PACRA Assigns Initial Entity Ratings to MAL Pakistan Limited

MAL Pakistan Limited ('MAL' or 'the Company') gathers strength from its association with the Army Welfare Trust ('the Trust'). The Company manufactures, markets, and sells lubricants, greases, chemicals, and specialty petroleum products of all kinds. Initially, Mobil International Petroleum Corporation (MIPC), USA, and the Trust entered into a shareholding agreement to form an unlisted entity named Mobil Askari Lubricants Limited (Mobil Askari), where ~70% shares were held by MIPC and ~30% stake resided with the Trust. In 2007, the Trust acquired the entire shareholding in Mobil Askari. ExxonMobil (Exxon) entered into an alliance agreement with Mobil Askari in respect of the blending, packaging, and sale of certain Exxon products in Pakistan under the trademark of Exxon. The agreement, executed through ExxonMobil Asia Pacific Pte Limited, Singapore, superseded the earlier distribution agreement and is renewable every ten years. In 2000, Mobil Askari entered into a blending and commercial supply agreement with Indus Motor Company Ltd. In 2005, Japanese-based ExxonMobil Yugen Kaisha agreed to provide technical assistance to Toyota Genuine Oils and chemical products, through which a local blending sub-licensing agreement was agreed for Indus Motor Company, Pakistan, and renewed in 2010. In 2007, the Company was renamed as MAL Pakistan Ltd. In May-25, the Company agreed with ISUZU Company Ltd. to manufacture and sell the ISUZU brand in Pakistan. MAL's governance structure is strong, supported by board-level committees, and operates with a lean organizational structure focused on operational efficiency. The management team is well-qualified and experienced, providing further confidence to the ratings. The control environment is robust, with well-developed policies in place. The ratings consider the stable demand for lubricants in the local market. Pakistan’s lubricants market is valued at ~USD 1.3bln, with annual consumption exceeding ~400mln liters. The market is broadly segmented into automotive, industrial, and marine lubricants, with the automotive sector accounting for the largest share. The market is dominated by both MNCs (Shell, Total & Chevron) and local players (PSO). While economic volatility and regulatory pressures pose a challenge, MAL has an established footprint in the local markets with a topline of ~PKR 9.6bln in CY24 and is ranked among top-tiered local players. Business margins remain steady within the range of ~16% to ~17% on gross level, and ~2% to ~3% on net level. The financial risk profile is characterized by moderate coverages and cash flows, along with a substantial borrowing cushion on the balance sheet. Working capital cycle is adequate, where borrowings primarily consist of short-term debt to finance working capital requirements. This, along with evident support from the Sponsor, i.e., the Trust, provides a key advantage to the Company. Going forward, the management is eyeing on expanding the existing network of storage and production, for which the Company has already partnered with renowned and well-positioned global lubricant players. The management also plans to tap in the mining sector of Pakistan along with some foreign investors. Timely and successful materialization of these initiatives as conceived are expected to bode well for the Company.
The ratings depend on the sustaining business volumes amid the current economic environment. Consistent efforts to maintain the growth trajectory in the topline and profitability matrix remain imperative. Simultaneously, maintaining a stable financial risk profile, with a strong emphasis on working capital management, is crucial to preserve favorable ratings. The adequacy of cash flows and the coverage are important.

About the Entity
MAL Pakistan Limited ('MAL' or 'the Company') is an unlisted public limited company incorporated in 1996. The Company is a wholly owned subsidiary of the Army Welfare Trust ('the Trust'), with the principal activity to manufacture, market, and sell lubricants, greases, chemicals, and specialty petroleum products of all kinds. The Board comprises six members, including four Non-Executive, one Independent, and One Executive Director. Lt. Gen. Nauman Mehmood (Rtd.) serves as the Board's Chairman, while Mr. Khawar Jamal heads the Company as the CEO. They are assisted by an experienced team.