Karachi, May 24, 2023 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/ A-Two) to Taj Gasoline (Private) Limited (TGPL). The medium to long-term rating of ‘A-’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-2’ reflects good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.
TGPL is an emerging Oil Marketing Company (OMC), primarily involved in the business of procurement, storage, marketing and sale of petroleum and related products. The Company forms part of the Taj Group which has been in the downstream oil business for six decades and over the years have expanded into the automobile dealership business with Indus Motor Company Limited by the name of Toyota Sukkur Motor, hospitality business with restaurants operating under Royal Taj, Piatto and YELO in addition to running one hotel under Hotel One-(PC) banner.
The Company currently operates 61 sites including 7 company owned and company operated (COCO) sites primarily across Sindh. Company’s storage facilities are based in Shikarpur with recent new storage capacity build-up in Habibabad to cater to the Punjab region for which TGPL has been recently granted license.
The ratings incorporate higher business risk for the industry players, largely emanating from operating on moderate level of fixed commission and significant exposure to foreign exchange movements from sizeable dependence of OMCs on imports, albeit adjustable with a lag. In addition, the industry remains highly regulated, which also exposes the Company to significant regulatory risk. Assigned ratings reflect company’s strong volume growth relative to the industry. In the current year also, while industry volumes recorded a decline on account of slowdown in economic activity amidst high interest rates and floods together with lower auto sales and power sector demand, TGPL has been able to maintain its volume growth. Ratings also take into account moderate to low margins of the Company with volatility reflected across the same. Projected margins are also expected to remain range bound.
Assigned ratings incorporate Company’s favourable capitalization profile with low gearing of 0.10x at end HY23, reflecting management’s conservative financial management. Growth has been primarily equity financed. Maintenance of capitalization profile in the wake of growth plans of the Company will remain important for ratings going forward. Ratings are further supported by adequate liquidity profile and sound cash flow coverage.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan