PACRA Maintains Entity Ratings of AGP Limited

The ratings reflect AGP's strong business fundamentals. The pharmaceutical industry has witnessed a high rate of sustained growth over the years. Cost-efficiencies as well as demand inelasticity benefits the industry players. Product pricing has been a challenge, however, the CPI-linked pricing criteria, recently implemented, has allowed an increase in prices with respect to inflation; indicating a positive sign for the sector. AGP's core profitability is strong in comparison with most of the peers; any downward revision must remain range-bound. Ratings incorporate AGP's strong and sizeable Cash flows and their adequacy to service the debt. Expansion strategies and strategic alliance with Mylan, USA to promote their product portfolio in Pakistan enables volumetric growth. Presence of OBS Group in the pharmaceutical sector provides strength, in the form of group synergies, to AGP's positioning within the industry.

The ratings are dependent on continued sustainability of profits and improved market share. Adequacy of cash flows and availability of alternative resources to make debt-related payment remains critical. Meanwhile, compliance with internally-defined leveraging metrics is a prerequisite. Moreover, the instrument rating is dependent upon upholding of all major covenants.

About the Entity
AGP Limited (AGP) is a listed pharmaceutical company; the operations of entity have been in Pakistan since 1989. Listing in Pakistan Stock Exchange has recently taken place in CY18, making it first public offering of a Pharmaceutical company after a gap of over 23 years. It is majority owned by OBS Group (OBS) (~51%), followed by strategic partners: Muller & Phipps (M&P), Baltoro Growth Fund (BGF), Bank Alfalah, High Q Pharmaceuticals and Aspin Pharma. OBS Group - ranked 9th in the local pharma industry, deals in clinical research, manufacturing, marketing, sales and distribution of pharmaceutical & healthcare products.

The seven-member BoD comprises four representatives of OBS Group, and one each of M&P and BGF and one independent director. The board comprises experienced professionals from pharmaceutical and financial backgrounds. The Chairman, Mr. Tariq Moinuddin Khan, is the brains behind OBS Group. Mr. Khan, CPA from Canada, carries over three decades of domestic and international professional experience. The MD & CEO, Ms. Nusrat Munshi, has close to 27 years of experience, around a decade of which is in the pharmaceutical industry. She is supported by an experienced core management team.