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VIS Assigns Rating to proposed Islamic Commercial Paper of Hascol Petroleum Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- August 27, 2019 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited


VIS Credit Rating Company Ltd. (VIS) has assigned preliminary rating of A-1 (Single A One) to Hascol Petroleum Limited's (HPL) proposed privately placed and unsecured Islamic Commercial Paper (ICP) of up to Rs. 3.0billion (inclusive of Green Shoe Option of Rs. 1,000m) having a tenor of up to six months. The ICP would be Shariah compliant. HPL plans to raise up to Rs. 3.0billion through a ICP issue having a tenor of up to 3 months to fund working capital requirement. The commercial paper will be issued in 6 tranches each of Rs. 500m on bi-monthly basis and will have a rental rate of KIBOR plus 200bps.

VIS had maintained the entity ratings of HPL at AA-/A-1 (Double A Minus/ A-One) on April 24, 2019. Outlook on the assigned ratings is 'Negative' given weakening in OMC industry dynamics as reflected by sizeable dip in industry volumes and increasing competition. The assigned entity ratings take into account Company's prominent position in the Oil Marketing Sector. Overall market share has declined in recent months but remains sizeable and was recorded at 10.4% (FY18: 11.9%) during FY19.

Decline in market share has been more pronounced in retail fuels and is partly attributable to implementation of a revised credit policy to limit increase in finance cost given high interest rate environment. Moreover, lower market share is also due to focus on limiting exchange losses in the backdrop of significant fluctuation in currency movements. Given the company's investment in infrastructure, VIS expects HPL to sustain its market position over the long-term. Ratings draw strength from strategic investment of Vitol Dubai Limited (VDL) in HPL, a significant international player in the oil sector. Recently, VDL has provided financing facilities to the tune of $42million to HPL.

Ratings assigned draw comfort from the liquid nature of inventory carried on balance sheet and sizeable revenue base which was recorded at Rs. 233.6b in 2018. Moreover, company's diversification initiatives (Lubricants, LPG, Specialized Fuels/Chemicals and LNG) and significant investment in infrastructure (both storage and retail pumps) will be a source of competitive advantage for HPL vis-a-vis other OMCs and will allow it to sustain its market position.

Slowdown in capital expenditure, improvement in working capital management and cost controls besides diversification into newer product segments are key focus areas. Key risk factors include HPL's import based operational model and leveraged capital structure which along with lower volumes and higher turnover tax for OMCs is expected to keep profitability under pressure in the short-term.

For more information, contact:Director Compliance and Rating Analytics,VIS Credit Rating Company LimitedVIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,Phase VII, DHA, Karachi, PakistanTel: +92-21-35311861-72Fax: +92-21-35311873Email:


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Publication:PPI - Pakistan Press International
Date:Aug 27, 2019
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