Press Release

VIS Assigns Initial Entity Ratings to Premier Sales (Private) Limited

Karachi, July 07, 2022: VIS Credit Rating Company Ltd. (VIS) has assigned initial entity ratings of ‘A/A-1’ (Single A /A-One) to Premier Sales (Private) Limited (‘PSPL’ or ‘the Company’). Long Term Rating of ‘A’ reflects good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ signifies high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’.

PSPL was incorporated in Pakistan on January 30, 2020. The Company is engaged in trading and distribution of Pharmaceutical, FMCG and Allied products. The Company operates 60 branches in 52 cities within Pakistan and is part of Premier Group of Companies (PG). PG is based in Pakistan and has a diversified group portfolio across various sectors including Textile (Zaman Textile Mills (Pvt) ltd), Pharmaceutical (PharmEvo. (Pvt) ltd), Household (Shield Corporation Ltd) and E-commerce platform (QnE- Online Grocery Store).

Ratings incorporate PSPL’s market positioning and long term contracts with clients. In terms of business volumes PSPL can be categorized as the second largest distribution company operating in the country. The Company provides its services to diversified category of clients from Pharmaceutical and FMCG sectors. PSPL’s revenue base is diversified across segments, with the most dominant sector being pharmaceutical, comprising 45% of the sales mix as of H1’FY22. The business mix does feature some client concentration. However, the risk is addressed by the presence of long term contracts with these clients.

VIS classifies the business risk of Distribution business as ‘Medium to Low’, given ‘Medium to Low’ competitive intensity, technology risk and energy sensitivity and ‘Medium’ capital intensity and cyclicality. In case of PSPL, the business risk is in line with industry risk, as can be ascertained from the stability in gross margins. PSPL’s net margin does depict sensitivity to changes in cost of doing business and benchmark rates, given that Company does rely on running finance lines to fund its working capital requirements. However, as gearing has reduced over the years, net margin has improved. Going forward, the net margins may come under pressure, given significant hike in petroleum prices. However, the inflationary pressure will also translate in uptick in product pricing and hence the revenue on each product. Accordingly, there might be a short term pressure on profitability margins. Which is likely normalize over medium term.

The debt on the Company’s balance sheet is entirely short-term. Comfort is derived from adequate coverage of short term debt by inventory and trade debts, which stood at 1.8x as of Dec’21. Total equity of PSPL includes interest free subordinated loan from related parties. The Company maintained 100% profit retention for FY21. Given the internal capital generation capacity, full profit retention, and equity infusion, gearing has been on declining trend, albeit was in the high to medium category as of Dec’21. Going forward, PSPL is planning to add additional long term debt to the book, to finance planned capital expenditure. Incorporating the same into our debt projections and assuming the Company retains 100% of the profit, PSPL’s gearing is expected to rise in during the rating horizon. The assigned ratings are underpinned on full profit retention and maintenance of sponsor loan in the Company, going forward, in addition to maintenance of business & financial risk metrics in line with the benchmark for the assigned rating.

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 216) or the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.






Javed Callea
Advisor

VIS Entity Rating Criteria: Industrial Corporates - August 2021
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .