PACRA Maintains Entity Ratings of Sitara Petroleum Service Limited

Sitara Petroleum Service Limited ("Sitara Petroleum" or "the Company") benefits from its strategic affiliation with Gas & Oil Pakistan Limited (GO), along with a robust business profile. The Company's sponsors bring over three decades of experience in the petroleum sector, demonstrating strong business acumen and industry insight. Sitara Petroleum operates primarily in two core segments: Trading and Distribution of POL Products, and Fleet Logistics Services for various Oil Marketing Companies (OMCs). Within the trading segment, the Company operates both retail and bulk sale units. The retail arm operates through a network of 60 fuel stations, predominantly located in Punjab (~93%), serving customers via cash and fuel cards. In contrast, the bulk segment caters to corporate clients, offering POL products on credit—this segment represents the majority of the Company's total sales. The logistics segment is supported by a fleet of 400 lorries, with ~95% of the fleet revenue generated through intra-group business with GO. Overall, trading and distribution activities contribute ~90% of Sitara Petroleum’s total revenues. The Company reported consistent revenue growth reflecting increased activity in its core operations. Growth in the business margins and, in turn, profitability were backed by better procurement terms along with improved prices. On the financial risk front, working capital management presents a challenge, largely due to misalignment between receivable and payable cycles. Receivables—primarily from bulk POL sales and fleet services to the group company—follow a 30-day credit policy, with an average settlement period of 15 to 20 days. Conversely, payables, mainly for POL procurement from the Group company, are settled within a 7 to 14-day window. This mismatch pressures liquidity and necessitates reliance on short-term borrowings, which currently accounts for ~50% of the total debt. However, the Company's coverage ratios have improved, supported by a reduction in finance costs, and its leverage profile has normalized, aided by revaluation gains. These factors collectively contribute to enhanced financial stability.
The ratings are dependent on the management's ability 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 Limited (‘Sitara Petroleum’ and ‘the Company’) is a public unlisted concern incorporated in Jul-12 under the repealed Companies Act 2017. Sitara Petroleum primarily trades and distributes Diesel, Petrol, and Lubricants, and also offers fleet logistics services. ~90% of the Company's shareholding has been transitioned to the next generation, where M. Usman Javed, M. Hassan Javed, M. Ali, M. Siddique Javed, Huzaifa Bilal, and Hassan Bilal each hold an equal stake of ~14.96%. The remaining shares are distributed among various individuals. Mr. Azmat Saleem chairs the Board, while Mr. M. Umair Saghir heads the Company as the CEO. They are assisted by a team of experienced professionals.