January 11, 2019 (MLN): JCR-VIS Credit Rating Company (JCR-VIS) has assigned preliminary rating of A-1 (Single A One) to Hascol Petroleum Limited’s proposed privately placed and unsecured Islamic Commercial Paper (ICP).
The company plans to raise up to Rs. 4 billion through ICP issue having a tenor of up to 6 months to fund working capital requirement. The issue entails bullet payment at maturity and has a rental rate of 6 month KIBOR plus 150bps, the report by JCR-VIS says.
The assigned ratings to the proposed ICP of the company take into account Company’s position as the second largest Oil Marketing Company in Pakistan and adequate business & financial risk profile.
Given the company’s investment in infrastructure, JCR-VIS expects the company to sustain its market position over the long-term. Ratings also draw comfort from strategic investment of Vitol Dubai Limited in HPL, a significant international player in the oil sector.
However, business risk profile and market share in retail fuels of the company has weakened in view of the overall decline in OMC volumes in 1HFY19. Key risk factors include HPL’s import based operational model and leveraged capital structure which is expected to keep profitability under pressure in the short-term.
Over the long-term, JCR-VIS expects HPL to recover lost market share as macroeconomic indicators stabilize. Management has pursued a number of diversification initiatives which are expected to start contributing to profitability in 2019 but will only become sizeable over the medium term. Liquidity profile of the company is also expected to draw support from reduction in size of projected Capex, favorable working capital cycle and improvement in operational Cash flow in 2019.
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