Press Release

VIS Assigns Final Rating to the Sukuk of OBS Pakistan (Private) Limited

Karachi, August 23, 2023: VIS Credit Rating Company Ltd. (VIS) has assigned final rating of ‘A+’ (Single A plus) to the Sukuk issue of Rs. 3.6b of OBS Pakistan (Private) Limited (OBS-Pak). Rating of ‘A+’ signifies good credit quality with adequate protection factors. Risks may vary with possible changes in the economy. Outlook on the assigned rating is ‘Stable’. Previous ratings action was announced on April 18, 2023.

OBS-Pak, a Special Purpose Company (SPC) and subsidiary (presently 85% and ultimately up to 92.5%) of AGP Limited (AGP), entered into an asset purchase agreement with Viatris Inc. and Pfizer Inc. to acquire 17 pharmaceutical brands. Capital requirements have been estimated to be Rs. 9.3b. The same has been financed through a 75:25 Debt: Equity ratio.

Assigned rating take comfort from the Parent Company’s (AGP Limited) established market position, long track record in the pharmaceutical industry and the resulting operational, managerial and financial support available to OBS Pakistan. Furthermore, business risk profile is supported by non-cyclical nature of the industry and steady demand growth.

The Company has raised an amount of up to Rs. 3.6b for the acquisition through this Sukuk issue having a tenor of 7 years (including 18 months grace period). Principal amount will be redeemed through 22 consecutive, fixed, quarterly installments with quarterly profit payment frequency. Security structure of the Sukuk entails exclusive hypothecation charge on future fixed assets of OBS-Pak, shares of AGP Limited, Corporate Guarantee from AGP Limited for the Principle and Profit amount, revenue collection account and finance payment account. Rating of the instrument is notched up, backed by AGP Limited providing a corporate guarantee for the entire amount of the Sukuk (principal and profit).

Rating assigned takes into account the inelastic demand nature of the product portfolio being acquired along with high relative market share and brand value enjoyed by major products (top three include- Norvasc, Zoloft, Cardura). Rating also factors in concentration in product portfolio and therapeutic area coverage. Gradual growth in profitability indicators is expected on the back of expected increase in prices and uptick in volumetric sales planned through organic growth of current portfolio along with new product launches, line extensions over the rating horizon, however, margins remain exposed to currency volatility. Rating incorporates adequate debt servicing over the rating horizon, further supported by corporate guarantee. Liquidity indicators also depict improvement in the long run. Projected profit retention and annual repayments are expected to result in improvement in gearing and leverage indicators. Rating remains sensitive to continued availability of corporate guarantee, maintenance of sound debt servicing cushion and reduction in leverage indicators over the rating horizon in line with projections.

For further information on this rating announcement, please contact Mr. Saeb Muhammad Jafri (Ext. 202) or the undersigned (Ext. 207) at 021-35311861-70 or fax to 021-35311873.

Sara Ahmed

VIS Entity Rating Criteria Methodology – Industrial Corporates (May 2023)
VIS Issue/Issuer Rating Scale:

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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .