Press Release

VIS Reaffirms Entity Ratings of Oil Industries Pakistan Limited

Karachi, November 21, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Oil Industries Pakistan Limited (‘OIPL’ or ‘the Company’) at ‘A-/A2’ (Single A minus/A Two). Medium to long term rating of 'A-' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains ‘Stable’. Previous ratings action was announced on August 31, 2023.

OIPL, established on November 20, 1976, under the "TARGET" brand, transitioned to a Public Limited (Unlisted) entity on October 28, 2021. The Company operates in manufacturing, blending, and selling lubricating oils, alongside the procurement and distribution of petroleum products. Its registered office in Karachi serves as the administrative headquarters, while production and blending activities are conducted at its manufacturing facility at the Korangi Industrial Area, Karachi. The Company also operates a petroleum storage facility in District Sahiwal, Punjab, with a capacity of 5,000 metric tons, to support storage and regional distribution. Also, plans are in hand to expand storage operations with a facility in Daulatpur, Sindh, initially designed for 5,000 metric tons, scalable to 8,000 metric tons. Distribution is further supported by branch offices in Lahore and Multan to enhance market reach.

Assigned ratings incorporate the business risk profile of the Company, reflecting its diversified presence in the lubricant and oil marketing segments. The oil marketing segment is subject to high sector risk due to exposure to regulatory oversight, macroeconomic volatility, stiff competition and environmental concerns. The lubricant segment faces medium sector risk, supported by stable demand drivers though impacted by currency volatility and competitive pressures. The Company’s established market positioning in the lubricant segment, particularly in transformer oil and retail engine oil, have been factored into the ratings. The diversification of revenue streams supports the overall risk profile, with the lubricant business expected to offset the higher risk of the oil marketing segment. However, the Company’s status as an unlisted entity is also factored in to the assigned ratings.

Assigned ratings also consider the financial risk profile of the Company. Revenue growth is supported by an expansion in the oil marketing business, which now contributes a larger share to total revenue. While gross margins declined due to lower profitability in the oil marketing segment, the lubricant segment continues to support overall profitability. Capitalization metrics have improved, with reductions in both gearing and leverage ratios driven by profit retention and lower short-term borrowings. Liquidity metrics reflect stability, with improved current and short-term debt coverage ratios, supported by operational cash flows. Debt service coverage remains adequate, albeit slightly reduced due to higher financial charges.
Going forward, the Company's risk profile will be influenced by the expansion of the OMC segment and its impact on margins. The lubricant business is expected to continue supporting the business risk profile. The ability to maintain capitalization metrics, liquidity, and coverage ratios will be important for the assigned ratings. The eventual listing of the Company will be viewed positively from a ratings perspective.

For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk






Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, 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 , 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 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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .