JCR-VIS upgrades entity ratings of Hascol Petroleum Limited

Karachi, March 31, 2014 (PPI-OT): JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has upgraded the entity ratings of Hascol Petroleum Limited (HPL) from ‘A-/A-2’ (Single A Minus/A-Two) to ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings is ‘Stable’.

The rating action takes into account improvement in both financial and business risk profile of the company. The company has raised Rs. 1 billion during the book building process while another Rs. 400 million is expected to be generated during the Initial Public Offering (IPO); the amount of IPO is underwritten. This is expected to enhance availability of credit facilities which is considered important in view of the expansion in business operations.

Development of requisite infrastructure and an integrated supply chain network will be a competitive advantage for HPL vis-à-vis third party marketers. The business plan of HPL envisages storage facilities at strategic locations, keeping in view discharge points of White Oil Pipeline (WOP) and Mahmood Kot-Faisalabad-Machike (MFM) pipeline.

In addition to the storage facility at Shikarpur, another one at Machike is proposed to come online as early as April 2014 while a third one in Mehmood Kot is also planned. Timely completion of storage facilities is considered critical to achieve growth targets and is a requisite for issue of permanent OMC license by the regulator. In addition to owned facilities, the company also has third party hospitality arrangements in place.

Given considerable increase in sales volumes, market share of HPL has strengthened across all major products during FY13. While gross margins declined, higher volumetric sales translated into improved bottom line results. With completion of additional two storage facilities during the ongoing year, the management projects sales growth trajectory to continue in the coming years.

Liquidity profile of the company is considered satisfactory as credit period available from the upstream oil refineries is longer than the credit period offered to downstream customers. This allows the company to effectively manage its cash flows. Quantum of on balance sheet financing has remained low.

With the deployment of JD Edwards, IT infrastructure of the company has strengthened. The centralized database provides structured information for management decision making. Management team of HPL comprises seasoned professionals carrying years of experience in the oil and gas sector.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
Tel: at 021-35311861-70
Fax: +9221 35311872-3

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