The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Noor Ul Haq

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PACRA Maintains Entity Ratings of AGP Limited

Rating Type Entity
(07-Nov-19 )
(08-May-19 )
Action Maintain Upgrade
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect AGP's established market position and long track record in the pharmaceutical industry. 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. The latest price revision,and CPI-linked pricing criteria recently implemented, has indicated 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. Consequently, debt servicing ratios has improved. Interest coverage increased with an improvement in EBITDA and leverage reduced on account of debt repayments on its Sukuk. Debt metrics need to be upheld. Benefits from the expansion initiatives to develop new products should lead to healthy demand and strategic alliance with Mylan, to promote their product portfolio in Pakistan enables volumetric growth as well as growth in locally manufactured goods. AGP's 82% business is through sole distributor Muller & Phipps Pakistan (Pvt) Limited (M&P); going forward this concentration risk may pose challenge. However, the comfort can be taken from the presence of M&P's shareholding in AGP. 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 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. It is majority owned by Aitken Stuart Pakistan (Private) Limited with shareholding previously held by OBS Pakistan (Private) Limited; although the sponsor remains the same, 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 three representatives of OBS Group, and one each of M&P and BGF and two independent directors. The board comprises experienced professionals from pharmaceutical and financial backgrounds. The Chairman, Mr. Tariq Moinuddin Khan, is the sole brain 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.

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.