Press Release
VIS Reaffirms Entity Ratings of Premier Sales (Private) Limited
Karachi, Sep 11, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of ‘A/A-1’ (Single A/A-One) for Premier Sales (Private) Limited (‘PSPL or ‘the Company’). Medium to Long Term Rating of ‘A’ reflects good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ signifies strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on August 10, 2023.
Ratings incorporate PSPL’s market position, being the second largest distribution company in Pakistan. The Company caters to a diversified category of local and international companies engaged in Pharmaceutical, FMCG and Allied sectors, with pharmaceuticals being the most dominant segment. Ratings also take into account medium to low business risk of the business segments they operate in.
Recent business updates include acquisition of new principals and customers coupled with expansion of existing relationships. Growth in topline was driven by growing customer base and demand stability during the period under review. Despite improvement in overall profitability, bottom-line was impacted by higher operating costs in addition to escalating financial charges. Ratings take into account financial risk emanating from the business model of the Company, which requires maintaining larger inventories to support business growth, thus increasing working capital need. The Company has financed the construction of new warehousing facilities through additional borrowing, resulting in significant increase in gearing and debt leverage. Consequently, debt coverages have weakened during the review period. Nevertheless, the sponsors have been providing working capital support to the Company, which is expected to continue going forward.
Increasing profitability hinges on pricing revisions to existing business lines and introducing new business streams with better margins, which may be challenging for the Company in the prevailing macroeconomic conditions. Going forward, improvement in capitalization indicators together with maintenance of sponsor support will remain important for the ratings.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf