Press Release

VIS Assigns Preliminary Rating to Proposed Short Term Sukuk of OBS Pharma (Private) Limited

Karachi, February 28, 2024: VIS Credit Rating Company Ltd. (VIS) has assigned preliminary rating of ‘A-1’ (Single A one) to the
proposed Short Term Sukuk of PKR. 1,500 mln of OBS Pharma (Private) Limited (OBS Pharma). Rating of ‘A-1’ signifies high
certainty of timely payment; Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned rating is ‘Stable’. OBS Pharma has been assigned an entity rating of ‘A/A-1’, with ‘Stable’ outlook as of June 16, 2023. Upon review of the legal documents, rating will be finalized.

OBS Pharma (Pvt.) Limited is a Special Purpose Company (SPC) created to acquire 12 pharmaceutical brands and a manufacturing facility based in Lahore from Bayer AG. OBS Pharma is a subsidiary of Aitkenstuart Pakistan (Pvt.) Limited, with the ultimate parent company being West End 16 Pte Limited, Singapore. The acquisition agreement was entered on November 21, 2022 at a cost of Rs 7,000m, which was concluded in July 2023. It is funded through equity of Rs. 1.75b and a syndicated term facility of Rs. 5.125b. As part of the business acquisition, the Company had to acquire upfront inventory from Bayer Pakistan. To fund the same, the Company is proposing to issue an unlisted, secured, privately placed, Short Term Sukuk for an amount of Rs 1,500m for a 6-month tenor, which will be repaid on maturity through internal cash flows and working capital lines. The proposed profit rate on the instrument is 6 month KIBOR + 1.40% pa. The Sukuk will be secured against first pari passu hypothecation charge over present and future current assets of the Company inclusive of 20% margin. As represented by management, Company is actively engaged in securing working capital lines from banks, with Rs.1bn of running finance facilities expected to be formalized by end of March. For purposes of rating, comfort is drawn from Undertaking by the Company to buildup sales proceeds with Issue / Investment Agent up to 25% of monthly sales for the last three months before the maturity of the Short Term Sukuk.

Assigned rating reflects OBS Group’s strong market presence and proven track record of successful acquisitions that provide a foundation for projected revenue growth and margin improvement in the coming years. Rating also incorporates strong market presence of product portfolio. With flagship brands like Gravibinan, Ciproxin, and Primolut N leading the market, OBS Pharma commands a strong competitive position in the industry. Leveraging its extensive distribution network, OBS Pharma is poised to expand the coverage of its acquired portfolio, aiming to capture a larger market share. Additionally, plans are in place to bolster the team size to enhance marketing and sales efforts, with management projecting strong sales growth for the acquired portfolio. Moreover, OBS Pharma identifies the women's healthcare segment as a significant growth opportunity in the pharmaceutical sector, intending to introduce more products to capitalize on this market. Anticipated improvements in gross margins over time, driven by reduced raw material costs resulting from changes in Active Pharmaceutical Ingredients (API) sourcing, should support profitability and streamlining of capitalization indicators over time. Going forward, finalization of sufficient working capital lines will remain a key rating sensitivity.

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
Director

Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Rating the Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.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 .