The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of E-GAS (Pvt.) Limited

Rating Type Entity
(31-Aug-19 )
(03-May-19 )
Action Maintain Upgrade
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

E-Gas (Pvt.) Ltd operates a unique business model of supplying CNG through a virtual pipeline. Overall the industry is dependent on the two major state owned gas distribution companies; E-Gas through its virtual pipeline is capturing a small niche in that market. There is room available in this segment as the gas being distributed is a small fraction of what is being flared into the atmosphere. The demand from the customers is need-driven, which is perpetually increasing, as the energy starved industry doesn’t have access to uninterrupted supply or any other viable alternatives.
Success is pivotal on sound supply chain management and fulfilling the ever increasing demand through a well-managed fleet of logistical infrastructure. E-Gas has expanded its fleet size over the last few years. The Company is currently procuring gas from four fields and has sustained customer base. The management is planning to further enhance fleet size which will result in improved revenues and profitability. Expansion will increase leveraging but is expected to remain within comfortable range supplemented by cashflows of the Company. The cost structure is being managed; distribution costs, going forward, should be the main focus of the management. The sponsors have a good understanding of the business along with happenings in the industry. The sponsor support is evident from presence of interest free long term loan and personal guarantees of directors on the book.
The ratings are dependent on sustaining a steady revenue stream and financial risk profile. The ratings would positively benefit from the corporate governance principles, internal control systems and financial strength of E-Gas. Any prolonged downturn in subdued business volume and low gas prices can have a detrimental effect.

About the Entity
E-Gas was incorporated in 2006 as a private limited company. The company started off by partnering with Fornovo Gas, an Italian equipment manufacturer, providing CNG equipment and services in Pakistan. Since 2011 E-Gas has shifted its focus to operating Virtual Gas pipeline, supplying CNG to different industries in Pakistan through their huge fleet of High Pressure Specialized Modules (existing size: 27trucks; previous size: 25trucks). E-Gas is owned and run by the sponsoring family. The sponsors also own a Honda car dealership in Rawalpindi and four fuel stations across the provinces. Mr. Yasir Raza is the CEO with his two brothers, Mr. Taimur Raza and Mr. Hassan Raza as executive directors.

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.