The Pakistan Credit Rating Agency Limited
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Timnat Thomas

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PACRA Maintains Rating of Byco Petroleum Pakistan Limited | Sukuk | Jan-17

Rating Type Debt Instrument
Action Maintain Maintain
Long Term AAA AAA
Short Term - -
Outlook Stable Stable
Rating Watch - -

Byco possesses a notable share in meeting the economy's demand for petroleum products, with its refinery and marketing business. Byco's refinery business remains exposed to the vicissitudes in international crude and petroleum products (POL) prices, which in turn, steer the gross refining margins (GRMs) of the Company. However, Byco has resumed reporting profitability from previous years losses and booked Net Profit of PKR 2,180mln in 9MFY21 (FY20: PKR (2,431)mln; FY19: PKR (1,684)mln; FY18: PKR 5,020mln). On the back of revival in economic dynamics, this trend is going to continue in upcoming periods. Byco’s financial risk profile is well managed even in a challenging position with essential borrowings to cater to working capital needs and also stands in range-bound. Nonetheless, Byco stands out in embarking on a new strategic venture to upgrade its refinery process in order to cope with the key challenges prevailing in the sector.
The ratings are a reflection of Byco's largest capacity, efficient processes that enable the company to effectively shield its business profile from external vulnerabilities. Improved performance indicators and promising financial discipline, are imperative to the ratings.

About the Entity
Byco, incorporated in 1995, is listed on the Pakistan Stock Exchange. It is engaged in the manufacturing, production, and sale of a large range of petroleum products via its refinery and marketing segments. With the aggregate designed capacity of ~155,000 barrels per day, Byco has the highest refining capacity, in the country. The company is a subsidiary of Cnergyico Mu Incorporated (CMI) (formerly Byco Industries Incorporated (BII)), Mauritius, which currently holds 69.83% shares in the company after divestment/sale of 22% shares by IGCF Oil & Gas Limited (formerly Abraaj Mauritius Oil & Gas Limited (AMOGL)), while the rest is spread among other Financial Institutions and General Public.
About the Guarantor:
GuarantCo Limited was incorporated in 2005. The company has executed fifty-seven projects with exposure in twenty-seven countries to date. The ultimate ownership of GuarantCo lies with five governments, four of which (United Kingdom, Sweden, Switzerland, and Australia) own through Private Infrastructure Development Group (PIDG) Trust, the Netherlands maintains its stake through FMO (a Dutch development bank) and PIDG Trust, France through a stand-by facility and Global Affairs Canada through a repayable facility. GuarantCo is rated 'AAA' by PACRA and Bloomfield Investment, 'AA-' by Fitch, and 'A1' by Moody's.

About the Instrument
Byco Petroleum Pakistan Limited issued a rated, secured, privately placed Islamic certificates (Sukuk) of PKR 3,120mln in Jan'17 to finance capital expenditure towards the expansion of the Company's power, storage and processing infrastructure. The Sukuk has a tenor of five (6) years. The profit is being paid quarterly in arrears at the rate of 3M Kibor+1.05% p.a. Principal repayment commenced from Apr'19. The instrument was rescheduled under the Regulator’s Relief Package for Corporates in the COVID-19 situation and the principal repayment was deferred from Jul'20 to Apr'21. Smooth payments of principal commenced from Jul'21 and as of now, only 33.33% amount is outstanding. The instrument is secured by a financial guarantee from GuarantCo covering 100% of the issue amount, a ranking charge on all present and future fixed assets of the Company with a 25% margin and a DSRA account maintained by the Company.

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.