Press Release

VIS Assigns Initial Ratings to Oil Industries Pakistan Limited

Karachi, August 31, 2023: VIS Credit Ratings Company Ltd. (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A minus/A-Two) to Oil Industries Pakistan Limited (‘OIP’ or ‘the Company’). Medium to long-term ratings of ‘A-’ signifies good credit quality with adequate protection factors. Risk factors are considered variable if changes occur in the economy. Short term ratings of ‘A-2’ denote good certainty of timely payment, sound liquidity and fundamental protection factors; risk factors are minor. Outlook on the assigned ratings is ‘Stable’.

Oil Industries Pakistan Limited commenced operations in 1976 and became a Public Limited (Unlisted) company in October 2021. OIP is principally engaged in manufacturing, blending, and sales of lubricating oil, as well as procurement and distribution of petroleum products. The Lubricant Segment has been the Company’s core, emphasizing industrial and retail machine oils under the 'TARGET' brand. OIP entered the Oil Marketing Company (OMC) Segment in 2019, dealing in Premium Motor Gasoline (PMG) and High-Speed Diesel (HSD) through 37 retail petrol stations, fed by a storage facility based in Sahiwal. The Company is planning to expand its network to 50 sites by end FY24 and also to enhance storage capacity with addition of a new facility in Daulatpur (Sindh). Financing for the storage facility is planned through an Initial Public Offering, timing of which is still under determination.

Assigned ratings encompass OMC segment's medium to high business risk profile, marked by high cyclicality, substantial barriers to entry, moderate to low substitution risk, and regulatory sensitivity. However, ratings draw comfort from business diversification in its lubricant business which is expected to provide consistent support. Ratings also reflect OIP’s 4-decade operational history in the lubricant manufacturing field. The Company has secured significant market positioning, particularly in transformer oil and retail engine oil segments.

Ratings incorporate low financial risk profile, albeit constrained by small equity size. Margins of the Company reflect a declining trend on account of higher contribution from low margin OMC segment. Liquidity profile and cash flow coverages remain comfortable. Capitalization profile is favorable with low gearing and leverage indicators. However, given planned expansion, ratings are sensitive to OIP's ability to sustain current margins and debt coverages along with gearing levels under 1.5x.

For further information on this ratings announcement, please contact Mr. Saeb Muhammad Jafri (Ext: 202) or the undersigned (Ext: 207) at 021-35311861-64 or email at

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (May 2023)
VIS Issue/Issuer Rating Scale

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