The Pakistan Credit Rating Agency Limited
19-May-20
Analyst
Faraan Taimoor
faraan.taimoor@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-19
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-19
Related Research
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PACRA Maintains Entity Ratings of Sitara Petroleum Service (Pvt.) Limited
| Rating Type | Entity | |
|
Current (19-May-20 ) |
Previous (15-Nov-19 ) |
|
| Action | Maintain | Maintain |
| Long Term | A- | A- |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The ratings reflect the vigorous business profile of Sitara Petroleum Service (Private) Limited. Sponsors have been engaged in the business for over three decades, reflecting their industrial experience. Sitara operates a network of ~30 retail stations which is mainly spread out in the Southern Punjab region while providing PoL products directly to customers in bulk. The company is engaged in fleet logistic accommodations (carriage income) to OMCs (mainly to Gas & Oil Pakistan Ltd ). The sponsor’s long association with these business lines is being considered positive. The company’s prime profits are being engendered by the fleet logistics business. It carries ~51% share in the gross profit, followed by retail (~35%) and bulk business segments (~14%). The income from the fleet logistics division has soared over the tears as the fleet size expands whereas retail and bulk segments supplementing the profitability. The financial risk profile is characterized by an adequate leveraged capital structure. The equity has been boosted through profit. The company has further ventured into the real estate segment while sponsors plan to establish an OMC is on hold. The overall governance framework has been augmented by enhancing financial quality.
The ratings are dependent on the management's facility to sustain its business volumes while holding the margins. Sustaining the business and financial profile along with improvement in the governance framework would be vital for the ratings. The non-core business should be recorded as a separate function. Meanwhile, financial transparency is considered paramount.
About
the Entity
Sitara Petroleum Service Private Limited was incorporated in Jul’12. The company is 94% owned by Mr. Tahir Iqbal who is the CEO of the company. Since Jan’19 the roles of Chairman and CEO were split and Mr. Tahir Iqbal was appointed as the CEO of the company whereas Mr. Chaudhry Muhammad Akram was assigned as the Chairman of the board. Mr. Iqbal has been associated with the retail & oil transportation sector for more than three decades. He is supported by a team of experienced personnel.