The Pakistan Credit Rating Agency Limited
19-May-21
Analyst
Faraan Taimoor
faraan.taimoor@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-20
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-20
- Criteria | Rating Modifier | Jun-20
Related Research
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PACRA Maintains Entity Ratings of Sitara Petroleum Service (Pvt.) Limited
| Rating Type | Entity | |
|
Current (19-May-21 ) |
Previous (19-May-20 ) |
|
| 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 (Pvt.) Limited. Sponsors have been engaged in the business for over three decades, reflecting their business acumen. Sitara operates a network of ~40 retail stations which are mainly spread out in the Central and 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 ~68% share in the gross profit, followed by retail (~22%) and bulk business segments (~10%). The income from the fleet logistics division has soared over the years as the fleet size expands whereas retail and bulk segments supplement the profitability. The financial risk profile is characterized by an adequate leveraged capital structure. The equity has been boosted through profits. The company has sizable land holdings, which supplemet risk absorption capacity. The sponsors are engaged in real estate projects; these have been partly financed through group companies including Sitara Petroleum. The related and ensuing risk must be adequately managed.
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. Meanwhile, financial transparency is considered paramount.
About
the Entity
Sitara Petroleum Service Private Limited was incorporated in July 2012. The company is 94% owned by Mr. Tahir Iqbal who is the CEO of the company. The company derives strategic impetus from its business ties with Gas & Oil Pakistan. With a network of approximately 760 retail outlets, Gas & Oil Pakistan has ~ 8.9% market share based on (Mogas/HSD/HOBC) as of March-2021.
Mr. Iqbal has been associated with the Retail & Oil Transportation sector for more than three decades. The BOD comprises of seven members including two independents. He is supported by a team of experienced personnel.