Analyst
Muneeb Rashid
muneeb.rashid@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Assigns Entity Ratings to AGP Limited
Rating Type | Entity | |
Current (26-Jan-17 ) |
||
Action | Initial | |
Long Term | A- | |
Short Term | A2 | |
Outlook | Stable | |
Rating Watch | - |
The ratings reflect AGP's strong business fundamentals. The pharmaceutical industry has witnessed a higher rate of sustained growth over the years. The demand is almost inelastic. Product pricing is a challenge, yet cost efficiences are benefiting the industry players. At the same time, AGP's core profitability is strong; downward revision in margins must remain range-bound. Cash flows are strong and sizeable, adequate to service debt. The debt has been procured by the incumbent sponsors to acquire the company, routed through an SPV, which was later on merged and renamed as "AGP Limited". The presence of OBS Group in the pharmaceutical sector provides strength to AGP's positioning within the industry in the form of group synergies.
The ratings are dependent on continued sustainability of profits and market share. Adequacy of cash flows and availability of alternative resources to make debt related payment remain important for the ratings. Meanwhile, compliance with internally-defined leveraged metrics is a pre-requisite.
About
the Entity
AGP Limited (AGP) is an unlisted public pharmaceutical company; the operations of entity have been in Pakistan since 1989. It is majority owned by OBS Group (OBS) (69%), followed by strategic partners namely Muller & Phipps (M&P) (19%), Bank Alfalah (BAFL) (~7%) and JS Bank (~5%). OBS Group - ranked 5th in local pharma industry - partnering with international firms, deals in clinical research, manufacturing, marketing, sales and distribution of pharmaceutical & healthcare products.
The seven member BoD of AGP comprises five OBS representatives, one of M&P and one represents Bank Alfalah. The new board is operating since May'14, and comprises experienced professionals from pharmaceutical and financial backgrounds. The Chairman and CEO, Mr. Tariq Moinuddin, is the brain behind OBS Group. Mr. Tariq, CPA from Canada, carries over a three decades of domestic and international professional experience. Ms. Nusrat Munshi, the Managing Director of AGP since 2009, has close to 25 years of experience, around a decade of which is in pharmaceutical industry. She is supported by an experienced core management team.