Press Release
VIS Upgrades Entity Rating of Pakistan State Oil Company Limited
Karachi, February 6, 2026: VIS Credit Rating Company Ltd. (VIS) has upgraded the medium to long-term entity rating of Pakistan State Oil Company Limited (‘PSO’ or ‘the Company’) from ‘AA+’ (Double A Plus) to ‘AAA’ (Triple A) while maintaining the short-term rating at ‘A1+’ (A One Plus). The medium to long-term rating of ‘AAA’ denotes highest credit quality; the risk factors are negligible, being only slightly more than for risk-free Government of Pakistan’s debt. The short-term rating of ‘A1+’ signifies strongest likelihood of timely repayment of short-term obligations with outstanding liquidity factors. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on December 12, 2024.
The ratings reflect improvement in PSO’s financial metrics, its status as the largest oil marketing company (OMC) in Pakistan, its position as a strategic national asset reflected by the management control and implicit and explicit support from the Government of Pakistan (GoP). Moreover, the ratings take comfort from the GoP’s ongoing actions to address and settle inter-corporate circular debt in the energy sector, which remain important for supporting the company’s financial profile.
While the fuel distribution sector is fragmented, it remains concentrated at the top; PSO maintains leadership despite a gradual decline in market share due to rising competition and systemic challenges, such as fuel smuggling and import dependency. To counter these risks, PSO leverages its strategic stakes in Pakistan Refinery Limited (PRL) and Pak-Arab Pipeline Company (PAPCO) to stabilize its supply chain, while expanding its retail footprint and EV charging network.
Despite a dip in FY25 sales due to competitive pressures and lower black oil demand, profit margins improved as a result of cost-efficiencies and lower financial charges, while liquidity also improved due to some receivable recoveries from SNGPL and GENCOs. Given the expected improvement in liquidity, the settlement of major trade receivables would help in reducing reliance on short-term borrowings and, thus, further lowering financial costs. This, along with the potential increase in OMC margins in 2026, is expected to result in higher profitability despite pressure on volumetric sales, going forward. The capital structure depicted modest improvement and is expected to improve further. Assigned ratings will remain contingent upon continued government support on the settlement of dues from SNGPL, GENCOs, and other related parties, alongside improvement in profitability, debt coverage, and capitalization ratios.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk
Applicable Rating Criteria: Corporates & Government Supported Entities
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
https://docs.vis.com.pk/Methodologies-2025/GSEntities.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf