interest rates will also impact the bottom line positively.
The ratings are dependent on the sustainability of the growth trajectory in the topline and profitability matrix. The adequacy of cash flows and the availability of alternative resources to make debt-related payments remains critical. Meanwhile, compliance with internally-defined leveraging metrics is a prerequisite.

About the Entity
AGP Limited (AGP) is a listed public limited company, operating in the pharmaceutical sector of Pakistan since 1989. It is primarily owned by the OBS Group through Aitken Stuart Pakistan (Pvt.) Ltd (55.80%) followed by strategic partners: Muller & Phipps Pakistan (Pvt.) Ltd (13.54%), Baltoro Growth Fund (BGF) (9.57%), Aspin Pharma (4.79%) and others (16.79%). The seven-member Board of Directors comprises 2 independent directors, 3 representatives of the OBS Group, and one each of M&P and BGF. Mr. Tariq Moinuddin Khan is the Chairman whereas Mr. Muhammad Kamran Nasir is the CEO of the Company. Both have over 3 decades of diverse professional experience.