The Pakistan Credit Rating Agency Limited
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Raniya Tanawar

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PACRA Maintains Entity Ratings of Pakistan Oxygen Limited

Rating Type Entity
Action Maintain Initial
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect eminent position of Pakistan Oxygen Limited in industrial and medical gases, healthcare solutions, hardgoods & welding segment. The industry largely possesses oligopolistic structure, benefiting the players. Slower demand for industrial gases especially from large scale manufacturers on account of economic slowdown coupled with COVID-19 outbreak and subsequent lockdown kept the product demand depressed, eventually resulting in subdued Company's profitability. The ratings take comfort from the rich heritage on account of previous ownership of international group with a solid name in the chemical and gases industries globally. Pakistan Oxygen serves customers across a wide spectrum of industries ranging from chemical and petrochemical to steel, food and healthcare. Going forward Pakistan Oxygen, with its experienced and professional team and largest footprint across Pakistan has approved investment plan to set-up the largest and most efficient air separation unit in Pakistan, the process stands at a preliminary stage. The incumbent sponsors have added energy to the company and are eyeing expansion, of which the related modalities including funding requirement and mix, being negotiated with relevant institutions. Where existing COVID-19 pandemic has hampered almost all the industrial segments of the country - on the other hand - it has shifted the focus towards the self well-being, healthcare and medical engineering segments, which may result in an increased demand. Reversal of key economy driven challenges; interest rate, inflation will strengthen the financial risk appetite of the Company.
The ratings are dependent on the company's ability to effectively utilize its existing capacity and management of financial risk particularly the debt coverages, wherein any significant dilution would be imperative for the ratings. Debt-Equity mix and repayment plan for the investment would play a pivotal role in determining financial risk profile. The management is deploying a conservative expansion plan with borrowings carrying terms and conditions that the company can conveniently manage. The entity has been ably catering to a market more than its production capacity. Maintaining strong coverages and sustained market share with better profitability will remain vital.

About the Entity
Pakistan Oxygen Limited, incorporated in 1949 and listed on Pakistan Stock Exchange in 1958, is engaged in the manufacturing of industrial and medical gases, welding electrodes and marketing of medical equipment. Adira Capital Holdings (Private) Limited, Hilton Pharma (Private) Limited, Soorty Enterprises (Private) Limited and Mr. Shahid Umerani are the major shareholders of the company, together holding ~ 76% of the total shareholding. Mr. Siraj Dadabhoy is the major beneficial shareholder.
The company has geographical presence across Pakistan with multiple sale offices and sale depots to serve customers from South to North.
Pakistan Oxygen’s eleven members board is majorly represented by members of sponsoring group (seven), and four independent. All members are non-executive. Mr. Waqar A. Malik is Chairman of the board and Mr. Matin Amjad holds the office of CEO. To maintain highest level of independence, the Internal Audit has been outsourced to M/s EY Ford Rhodes, Chartered Accountants, which has a functional reporting relationship directly to the Board Audit Committee (BAC). Management of the company comprises of qualified and experienced professionals with a wide range of skills and diversified experience.

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.