Press Release

VIS Places Ratings of Hi-Tech Lubricants on ‘Rating Watch-Negative’ Status
 

Karachi, April 21, 2020: VIS Credit Rating Company Ltd. (VIS), while maintaining the entity ratings of Hi-Tech Lubricants (HTL) at ‘A/A-2’ (Single A/A-Two), has placed the same on ‘Rating Watch - Negative’ Status. The medium to long-term rating of ‘A’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. The previous rating action was announced on September 12, 2019.

With the prevailing uncertainty due to coronavirus outbreak, prolonged lockdown, and overall contraction in demand, it is expected that sales volumes and cash flows of lubricant and oil marketing players will be significantly impacted. Status of the assigned rating is therefore uncertain, as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating Watch Status’. Given the demand compression emerging from the continued lockdown situation and low quantum of cash flow from operations, ratings are being placed on ‘Negative’ outlook. Comfort is drawn from HTL’s low leveraged capital structure and absence of long-term debt on balance sheet which alongwith recent decline in interest rate is expected to reduce financial charges. Ratings remain dependent on maintaining market position, improving cash flow profile while maintaining low leveraged capital structure. VIS will closely monitor and will accordingly take action to resolve the outlook status.

HTL is the fourth largest player in the country’s lubricant industry and sells almost all of its lubricants under the brand name ‘ZIC’. The Company has also diversified in the oil marketing business with 11 operational HTL Fuel Stations and target of 20 in Punjab by 2020. OGRA has also granted permission to HTL to proceed with applying NOCs for opening of 35 HTL Fuel Stations with retail sales only expected to commence with completion of requisite storage infrastructure.

For further information on this rating announcement, please contact the undersigned (Ext: 306) at (021)35311861-70 or Mr. Talha Iqbal (Ext: 213) fax to (021)35311872-3.




Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria:
Oil & Gas Industry (April 2019) https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf
Industrial Corporates (June 2019) https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Meth-OilGas201906.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited