Press Release

VIS Assigns Preliminary Rating to Proposed Sukuk 2 of OBS Pakistan (Private) Limited

Karachi, September 25, 2023: VIS Credit Rating Company Ltd. (VIS) has assigned preliminary rating of ‘A+’ (Single A plus) to the proposed Sukuk issue of Rs. 3.3b of OBS Pakistan (Private) Limited (‘OBS-Pak’ or ‘the Company’). Rating of ‘A+’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Outlook on the assigned rating is ‘Stable’.
OBS-Pak, a subsidiary of AGP Limited (AGP), was established as a Special Purpose Company (SPC) to acquire a portfolio of pharmaceutical products from Viatris Inc. and Pfizer Inc. The Company has acquired 17 pharmaceutical brands at an estimated cost of Rs. 9.3b. The acquisition is to be funded through a debt equity ratio of 75:25. The Company has already raised Rs. 3.6b through a Sukuk issuance, while an additional Rs. 3.3b is being raised through the issuance of a second Sukuk.
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 (Both from AGP and from the overall group strength). Furthermore, business risk profile is supported by non-cyclical nature of the industry and steady demand growth.
The Company's Sukuk 2, with a 7-year tenor and 18-month grace period, aims to raise up to Rs. 3.3 billion. It will carry a profit rate of 3M KIBOR plus a 1.60% spread, with principal payments spread over 22 quarters. Profit payments will also be made quarterly, with the first payment due 3 months from disbursement. Security will include a mortgage/hypothecation charge on AGP's fixed assets, a corporate guarantee from AGP, and a collection account for revenue receipts. Similar to the first Sukuk, the FPA will be replenished two working days before each installment due date.
Rating takes into account the Company's strong market positioning with its top products, holding substantial market share across various therapeutic areas. While the concentration risk in the portfolio is acknowledged, their established market presence mitigates concerns. Furthermore, despite early challenges in the first five months of operation the management expects recovery through price adjustments, increased volumes, and supply chain stabilization going forward. With regards to liquidity, capitalization and coverage profile, the Company's performance is projected to improve as revenue generation from the acquired portfolio gains momentum and cash flows strengthen. Going forward, rating will remain sensitive to achievement of projected plans, including effective liquidity management, leverage reduction, and enhanced debt servicing capacity. Rating remains underpinned on corporate guarantee provided by the parent AGP Limited.
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:

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