PACRA Assigns Preliminary Rating to Gas & Oil Pakistan Limited | GO Long Term Sukuk - I | PKR 2.5bln | TBI

Gas & Oil Pakistan Limited ('GO' or 'the Company') benefits from a strategic partnership with Aramco, which holds ~40% stake in the Company. Aramco, a globally significant player in the energy and chemicals sector, is reshaping the dynamics of Pakistan's OMC sector and the Company's positioning within the sector. The sponsors are financially stable and possess extensive expertise across the energy supply chain. The Company's governance framework has been strengthened by the appointment of Aramco’s representatives to the Board and key managerial positions. Looking ahead, tapping into the lubricants segment by bringing Valvoline will further add strength. GO operates a vast retail network of ~1,329 stations. This includes 75 COCO sites, a significant portion of which have been successfully rebranded under the Aramco name. Additionally, the Company holds the second-largest storage capacity in the sector, with ~205,038 MTs, and generates income through hospitality services. GO is involved in the procurement of petroleum, oil, and lubricants (POL) from both local and international markets, as well as the storage, distribution, and marketing of these products. Standing among the top-tier players in volumetric sales and retail outlets population, GO has stabilized both its business and financial risks. The Company has seen exponential growth in its topline, while profits are also improving. This growth trajectory is expected to continue. The Company is managing its marketing initiatives effectively and expects to generate stable cash flows. An equity injection by Aramco, through a right issue, has strengthened the Company's overall financial footing. Additionally, the Company's working capital management is now strengthened by considerable supply credit available from Aramco, leading to reduced reliance on borrowings from financial institutions. Coverages are strong, providing the requisite financial cushion. Lately, the Company plans to issue a Sukuk ('GO Long Term Sukuk-I' or 'the instrument') of PKR 2,500mln, the proceeds of which will finance the expansion of COCO fuel sites, further strengthening the Company's profitability owing to better margins on self operated outlets. The instrument will be secured by a first charge on the existing COCO sites to cover the amount plus margin.
The ratings are dependent on keeping the growth trajectory, as a consequence of the above mentioned association with Aramco including materialization of other governance and control related matters.

About the Entity
Gas & Oil Pakistan Limited ('GO' or 'the Company') was incorporated as a public unlisted company in 2012 under the repealed Companies Act 2017. The Company obtained the license to operate as an OMC across Pakistan from OGRA in 2019. GO is engaged in POL procurement from the local and international markets and the storage, distribution, and marketing of petroleum products and lubricants. The Company holds a market share of ~13%. Aramco holds ~40% stake in the Company, while ~60% stake resides with GO. The Company has a ten-member Board; four members represent Aramco, and the other six are nominated by GO. Mr. Tariq Kirmani chairs the Board, while Mr. Khalid Riaz heads the Company as the CEO. To enhance transparency, a few prominent management positions are appointed by Aramco. Other members of the Board and the management are also seasoned professionals.

About the Instrument
GO's Long Term Sukuk-I is a secured instrument with a tenor of 5 years. It carries a profit rate is 3MK + 1% (tentatively). The proceeds will be used the proceeds of which will finance the expansion of COCO fuel sites. The valuation of the existing COCO sites, placed as security, amounts to ~PKR 3,483mln and adequately covers the amount to be raised. The principal repayment of GO Long Term Sukuk-I will commence from the fifteenth month and be made in equal quarterly instalments.