Press Release

VIS Assigns Rating to proposed Islamic Commercial Paper of Hascol Petroleum Limited (HPL)
 

Karachi, August 27, 2019: VIS Credit Rating Company Ltd. (VIS) has assigned preliminary rating of A-1 (Single A One) to Hascol Petroleum Limited’s (HPL) proposed privately placed and unsecured Islamic Commercial Paper (ICP) of up to Rs. 3.0billion (inclusive of Green Shoe Option of Rs. 1,000m) having a tenor of up to three months. The ICP would be Shariah compliant.

HPL plans to raise up to Rs. 3.0billion through a ICP issue having a tenor of up to 3 months to fund working capital requirement. The commercial paper will be issued in 6 tranches each of Rs. 500m on bi-monthly basis and will have a rental rate of KIBOR plus 200bps.

VIS had maintained the entity ratings of HPL at AA-/A-1 (Double A Minus/ A-One) on April 24, 2019. Outlook on the assigned ratings is ‘Negative’ given weakening in OMC industry dynamics as reflected by sizeable dip in industry volumes and increasing competition. The assigned entity ratings take into account Company’s prominent position in the Oil Marketing Sector. Overall market share has declined in recent months but remains sizeable and was recorded at 10.4% (FY18: 11.9%) during FY19. Decline in market share has been more pronounced in retail fuels and is partly attributable to implementation of a revised credit policy to limit increase in finance cost given high interest rate environment. Moreover, lower market share is also due to focus on limiting exchange losses in the backdrop of significant fluctuation in currency movements. Given the company’s investment in infrastructure, VIS expects HPL to sustain its market position over the long-term. Ratings draw strength from strategic investment of Vitol Dubai Limited (VDL) in HPL, a significant international player in the oil sector. Recently, VDL has provided financing facilities to the tune of $42million to HPL.

Ratings assigned draw comfort from the liquid nature of inventory carried on balance sheet and sizeable revenue base which was recorded at Rs. 233.6b in 2018. Moreover, company’s diversification initiatives (Lubricants, LPG, Specialized Fuels/Chemicals and LNG) and significant investment in infrastructure (both storage and retail pumps) will be a source of competitive advantage for HPL vis-à-vis other OMCs and will allow it to sustain its market position. Slowdown in capital expenditure, improvement in working capital management and cost controls besides diversification into newer product segments are key focus areas. Key risk factors include HPL’s import based operational model and leveraged capital structure which along with lower volumes and higher turnover tax for OMCs is expected to keep profitability under pressure in the short-term.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at (021)35311861-70 or Mr. Talha Iqbal (Ext: 213) fax to (021)35311872-3.





Javed Callea
Advisor


Applicable Rating Criteria:
Oil & Gas Industry (November 2016) http://www.vis.com.pk/docs/Meth-OilGas201611.pdf
Industrial Corporates (May 2016) http://www.vis.com.pk/docs/Corporate-Methodology-201605.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited(Formerly JCR-VIS Credit Rating Company Limited) (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS(Formerly JCR-VIS Credit Rating Company Limited), the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS(Formerly JCR-VIS Credit Rating Company Limited) is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS(Formerly JCR-VIS Credit Rating Company Limited) is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited(Formerly JCR-VIS Credit Rating Company Limited). All rights reserved. Contents may be used by news media with credit to VIS(Formerly JCR-VIS Credit Rating Company Limited).

VIS Credit Rating Company Limited (Formerly JCR-VIS Credit Rating Company Limited)