Analyst
Faraan Taimoor
faraan.taimoor@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Upgrades Entity Rating of Gas & Oil Pakistan Limited
Rating Type | Entity | |
Current (04-Jun-20 ) |
Previous (29-Nov-19 ) |
|
Action | Upgrade | Maintain |
Long Term | A+ | A |
Short Term | A1 | A1 |
Outlook | Stable | Positive |
Rating Watch | - | - |
The ratings incorporate Gas & Oil Pakistan Limited, hereinafter referred to as GO’s, growing presence in the oil marketing (OMC) segment. The company has augmented its market share in a competitive market, benefiting from the strategic positioning of the stations that it feeds. The growth spree continues. GO aims to carry out its expansion strategy by further penetrating the retail segment of semi-urban and rural areas. The company has increased its storage capacity consolidated from 105,740 MTs to 130,792 MTs. This supplements its resolve to keep the pace of growth. While striving to inaugurate company owned and operated sites, which will further enhance the margins, it aims to expand its franchise presence by a sizeable margin. Unlike other OMCs, which had to reproduce lost sales on account of Furnace Oil, GO had formidable position in value added products, mostly premier motor gasoline and high speed diesel. GO has traditionally capitalized on strong managerial support from its sponsors who have significant knowledge in oil procurement and distribution. The management has taken several steps to enhance its control environment while boosting the financial transparency. The equity base of the company has taken support from internal capital generation after equity injection a while ago. The management intends to keep the leverage indicators aligned to its risk profile. The company aims to sustain its improving market position while ensuring commensurate leverage as it moves on its expansion drive.
The rating captures the company’s ability to sustain its business despite challenges arising from outbreak of COVID-19. Rollout of the planned business strategy and sustainable profitability is essential. In the meantime, financial matrix needs to be upheld.
About
the Entity
Gas & Oil Pakistan Limited incorporated in 2012, was granted the license as an OMC in 2012. Gas & Oil started its operation in 2014 in Punjab region and later expanded its sales and marketing network into Sindh in 2016, KPK in 2017 and also Balochistan in 2019. With a network of approximately 600 retail outlets, Gas & Oil Pakistan has ~ 8.4% market share (ranked 4th) as of January-April 2020 (CY19: 6.4%) based on the total sales and 10% market share (ranked 3rd) on the basis of MS/HOBC/HSD sales. The company has storage infrastructure of over 130,792 MT spread all across the country spread along with six sites. The majority shareholding of the company is owned by three individuals. Mr. Khalid Riaz (CEO and Chairman) has 58% stake in the company followed Mr. Shahzad Mubeen (21%), Mr. Bilal Ansari (11%) and VITOL Dubai Limited (10%) stake in the company. The Board of Directors comprises nine experienced professionals with four independent members.