Press Release

VIS Upgrades Entity Rating of Faisalabad Oil Refinery (Pvt.) Limited

Karachi, June 23, 2023: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Faisalabad Oil Refinery (Pvt.) Limited (FORL) to ‘A-/A-2’ (Single A Minus/ A-Two) from ‘BBB+/A-2’ (Triple B Plus/A-Two). The medium to long-term rating of ‘A-’ signifies good credit quality and adequate protection factors. Risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity factors and company fundamentals. Access to capital markets is good and risk factors are small. Outlook on the assigned ratings has been revised from ‘Positive’ to ‘Stable’. The previous rating action was announced on June 29, 2022.

FORL, incorporated in 1980s is involved in the manufacturing and sale of banaspati ghee, cooking oil, spices, water, and by-products. The Company has numerous brands under its umbrella, with ‘Kisan’ being the flagship brand. FORL is associated with the Madinah Group of Industries, which has business stake in various sectors including sugar, ethanol, power generation, steel, and mass media.

Upward revision in ratings reflect sustainability in profitability profile amidst challenging macroeconomic environment along with improvement in liquidity and capitalization parameters. The assigned rating incorporates high business risk profile of the edible oil industry given heavy reliance on imported raw material, fragmented market, low value addition & switching cost and thin margins.

Financial assessment of the Company reflects strong growth in topline, stable margins, sufficient cash flow coverages against outstanding obligations and a conservative capitalization profile. Top line of the Company witnessed a sizeable jump of 83% in FY22 and continued the growth momentum in 9MFY23 contributed largely by higher sales prices. As per management, with ease in LC constraints and access to seed inventory from April’23 onwards, revenue is expected to increase in all product categories over the rating horizon. Given volatility in exchange rates and inflationary adjustments on other input costs, gross margins reduced in FY22; however the same improved in the ongoing year provided by inventory gains. Moreover, investment in associated companies continue to support the bottom-line. Going forward, management expects profitability of the company to report a stable growth in view of conservative projections. However, successful commencement of in-house packaging plant in FY24 is expected to yield operational efficiencies to the Company. Materialization of the same will be important. Ratings factor in sufficient cash flow coverages against outstanding obligations. Current ratio stood at 1.63x at end-Mar’23, which is deemed adequate; however, improvement in short-term borrowing coverage over the rating horizon will be important. FORL’s equity base continues to grow on the back of prudent profit retention. Moreover, ratings positively note a conservative capitalization profile, with leverage indicators on the lower side over the past four years. Given no plans to hire additional debt for expansion, capitalization indicators are expected to remain at similar levels. Ratings remain underpinned on meeting projected financial parameters.

For further information on this rating announcement, please contact Ms. Asfia Amanullah (Ext: 212) or the undersigned (Ext: 201) at (021) 35311861-66 or email at

Javed Callea

Applicable Rating Criteria: Corporates (May 2023)

VIS Issue/Issuer Rating Scale:

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