The Pakistan Credit Rating Agency Limited
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Saadat Mirza

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PACRA Maintain Entity Ratings of Byco Petroleum Pakistan Limited

Rating Type Entity
(25-Aug-21 )
(25-Aug-20 )
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes Yes

The ratings reflect the resilient business profile of Byco Petroleum Pakistan Limited (Byco) emanating from its diversified operational capability and its strategic importance in the domestic context. Byco possesses a notable share in meeting the economy's demand for petroleum products, with its refinery and marketing business. Byco's refinery business remains exposed to the vicissitudes in international crude and petroleum products’ (POL) prices, which in turn, steer the gross refining margins (GRMs) of the Company. Significant challenge underlying the future of refinery industry in Pakistan pertains to up-gradation of the refining complexes. In order to cater the issue, ‘Working Group’ constituted by the Government that comprising of the Government officials and representative of refineries. This group finalised a draft ‘Refining Policy’ which envisages certain fiscal and tariff concessions to the refining sector that has improved implications on the financial condition of the refineries, also enabling up gradation of plants. However, the final approval and actual financial impact is yet to be seen. Economic activities have resumed despite continuing vicissitudes of COVID 19. This resulted in improved oil demand along with pricing implications supporting refining margins. It is important that the uptick trend continues, going forward. Uncertainty is still around as the third and fourth waves of the pandemic occasions frequent reviews of business timings and otherwise. Byco has resumed to report profitability from previous years losses and booked Net Profit of PKR 2,180mln in 9MFY21 (FY20: PKR (2,431)mln; FY19: PKR (1,684)mln; FY18: PKR 5,020mln). On the back of revival in economic dynamics, this trend is going to continue in upcoming periods. Byco’s financial risk profile is well managed even in challenging position with essential borrowings to cater working capital needs and also stands in range bound. Nonetheless, Byco stands out in embarking on a new strategic venture to upgrade its refinery process in order to cope with the key challenges prevailing in the sector. The project also encompasses installation of DHDS plant, which would enable the company to produce Euro V & Euro-VI, compliant with requirements. Byco has completed the feasibility study for the DHDS plant and ground construction work has already been started, in next phase the Company starts to import the machinery. Management is of view that project will be completed in FY 2025. More recent changes in the capital structure on account of the divestment of Abraj Fund’s stake, one of the two key sponsors poses changes on strategic sphere. Wherein, the key sponsoring family - Abbassciy family, is committed to ensure continuity and extending essential support.
The ratings are reflection of Byco's largest capacity, efficient processes that enables the company to effectively shield its business profile from external vulnerabilities. Improved performance indicators and promising financial discipline, are imperative to the ratings. The entity has been placed on Rating Watch to oversee challenges on the business and financial risk profile of the company, amongst others, related to industry dynamics.

About the Entity
Byco, incorporated in 1995, is listed on the Pakistan Stock Exchange. It is engaged in the manufacturing, production, and sale of a large range of petroleum products via its refinery and marketing segments. The refinery complex of the company comprises two refineries. With the aggregate designed capacity of ~155,000 barrels per day, Byco has the highest refining capacity, in the country. The company is a subsidiary of Cnergyico Mu Incorporated (CMI) (formerly Byco Industries Incorporated (BII)), Mauritius, which currently holds 69.83% shares in the company after divestment/sale of 22% shares by IGCF Oil & Gas Limited (formerly Abraaj Mauritius Oil & Gas Limited (AMOGL)), while the rest is spread among other Financial Institutions and General Public. Mr. Amir Abbassciy has been the Chief Executive Officer of Byco since January 1, 2017.

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.