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The Pakistan Credit Rating Agency Limited

Date
26-Jan-2017
Analysts
Amara Gondal
amara.gondal@pacra.com

Muneeb Rashid
muneeb.rashid@pacra.com

+92-42-35869504
www.pacra.com
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Related Research

  • Sector Study | Pharmaceutical (Jan 17) [View]
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PACRA Assigns Initial Entity Ratings to AGP Limited
 Rating Type Entity
Current
(26-Jan-2017)
 Action Maintain
 Long Term A-
 Short Term A2
 Outlook Stable
 Rating Watch -

The ratings reflect AGP's strong business fundamentals. The pharmaceutical industry has witnessed a higher rate of sustained growth over the years. The demand is almost inelastic. Product pricing is a challenge, yet cost efficiences are benefiting the industry players. At the same time, AGP's core profitability is strong; downward revision in margins must remain range-bound. Cash flows are strong and sizeable, adequate to service debt. The debt has been procured by the incumbent sponsors to acquire the company, routed through an SPV, which was later on merged and renamed as "AGP Limited". The presence of OBS Group in the pharmaceutical sector provides strength to AGP's positioning within the industry in the form of group synergies.

The ratings are dependent on continued sustainability of profits and market share. Adequacy of cash flows and availability of alternative resources to make debt related payment remain important for the ratings. Meanwhile, compliance with internally-defined leveraged metrics is a pre-requisite.
About the Entity
AGP Limited (AGP) is an unlisted public pharmaceutical company; the operations of entity have been in Pakistan since 1989. It is majority owned by OBS Group (OBS) (69%), followed by strategic partners namely Muller & Phipps (M&P) (19%), Bank Alfalah (BAFL) (~7%) and JS Bank (~5%). OBS Group - ranked 5th in local pharma industry - partnering with international firms, deals in clinical research, manufacturing, marketing, sales and distribution of pharmaceutical & healthcare products.

The seven member BoD of AGP comprises five OBS representatives, one of M&P and one of Bank Alfalah. The new board is operating since May'14, and comprises experienced professionals from pharmaceutical and financial backgrounds. The Chairman and CEO, Mr. Tariq Moinuddin, is the brain behind OBS Group. Mr. Tariq, CPA from Canada, carries over three decades of domestic and international professional experience. Ms. Nusrat Munshi, the Managing Director of AGP since 2009, has close to 25 years of experience, around a decade of which is in pharmaceutical industry. She is supported by an experienced core management team.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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