Press Release
VIS Upgrades Short Term Entity Rating of Biotech Energy (Private) Limited
Karachi, September 21, 2023: VIS Credit Rating Company Limited (VIS) has upgraded Biotech Energy (Private) Limited’s (“BEPL” or “the Company”) short-term entity ratings to ‘A-1’ (A-One) from ‘A-2’ (A-Two). Short-term rating of ‘A-1’ reflects high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Medium to long-term entity rating of ‘A’ (Single A) was last announced on March 29, 2023. Outlook on the assigned ratings is ‘Stable’
Biotech Energy (Private) Limited (Biotech) is a private limited company that produces second generation biodiesel from organic wastes, residues and used cooking oil. Biodiesel is a clean-burning diesel replacement that can be used in existing diesel engines without replacement. The Company’s refinery is located in Sheikhupura and is part of the Shaikh family’s holding structure, which is involved in owning and operations of Biodiesel refineries, trading of non-ferrous metals and investments in liquid and semi-liquid asset classes.
The demand for the global biodiesel market is driven by a number of factors, including government policies and incentives to promote the use of renewable energy sources, increasing demand for biofuels in the transportation sector, and growing concerns over climate change and air pollution. European Union under Renewable Energy Directive (RED) has set strong renewable energy targets to be achieved by 2030 for the transport sector.
Assigned ratings reflect the Company's strategic position in the biodiesel market, underpinned by its export-focused operations and a secure 3-year EU offtake agreement, ensuring a consistent revenue stream. Furthermore, recently secured offtake agreements are expected to further support capacity utilization, top-line growth and margins, due to enhanced fixed-cost coverage. While historical margins have exhibited stability, economies of scale and currency dynamics are anticipated to yield margin enhancements.
Assigned ratings also reflect the Company’s strong capitalization indicators, supported by fresh equity injection and low gearing capital structure. Comfort is drawn from conservative financial management of the Company, which is expected to persist as per management projections. Revision in short-term rating incorporates consistent improvement in liquidity metrics. Efficient working capital cycle provides comfort to liquidity profile. The involvement of sponsors in operations, along with a competent management team, ensures effective oversight. Furthermore, ratings acknowledge the positive environmental impact of biodiesel fuel, aligning with sustainability standards. Going forward, achievement of projected revenues and margins while maintaining gearing and liquidity profile at existing levels will remain important for ratings.
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 info@vis.com.pk.
Sara Ahmed
Director
Applicable Rating Criteria: Industrial Corporates (May 2023)
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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .