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The Pakistan Credit Rating Agency Limited
Press Release

Date
17-Jun-21

Analyst
Muhammad Mubashir Nazir
mubashir.nazir@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Ratings to Flow Petroleum (Pvt.) Limited

Rating Type Entity
Current
(17-Jun-21)
Action Initial
Long Term BBB+
Short Term A2
Outlook Stable
Rating Watch -

The ratings incorporate the steady growth of Flow Petroleum (Pvt.) Ltd in the oil marketing company (OMC) sector. Set up in 2019, it has ~ 18 retail outlets, currently in Punjab. Storage infrastructure, aligned to the current size, has been laid out; the facility is at Faqirabad, Attock (capacity of 1,500 MT) while also utilizing hospitality storages. This will have to be enhanced for growth. The market share is miniscule at the moment, expected to increase, as number of new outlets are underway. This also provides an alternative stream of income, in lieu of joining fee. The profitability indicators are congruent to the current size, having dependence on the joining fee as well. The company has local supply chain, while ability to procure from the international suppliers is being worked out. Flow Petroleum capitalizes on strong entrepreneurial capital of its sponsors, having significant knowledge in oil trading segment from its sister concern, Aslam Oil Traders. The ratings drive strength from a structured organization and experienced management team.

Flow Petroleum has moderate financial risk profile reflected by adequate leveraging and coverage indicators. Currently, the company has no long-term debt whereas short-term borrowing needs emanate from working capital requirements. The new funding lines are being negotiated. Corporate governance structure needs to be enhanced; the BOD is currently occupied by the sponsors. Up gradation of oversight environment is vital.
The ratings are dependent on Flow Petroleum’s ability to build market penetration. Improvements in Corporate Governance Structure including but not limited to i) induction of a diverse, independent set of individuals as board members and ii) quality external auditors are important. In addition to timely implementation of these initiatives, the ratings are also reliant on the company’s ability to maintain a manageable leverage structure supported by healthy margins.

About the Entity
Flow Petroleum (Pvt) Ltd was established in February 2017 under Securities and Exchange Commission of Pakistan having its registered office at MM Alam Road, Gulberg III, and Lahore. It has obtained the Permission to establish OMC in April 2018 and finally Marketing License in January 2019 from OGRA.

This entity is headed by Mr. Muhammad Waris as CEO along with two other directors/members and highly skilled professional team. The overall personnel’s involved in the management of the company are having 5 to 20 years of the relevant experience. The entity sponsors are carrying the oil business legacy since four decades and carries extensive expertise.

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.