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The Pakistan Credit Rating Agency Limited
Press Release

Date
15-Nov-19

Analyst
Faraan Taimoor
faraan.taimoor@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Sitara Petroleum Service (Pvt.) Limited

Rating Type Entity
Current
(15-Nov-19 )
Previous
(16-May-19 )
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect the vigorous business profile of Sitara Petroleum Service (Private) Limited. Sponsors have been engaged in the business for over three decades and reflecting their industrial experience. Sitara Operates a network of ~30 retail stations which is mainly spread out in the Southern Punjab region while also provides PoL products directly to customers in bulk. The company provides fleet logistic accommodations (carriage income) to OMCs (mainly to Gas & Oil Pakistan Ltd ). The sponsor’s long sodality with these business lines is being considered positive. The company’s prime profits are being engendered by the fleet logistics business. It carries ~70% share in the gross profit, followed by retail (~21%) and bulk business segments (~9%). Over the years portion of the profit from the fleet logistics division is soaring while retail and bulk segments are additionally supplementing the profitability.
The company’s decision to build oil reserves reflects its risk appetite which must be considered, though the latest results have been positive. The financial risk profile is characterized by an adequate leveraged capital structure. This along with amended cashflows avail manage the financial peril. Adequate coverages lend support to financial profile. The equity has been boosted through profit. The sponsors plan to establish an OMC has been put on hold considering the economic situation. The overall governance framework has augmented by enhancing financial quality.
The ratings are dependent on the management's facility to sustain its business volumes while holding the margins. Sustaining the business and financial profile along with improvement in the governance framework would be vital for the ratings. Meanwhile, financial transparency is considered paramount.

About the Entity
Sitara petroleum Service Private Limited was incorporated in Jul’12. The company is 94% owned by Mr. Tahir Iqbal. who is the CEO of the company since Jan’19 he roles of Chairman and CEO were split and Mr. Tahir Iqbal was appointed as the CEO of the company and Mr. Chaudhry Muhammad Akram has been assigned as the Chairman of the board. Mr. Iqbal is a veteran of the retail & oil transportation sector having an experience of more than three decades. Mr.Tahir is supported by a team of experienced personnel.
The company has a four-member board (including CEO). Board comprises two executives and two independent directors. The board has formulated two committees, i) Board Audit Committee and ii) Board Human Resource & Remuneration Committee.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.