PACRA Assigns Preliminary Rating to Euro Oil (Pvt.) Limited - PPSTS - PKR 2.0bln - TBI

Euro Oil (Private) Limited (“Euro Oil” or “the Company”) has evolved itself into a significant market player, having prominent presence in Lahore and other major cities of the Punjab province. With 12,800 MT storage depot in Sahiwal, the company’s network extends to 168 sites, of which 18 sites are CoCo. The ratings are fortified by the sectoral expertise of its key sponsors and a strategic ~20% equity stake held by global energy trader BB Energy. This international partnership has been instrumental in streamlining the Company’s supply chain, a trajectory of growth further complemented by its distribution agreement with PETRONAS to market and sell premium lubricants nationwide. Currently managing a robust product portfolio that includes High-Speed Diesel (HSD), Premier Motor Gasoline (PMG) featuring the PMG 95 RON variant. During FY25, the Company sold an increased quantum of PMG and HSD amounting to ~193,732 MT (FY24: ~153,650 MT). To capitalize on a 1.2% market share and a notable 15% revenue surge to PKR 61,487mln in FY25, Euro Oil is pursuing infrastructure expansion at Sahiwal and Daulatpur. The timely materialization of these projects remains a critical prerequisite for future scaling. The management is projecting a revenue base of around PKR 66,998mln and net profit of PKR 967 mln by end of FY26. The company intends to issue a short term privately placed sukuk of upto PKR 2,000mln for working capital management. The sukuk will be secured via a conventional ranking charge on current assets with 25% margin. Additional credit enhancement features include a collection account mechanism, of which the minimum throughput is agreed at 4times during the tenor. The account, as under lien, will be monitored by the investment agent. Moreover, Debt Payment Account (DPA) will also be under lien; to fill in the DPA, a cash entrapment mechanism further reduces the take-out risk. Irrevocable instructions to this effect will be issued by the company to Askari Bank and the bank will acknowledge. Implementation of the same will be overseen by the investment agent.
The Company maintains a sound risk absorption capacity. The working capital cycle is favorable due to supply agreement with its key shareholder. The management of financial risk is important. The management has no plan to raise long term funding, of which the feasibility might impact the financial risk.
The compliance with the security structure is important.

About the Entity
Euro Oil (Private) Limited (“Euro Oil” or the “Company”) was established in 2016 and formally obtained its Oil Marketing Company (OMC) license from OGRA in 2018. The Company’s major shareholding lies with Mr. Umer Mujib Shami and associates (~38%), Mr. Adnan Nasir and associates (~38%), and BBE D PTE. LTD. (~20.0%), a Singapore-domiciled subsidiary of BB Energy. The Board comprises of 07 members, including 3 Non-Executive and 4 Executive Directors. Mr. Adnan Nasir serves as Chairman of the Board, while Mr. Umer Mujib Shami leads the Company as Chief Executive Officer (CEO).

About the Instrument
Euro Oil (Pvt.) Limited is set to issue a short-term, rated, secured, and privately placed Sukuk of up to PKR 2,000 million, which includes a PKR 500 million green shoe option. The instrument carries a six-month tenor with an indicative profit rate of 6-Month KIBOR plus 150 bps, aimed at fulfilling the company’s short-term working capital requirements. The instrument features a bullet repayment of the total principal amount plus profit on maturity. The instrument is backed by a structured Debt Payment Account (DPA) build-up, requiring 100% in the final 07 days of maturity, alongside a mandatory 4x cash flow throughput requirement routed through designated collection accounts held under lien.