PACRA Assigns Initial Ratings to National Refinery Limited - PPSTS - PKR 10.0bln | Jul-26

The ratings reflect National Refinery Limited's ("NRL" or "the Company") position as a strategic pillar of Pakistan's downstream energy sector and a key entity within the diversified Attock Group. NRL's core business comprises the refining of crude oil into High-Speed Diesel (HSD), Motor Gasoline (MS), lube base oils, and a range of other refined petroleum products, catering primarily to the domestic market. Pakistan's refining sector staged a marked operational and financial recovery during FY26, supported by favorable international market dynamics that temporarily widened product crack spreads during the third quarter, resulting in a significant improvement in sector-wide profitability. NRL capitalized on this environment through proactive crude sourcing, a strategic shift toward lighter crude such as Arab Extra Light crude / Umm e Lulu crude etc, improved throughput and uplift performance, reporting a net profit of PKR 6.16bln for FY26 against a net loss of PKR 14.87bln in FY25, with net revenue up 43.3% to PKR 440.8bln. In order to meet the working capital requirement, the Company raised PKR 10,000mln through a Rated, Unsecured, Privately Placed Short-Term Sukuk as an alternate source. This represents the Company's first-time capital market debt instrument, with proceeds earmarked specifically to fund working capital arising from the cyclical and price-sensitive nature of crude procurement and product sales. The instrument is unsecured; however, PACRA draws comfort from the inherent structure of NRL's business, which is characterized by a rapid cash conversion cycle typical of the oil refining and marketing trade. Crude is procured, refined, and sold into an active domestic market on relatively short credit terms, translating throughput into cash within a compressed operating cycle, and providing an implicit source of repayment support ahead of the Sukuk's short, six-month tenor. This is further reinforced by the Company's improved coverage metrics, with Free Cash Flows from Operations turning sharply positive for FY26 (FY25: negative) and by the continued financial strength of the sponsoring Attock Group.
Going forward, sustainability of profitability, disciplined working capital and debt management, continued operational stability, and timely operating cash flow generation to support repayment of the Sukuk at maturity remain the key rating considerations. Continued progress on the Brownfield Refinery Policy 2023 upgrade plans will remain an important longer-term consideration.

About the Entity
National Refinery Limited (NRL), incorporated in Pakistan on August 19, 1963, is the country's third-largest refinery with a designed capacity of approximately 23.1 MBPA, operating two lube refineries and one fuel refinery. The Company is majority owned by the Attock Group (51%) through Attock Refinery Limited, Pakistan Oilfields Limited, and Attock Petroleum Limited. Other key shareholders include the Islamic Development Bank (15%), institutional investors (12%), and the general public (22%). The Board is chaired by Mr. Shuaib A. Malik, while Mr. Asad Hasan has served as CEO since December 2024.

About the Instrument
The Company issued a Rated, Unsecured, Privately Placed Short-Term Sukuk of PKR 10,000mln, on 29th July 2026, in a single tranche. The Sukuk will have a tenor of up to six (6) months from the Issue Date. The principal will be repaid as a bullet payment at maturity, while profit, priced at 3-month KIBOR minus 10bps, will be repriced quarterly and paid at maturity. The Sukuk allows optional prepayment by the Company from internal cash flows with prior notice to the Investment Agent and will be inducted into the CDC's Central Depository System (CDS).