INFORMATION BRIEF

LEAD MANAGERS & ARRANGERS

BOOK RUNNER

All communication, inquires and requests for information relating to the IPO of Hascol Petroleum
Limited should be addressed to:
Umair Aijaz, FCCA
SVP / Head
Investment Banking
AKD Securities Limited
Tel:
+92-21-35863512
Fax:
+92-21-35867992
E-mail: umair.aijaz@akdsecurities.net

Liaquat Ali, FCA

Partner
Avais Hyder Liaquat Nauman Chartered Accountants
Tel:
+92-21-35655975
Fax:
+92-21-35655977
E-mail: liaquatali@ahln.com.pk

Mohammad Yasir Khan

Senior Associate
Investment Banking
AKD Securities Limited
Tel:
+92-21-35371303
Fax:
+92-21-35867992
E-mail: yasir.khan@akdsecurities.net

Syed Saquib Moiz

Assistant Manager
Avais Hyder Liaquat Nauman Chartered Accountants
Tel:
+92-21-35655976
Fax:
+92-21-35655977
E-mail: consultancy.khi@ahln.com.pk

INFORMATION BRIEF
DISCLAIMER
This Information Brief (IB) has been prepared by AKD Securities Limited (AKDS) Avais Hyder Liaquat
Nauman Chartered Accountants (AHLN) (hereinafter referred to as Joint Lead Managers & Arrangers).
The information provided and opinions herein have been compiled or arrived at based upon information
obtained from Hascol Petroleum Limited (HPL or the Company) documents and / or
communications and / or other sources believed to reliable in good faith. Although, the information has
been verified, to the extent possible, we make no expressed or implied representation or warranty as to
its accuracy, completeness or correctness.
The information is not meant to be a substitute for the recipients personal judgment. All such
information, representation and opinions contained in these documents assume certain economic
conditions and industry developments and constitute only current scenarios. The recipient of this
information is cautioned to exercise his / her own independent judgment and analysis at all times.
This IB includes certain statements, estimates, analysis and projections with respect to the anticipated
future performance of HPL. Such statement, estimates and analysis reflect certain assumptions
concerning the anticipated result, which assumption and / or anticipated results may or may not prove
to be correct. Neither the Joint Lead Managers, nor any of their affiliates have independently verified
these estimates, analysis and projections and accordingly they do not express any opinion or provide
any form of assurance with regard to such estimates, analysis and projections.
The Joint Lead Managers expressly disclaim any and all liability that may be based on any errors or
omissions from, or mistake in assumptions with respect to any information, estimates, analysis or
projections contained in this IB or any other written or oral communication transmitted to any potential
investor in the course of its evaluation of the possible investment.

INFORMATION BRIEF
Table of Contents
Serial
1
2
3
4
5
6

Contents
Transaction Overview
OMC Sector Dynamics
Hascol Petroleum Limited
Profile of Directors
Investment Rationale
Management Projections & Valuation

Page #
04
06
10
20
24
29

INFORMATION BRIEF

SECTION I
TRANSACTION OVERVIEW

INFORMATION BRIEF
Transaction Overview
The purpose of this Information Brief (IB) is to solicit the interest of potential institutional and
individual investors for participation in the Initial Public Offering of Hascol Petroleum Limited (HPL or
the Company).
The Company intends to issue 25 million Ordinary Shares (27.59% of post-IPO Paid-up Capital) through
an Initial Public Offering via the Book Building process at a Floor Price of PKR 20.00 per share. Moreover,
a total of 18.75 million Ordinary Shares (75% of the Issue) will be issued in the Book Building portion and
subsequently 6.25 million Ordinary Shares (25% of the Issue) will be issued in the General Public portion
at the Strike Price determined via Book Building.
HPL was incorporated in Pakistan as a Private Limited Company on March 28, 2001 and was converted in
to a Public Unlisted Company on September 12, 2007. The principal business of HPL is distribution and
marketing of petroleum products along with blending and marketing of foreign branded lubricants
"FUCHS". The Company obtained its oil marketing license from the Ministry of Petroleum & Natural
Resources in 2005 while the commercial operations were initiated in September 2005.
The purpose of this Initial Public Offering is to utilize the raised proceeds in completion of a storage
facility at Machike in the province of Punjab. Further to this, the proceeds would also be used for the
construction and commissioning of 50 retail fuel outlets.
It is also pertinent to highlight that prior to the IPO a pool of strategic investors have purchased
3,875,000 Ordinary Shares of HPL (5.91% of the existing total paid-up capital) from a few existing
shareholders of HPL at PKR 25.00 per share that is at a 25% premium over the floor price of PKR 20.00
per share. This clearly portrays the level of confidence that investors have on HPLs growth trajectory.

HPL Flagship Site - Sharah-e-Faisal, Karachi

INFORMATION BRIEF

SECTION II
OMC SECTOR DYNAMICS

INFORMATION BRIEF
Domestic Oil Marketing Industry Overview
There are thirteen Oil Marketing Companies (OMC) operating in Pakistan including foreign and
domestic players. That said, close to 90% of the market is dominated by four oil marketing companies
with state-owned PSO having the largest market share at 63%. Among these thirteen OMCs there are
two relatively new companies, namely Total Parco Pakistan Limited and Hascol Petroleum Limited that
have emerged as active players and are rapidly gaining further market share.
Following are the current market shares of all OMCs operating in Pakistan:
Company
Pakistan State Oil
Shell Pakistan Ltd
Attock Petroleum Ltd.
Chevron Pakistan Ltd.
Total-Parco Pakistan Ltd.
Hascol Petroleum Ltd.
Byco Petroleum Ltd.
Bakri Trading Co. Pakistan (Pvt.) Ltd.
Askari Oil Services (Pvt.) Ltd.
Overseas Oil Trading Co. (Pvt.) Ltd.
Zoom Petroleum (Pvt.) Ltd.
Admore Gas (Pvt.) Ltd.
Pearl Parco (Pvt.) Ltd.

Market
Share (%)
63.30
9.90
9.50
4.40
3.80
2.40
1.60
1.60
0.14
0.10
0.10
0.00
3.16

Listing Status
Listed
Listed
Listed
Branch Office
Non Listed
Under Listing
Listed
Pvt. Limited
Pvt. Limited
Pvt. Limited
Pvt. Limited
Pvt. Limited
Pvt. Limited
(Non OMC)

No. of Retail
Outlets
3,760
798
362
518
260
210
219
47
294
109
12
442

Market
Price*
PKR 345
PKR 210
PKR 508
N/A
PKR 9
-

(Source: OCAC Oil Report Oct- 2013)

*Price quoted as at January 16, 2014
Oil marketing companies have three primary drivers of earnings which include product inventory and
resulting inventory Net Realizable Value (NRV) adjustments, marketing margins and overall sales
volumes. While marketing margins are regulated and NRV adjustments on inventory are a function of
international oil prices, OMC strategy to increase core earnings focuses on increasing volume and
expanding market share.
While OMC volumes have increased at tepid 5-year CAGR of 1.6%, earnings have posted a volatile trend
with a CAGR of 2.3%. Earnings volatility is largely due to: 1) NRV adjustments on inventory due to
changes in crude oil and refined product prices, 2) PKR depreciation with SBP rebuffing FX cover for oil
marketing companies since 2009, 3) higher financial charges due to working capital requirements to
finance circular debt and buildup in receivables and 4) interest income/expense on delayed payments
due to circular debt.
Pakistan's oil & gas landscape is divided between up, mid and downstream sectors within the regulatory
ambit of the Ministry of Petroleum and Natural Resources. Pakistan's oil marketing and distribution

INFORMATION BRIEF
however is undergoing a deregulation phase within the backdrop of increasing volume demand and
higher reliance on imported products. Consumption of petroleum products has increased at a 1% CAGR
over the last 10 years, led by expanding rural incomes and per-capita incomes. This is despite
cannibalization with the trend in shift to Compressed Natural Gas (CNG) as a transport fuel up till
FY12, which has reversed of late with a severe shortage of natural gas in the country.
Pakistan's oil demand is expected to rise by approximately 7% during the current fiscal year (2013-14)
ending June 30, 2014 on year-on-year basis. The demand would touch 21 million tons against 19 to 20
million tons, on the back of closure of CNG stations and resolution of circular debt problem.
Over the last few years, POL products demand rose by an average 3%to4% per year, but if the country's
growth rate managed to remain between 5% - 6% during this year along with the closure of CNG
stations in Punjab then the subsequent increase in demand of petroleum products is likely increase
rapidly.
The country is a huge oil guzzler as more than 80% of the total demand is either imported in the form of
Crude or Refined products. The product slate is dominated by 9 million tons of Fuel Oil (including 4.5
million tons produced locally) followed by High Speed Diesel with total consumption of 7.5 million tons
(including 4 million tons of imported products). With the shortage of CNG in the market the Motor
Gasoline (Petrol) market has almost doubled from 1.2 million tons to 2 million tons.
With domestic refining capacity at 13.15mn tons per annum, Pakistan produces approximately 9.5mn
tons while annual consumption is close to 20mn tons per year. The deficit is primarily for fuel oil, high
speed diesel and more recently motor gasoline.
At present there are 6 major oil refineries operating in the country:
UNIT: M. Tons

Oil Refineries
Pak Arab Refinery Limited ("PARCO")
National Refinery Limited ("NRL")
Attock Refinery Limited ("ARL")
Byco Petroleum Pakistan Limited ("BPPL")
Byco Oil Pakistan Limited ("BOPL") Under Commissioning
Pakistan Refinery Limited ("PRL")

Capacity
4,500,000
2,710,500
1,916,500
1,740,500
5,800,000
2,298,500

Production
3,216,416
1,834,845
1,710,000
120,332
941,272

Regulatory Landscape for OMCs:

Over the last decade, oil marketing and distribution has been semi-regulated with marketing margins set
by the Government of Pakistan (GoP) while price setting at the forecourt retail level has moved back
and forth from regulatory ambit. In 2000 the market for residual fuel oil and industrial products mainly
used for power generation was completely de-regulated which was followed by GoPs reforms across
key areas of the economy. While marketing margins remain regulated, OMCs in Pakistan focus on

INFORMATION BRIEF
increasing core earnings by volumetric growth that eventually boasts their respective market share and
profitability.
In order to stimulate foreign investment, marketing margins for OMCs were revised from an initial
0.51%-2.17% to 3% for all regulated products. Margins were further enhanced to 3.5% in July 2002 and
Pakistan's 2nd largest volume generating product HSD (accounts for 35% of total petroleum products
consumption today) was de-regulated at the principal stage in view of the domestic production deficit.
OMCs were allowed to import HSD and set the retail level price of the product with prices uniform
across the country through a system known as Inland Freight Equalization Margin (IFEM) evenly
spreading the distribution and transport costs of the products across the country onto end retail prices.
During 2002 to 2008, petroleum product pricing included ex-refinery prices based on import parity, with
dealer and distributor margins and taxes taking prices to the ex-depot level. Prices were independently
regulated by the Oil and Gas Regulatory Authority (OGRA). Post 2008, within the backdrop of firmly
high oil prices, the GoP reinstated the reform process to further deregulate the sector.
Marketing margins were changed from a percentage to an absolute basis in 2010 leading to a reduction
in product distribution margins by 20%-25% across the regulated product range. In 2011, the GoP
revised upwards margins on premium motor gasoline and HSD by 32% and 30%, respectively, to
improve core profitability of downstream marketing within the backdrop of circular debt exposure and
PkR depreciation. Imports of premium motor gasoline were deregulated at the principal stage i.e.
allowing OMCs to set the ex-refinery and ex-depot price based on actual product imports excluding
gallop tenders while the GoP continued to monitor HSD prices at the ex-refinery level for refiners. In
2012, the GoP for the first time deregulated HSD prices at the ex-refinery level bringing them in-line
with actual OMC import prices as set by Pakistan State Oil Company Limited (state owned and is the
largest oil marketing company in Pakistan). Currently, margins on HSD and MS are being considered for
an upward revision by the GoP given inflationary pressures amid repeated requests by the industry.

INFORMATION BRIEF

SECTION III
HASCOL PETROLEUM LIMITED

10

INFORMATION BRIEF
Hascol Petroleum Limited
HPL was incorporated in 2001 under the Companies
Ordinance, 1984 primarily to take advantage of the
petroleum sector deregulation and undertake a program for
owning, leasing and renting oil storage facilities as well as
importing petroleum products for its own account.
In February 2005 HPL was granted a full marketing license by
the Government of Pakistan and since then, HPL has been
engaged in developing a retail network and storage facilities
under the Hascol brand and by 31st December 2013 the
Company had commissioned approximately 210 retail outlets
across Pakistan and this number is expected to reach 291 by
the end of 2016.
The Directors and sponsors of the company have decades of
multinational companies experience in Oil Trading, Retail
Management, Marketing & Supply Chain Management.
HPL management team comprises of well experienced staff
from each segment of the oil industry who have worked in
local and multinational oil companies for many years and
have ability to do things right.
Pattern of shareholding of HPL as at 31st December 2013 is as follows:
Serial
1
2
3
4

Name of Shareholder
Mr. Mumtaz Hasan Khan - Chairman & CEO
Fossil Energy (Private) Limited
Marshal Gas (Private) Limited
Other Shareholders
Total Shares

Shares
34,387,567
12,175,713
8,500,396
10,536,324
65,600,000

%
52.42
18.56
12.96
16.06
100.00

As at December 31, 2013 HPLs investment in its fixed assets amounted to PKR 2,315 million while the
Company operates through 210 retail fuel stations wide-spread across Pakistan. Further to this, HPL has
constructed and commissioned a state of the art storage installation at Shikarpur while another purpose
built installation is currently being constructed at Machike.
HPLs product mix includes petroleum products such as Motor Spirits (MS), Furnace Oil (HSFO), High
Speed Diesel (HSD), Jet A-1, Liquid Petroleum Gas (LPG), Super Kerosene Oil (SKO) and Lubricants.
The Company is currently offering Petrol, Diesel under the Companys own brand name as Tiger Super
and Rocket Diesel and lubricants under the brand name of FUCHS.

11

INFORMATION BRIEF
The Code of Corporate Governance applicable to listed companies is fully in place at the Company and
the following Management Committees and Board Committees actively function towards the
sustainability and growth of HPL:

Product Line:
HPLs product mix includes petroleum products such as Motor Spirits (MS), Furnace Oil (HSFO), High
Speed Diesel (HSD), Jet A-1, Liquid Petroleum Gas (LPG), Super Kerosene Oil (SKO) and Lubricants.
The success of an OMC is dependent on how well its supply chain has been established. The presence of
storage facility at each discharge point of Pak Arab Pipe Line Company System is a necessity. HPL has
very successfully developed supply depots, either through its own sources or through third party
arrangements.
Supply chain is a lifeline of any industry throughout the world. It plays an essential role in ensuring that
the right products are available at the right places at all times; specially, in the country like Pakistan
where the gap between supply and demand is continuously widening.

Storage Facilities:
HPL has developed state-of-the-art storage facilities at
strategic locations that fully cover its retail network. Out of
the 5 functional facilities, the Shikarpur storage facility is fully
owned and operated by HPL while Machike storage facility
would be the second facility to be owned by HPL.

12

INFORMATION BRIEF
The existing storage facilities currently operating under the banner of HPL including the under
construction Machike Facility are as follows:
Unit in MT

Serial
1
2
3
4
5
6

Facility
Port Qasim
Kemari
Kemari Import Terminal
Shikarpur
Machike
Amangarh

Ownership
Long-term agreement - VTT Port Qasim (Pvt.) Ltd.
Long-term agreement - Al-Raheem Trading
Long Term Lease Agreement with Al-Abbas Group
HPL Owned
HPL Owned (Under Construction)
Long-term lease agreement - an option to buy

Capacity
32,400
12,150
15,000
6,500
6,500
1,500

In order to further enhance its capacity the Company is in the process of acquiring a land at Mehmood
Kot, Punjab adjacent to Pak-Arab Refinery Limited. This will facilitate the Company to cover its supply in
the Southern Punjab envelope.

13

INFORMATION BRIEF
Efficient Logistics Network:
HPLs logistics network provides the Company with an
efficient value chain that drives the Logistics department is
the backbone of an oil marketing and distribution company.
Hascol Petroleum Limited does not compromise on quality
and quantity of petroleum products.
HPL is maintaining its logistics policy wherein we ensure the
deliveries of safe and sound condition to the valued
customers. Tank Lorries registered with HPL are duly
calibrated by weights & measures, and designed as per rules
required by 'OGRA' and 'Ministry of Petroleum and Natural
Resources'.
HPL has got 19 registered contractors maintaining a fleet of
1,300 Tank Lorries for Black Oil and 350 Tank Lorries for
White Oil.
HPL all the tank lorries are registered in HPL state of the art
ERP system JD Edwards to control the logistics data and
product movement and time log, as well. The cartage
contractors have to provide the tank lorries as per demand
of HPL Cartage Agreements.

IT Infrastructure:
In 2013 HPL successfully implemented JD Edwards ERP software
which is an integrated system comprising of the following six
modules:
Financial
Procure to Pay
Order to Cash
Inventory Management
Transportation
Advance Pricing
Now all Hascol Installations, depots and warehouses are
connected with the Hascol Head Office in Karachi enabling
Hascol real time information for business controls efficient
customer service and structured MIS of management decisions.

14

INFORMATION BRIEF
All of HPL regional offices, Installations & depots are connected online for the Video Conferencing with
HPL management at Head office.
Hascol has built its own state-of-the-art data center for the centralized and safe storage of Company's
valuable data with inside and outside firewalls to ensure data security and safety.

Retail Outlets:
HPL has a large network of retail outlets in all corners of the country. With over 210 retail outlets in all
four provinces of the country HPL has invested more than PKR 2 billion in their expansion venture
through dealers and its own investment.
Attached to the retail outlets HPL is also operating a network of convenient store with a brand name
"Hasmart". HPL have 42 Hasmart, 40 Tyre - Care and 15 Express Wash nationwide to cater the needs of
its customers.

Automax LPG (Liquefied Petroleum Gas) is an economical,

safe and environment friendly alternate to CNG, Petrol
and Diesel. HPL is the first oil marketing company to
develop LPG auto station and started dispensing LPG
through its Flagship retail outlet at Sharah-e-Faisal with a
brand name AUTOMAX. At present 15 AUTOMAX stations
are in various stages of approval with the Government of
Pakistan.

15

INFORMATION BRIEF
The detail of current retail outlets with respect to location is as follows:
Province

Retail Outlets

Sindh
Baluchistan
Punjab
Khyber Pakhtun Khua
Azad Jamu & Kashmir
Total

72
7
98
30
3
210

34.30%
3.30%
46.70%
14.30%
1.40%
100.00%

FUCHS HPLs Lubricants:

HPL has a sole strategic agreement with FUCHS international to manufactures/import, distribute and sell
FUCHS branded lubricating oils and greases in Pakistan. A company that combines tradition with
progress is best poised to meet the challenges of the future.
HPL is the only local company with International Lubricant Brand
.i.e. FUCHS Germany that gives a great strength to HPL's lubricants
product line. In addition to its strong sales through 210 retail
outlets, HPL also operates in high street market, commercial and
industrial sector. It is also the market leader for supplies to
Pakistan Army with sales well over PKR 1 billion (2.5 million liters).
HPL has the proprietary product rights to cater for lubricant for
Pakistan Army's indigenous tank, Al-Khalid.

16

INFORMATION BRIEF
Historical Financials of HPL (2011 2013):
(PKR in millions)
Description
Fixed Assets
Current Assets
Equity (Including Revaluation Surplus)
Current Liabilities
Sales (in Thousand Liters)
Sales
Gross Margin
Operating Profit / (Loss)
Finance Cost
Profit Before Tax
Profit After Tax
Earnings per Share
Break-up Value per share (with Revaluation)
Break-up Value per share (w/o Revaluation)
Current Ratio
*Financial Year January to December

17

2013
2,286
6,707
1,444
7,630

2012
1,724
2,595
1,065
3,067

2011
877
1,136
460
1,686

619,923
57,441
1,320
548
110
438
392

341,738
29,775
996
393
101
292
218

259,910
19,584
699
257
202
43
82

5.97
22.02
16.55
0.88:1

3.33
16.24
10.20
0.85:1

1.94
7.01
6.71
0.67:1

INFORMATION BRIEF
Key Agreements:
1. Currently HPL has fuel supply arrangements with all
refineries in Pakistan.
2. HPL has hospitality agreement with PSO for the storage
and handling of products at, Machike, Chakpirana and
Sihala.
3. HPL is engaged in a sole strategic agreement with
FUCHS International for the manufacture, import
distribution and sale of their products in Pakistan.
4. HPL is in contract with OOPL as it blending partner for
lubricants in Pakistan.
5. HPL is in contract with Sui Sothern Gas Company (SSGC) for the supply of LPG.
6. HPL is in contract with Marshal Gas (Pvt.) Limited for the supply of LPG.
7. HPL has signed a Technical Services Agreement (TSA) with an International Operator, to start
aircraft refueling services in Karachi.

Principal Purpose of the IPO:

The principal purpose of the Issue is to inject additional equity into the Company mainly for utilization in
the completion of Machike Storage Facility in Punjab and for setting up new retail outlets all across
Pakistan. As per the Companys plans, out of the total equity raised via issuance of 25 million shares at
PKR 20/- per share:

PKR 200mn will be utilized for capital expenditure on the completion of Machike Storage
Facility which includes purchase of pipelines, gensets, pumps, electrical equipment etc.
PKR 100mn will be utilized for the setting up and commissioning of new / under
construction retail fuel stations
The remaining proceeds will be utilized for working capital requirements of the Company

Future Prospects:
Pakistan economy is in a growth mode and energy is a very essential ingredient, more trucks will move
across the country for trade and there will be more cars and motorcycles on the road.
The expected growth rate of the of the economy is between 3% to 4% and the in efficiency of state
owned OMC will create a space for new market entrant with thin cost structure, efficient supply chain
management and good corporate governance.
HPL has doubled its sales volume and profitability on year to year basis. During the last three years this
growth has resulted in a market share from 1% to 2.4% up to October 2013 (Source OCAC Report), from
2014 and onwards within 2 years the company has a target to achieve a volumes of 1,000,000 MT with a
market share of 5%.

18

INFORMATION BRIEF
This growth will be achieved by HPL backed by the following strategic steps:

19

Completion of Machike Storage Facility

Development of a Storage Facility at Mehmood Kot
Depots at Sahiwal and Shershah
Increase in retail outlets from 210 to 291 by the end of 2016
Development of Aircraft Refueling Station (JET-A1) at Karachi Airport. After PSO, HPL is the only
OMC that has a TSA with an International Operator to sell Jet A-1 to airlines
Development of a Lubricants and Grease Plant by end of 2016

INFORMATION BRIEF

SECTION IV
PROFILE OF DIRECTORS

20

INFORMATION BRIEF
Profile of Directors
Mr. Mumtaz Hasan Khan Chairman & C.E.O
Mr. Mumtaz Hasan Khan has over 50 year of experience within
the oil industry. He started his career with Burmah Shell Oil
Storage and Distribution Company in May 1963. In January
1976 Mr.Mumtaz resigned from the post of International Sales
Manager to join Pakistan Services Limited as Managing
Director. Pakistan Services Limited was the owning company of
four Intercontinental Hotel (now known as Pearl Continental
Hotel) in Pakistan at that time. In 1980 Mr. Mumtaz left
Pakistan Services Limited and moved to London.
He established Hascombe Limited, which started trading in Crude Oil and Petroleum Products.
Hascombe bought petroleum product from Middle Eastern sources and sold to international trading
companies like Shell and Elf. Hascombe was also a major supplier of petroleum products to Pakistan
during 1991 till 1996.
In 2005 Hascol was granted an oil marketing license by the government of Pakistan in Pakistan. Hascol
has established a network of 200 Petrol Pumps all across Pakistan including Azad Jamu and Kashmir.
Mr. Mumtaz Hasan Khan is currently also serving as Chairman of Sigma Motors (Sole distributor of Land
Rover vehicles in Pakistan).He is a Trustee of the Foundation of Museum of Modern Art (FOMMA)
located in Karachi and the member of the Expert Energy Group which prepared Pakistans first
Integrated Energy Plan in 2009.

21

INFORMATION BRIEF
Dr. Akhtar Hasan Khan Director
Dr Akhtar Hasan Khan is a former civil servant. He retired as Secretary Planning for the Government of
Pakistan. Dr. Akhtar holds a Masters in Public Administration from the University of Harvard and a PHD
in economics from the TUFFs University in USA. Dr. Akhtar served as Secretary Education, Additional
Secretary Finance, Additional Secretary Commerce and additional secretary ministry of production. Dr.
Akhtar has served on the board of public organization such as Pakistan International Airline, National
Development Finance Corporation, Pakistan Automobile Corporation and Chairman of the Pakistan
Ghee Corporation. Dr Akhtar is the author of several publications; his recent book was called the
impact of privatization in Pakistan. He is a Director of Sigma Motors Limited.
Mr. Najmus Saquib Hameed Director
Mr. Najmus Saquib Hameed is the honorary Vice Chairman and C.E.O of Layton Rahmatullah Benevolent
Trust (LRBT). LRBT is one of the largest charitable organizations in Pakistan providing free eye care to
over 2 million patients through a network of 17 hospitals annually. He has over 47 year of experience in
Senior Management position with multinational organization such as Unilever and Pakistan Tobacco
where he retired as Chairman of the Company. Mr. Najmus Saquib holds a Master in International
Relations and was a gold medalist at Institute of Business Administration (IBA). He has served as
Chairman of the Cigarette Manufacturers Association and past Chairman Board of Governor at the Indus
Valley School of Art and Architecture, Karachi. Mr. Najmus Saquib Hameed is currently serving on the
board of NIB Bank Limited and Sigma Motors Limited.
Mr. Farooq Rahmatullah Director
Mr. Rahmatullah is law graduate from the University of Peshawar. He joined Burmah Shell and Oil
Distribution Company in 1968. Mr. Rahmatullah worked in various capacities with the organization i.e.
Chemical, Human Resource, Marketing, Supply, Distribution and Retail. In 1994 Mr. Rahmatullah was
transferred to Shell International London as Manager Business Strategy Division. He looked after various
portfolios covering 140 countries. In 1998 he was transferred back to Pakistan as Head of Operations
Shell Pakistan. Mr. Rahmatullah was also looking after Middle East and South Asia (MESA).In 2001 he
was appointed managing director Shell Pakistan Limited a post he retired from in June 2006.
Mr. Rahmatullah is credited with being the founding member of PAPCO (Pak Arab Pipeline Company
limited). He has also served as the Director General of Civil Aviation Authority, Chairman of the Oil and
Gas Development Authority, Chairman of LEADs. Since 2005 he has been chairman of the Pakistan
Refinery Limited. He is currently serving on the Board of Director of Faysal Bank Limited, Society of
Sustainable Development, and Resource Development Committee for the Agha Khan Hospital. He is also
the Group Founding Member of the Pakistan Human Development Fund and a member of National
Commission of Government Reform and Member of the Pakistan stone Development Company. He is
the Chairman of Pakistan Refinery Limited and Non-Executive Director of Faysal Bank Limited.

22

INFORMATION BRIEF
Mr. Liaquat Ali Director
Mr. Liaquat Ali is a Chartered Accountant by profession and a fellow member of the Institute of Charted
Accountantsof Pakistan (ICAP). He has over 18 years of experience in leasing and investment banking
field and has completed numerous transactions including restructuring of companies, merger and
Acquisition.
Mr. Liaquat Ali is a member of one of the leading Chartered Accountant firm Avais Hyder Liaquat
Nauman Chartered Accountants (AHLN). AHLN is a member of RSM international which is the 7th largest
network of accounting and consulting firms in the world[1]. AHLN has offices in Lahore, Karachi,
Peshawar, Faislabad, Islamabad, Quetta and Kabul (Afghanistan). He is also a member of the benevolent
fund committee of ICAP.
Mr. Sohail Hasan Director
Mr. Sohail is a Chartered Accountant and a member of the Institute of Chartered Accountants in England
and Wales and the Institute of Chartered Accountants of Pakistan. He was a partner in a leading
accounting firm A.F.Ferguson & Co for over 35 years and has also served as its senior partner. He has
served as the member of the Provisional Financial Commission Punjab and is currently a member of the
Corporate Law Review Commission of Pakistan. He is a Non-Executive Director of Habib Metropolitan
Bank Limited.
Mr. Saleem Butt Chief Operating Officer& Executive Director
Mr. Saleem Butt has achieved a diversified 22 year career in Finance, Corporate Affairs, Supply Chain,
Sales, Management, Human Resource, I.T and ERP implementation. Mr. Butt started to work as a
Chartered Accountant for a firm which is now a part of Price Waterhouse Coopers. He then worked with
various Shell Group of companies in Pakistan and overseas for 14 years. He was then offered a position
with Emaar Pakistan a subsidiary of Emaar PJSC, U.A.E as Chief Operating Officer (COO).
Mr. Butt is a Chartered Accountant and holds a Bachelor Degree in Commerce from the University of
Karachi. He received his fellowship from the Institute of Chartered Accountants of Pakistan in 2004. He
also serves as non-executive director on the boards of Pakistan Refinery Limited, TRG Pakistan Limited
and Sigma Motors Limited.

23

INFORMATION BRIEF

SECTION V
INVESTMENT RATIONALE

24

INFORMATION BRIEF
Investment Rationale
Growth Story: HPL has taken a time span of approximately 8 years to turn itself into a fully developed
OMC. The sponsors of the Company have mostly invested the capital from their own resources and have
now made the company capable running as a profitable and sustainable entity which can clearly be seen
through the financial highlights of the Company.
The construction of back-end (storages) and front-end (retail outlets) facilities has been a game changer
for HPL as the functionality of these facilities have brought the Companys sales volumes at an optimum
level and further volumes can be generated as well. In addition to this, the local and the international
brands such as FUCHS AG attached to the Company now carries significant business value and today HPL
is known for its quality products and services.
The below given table shows average throughput of OMCs in liters for the period from July to
September 2013 which clearly depicts the growth potential that HPL has in order to increase its market
share backed by an efficient and strategically placed storage network:

Internationally Renowned Lubricant Provider: The Company has a strategic agreement with Fuchs
Lubricants, one of the largest global manufacturers of lubricants based out of Fuchs Petrolub AG with its
headquarters in Mannheim, Germany. This agreement allows HPL to manufacture, import, distribute
and sell branded lubricating oils and greases in Pakistan.
Share Premium: A pool of strategic investors have recently purchased 3,875,000 Ordinary Shares of HPL
(5.91% of the existing total paid-up capital) from existing shareholders of HPL at PKR 25.00 per share
that is at a 25% premium over the floor price of PKR 20.00 per share. This clearly portrays the level of
confidence that investors have on HPLs growth trajectory.

25

INFORMATION BRIEF
Fuel Supply Arrangements: HPL has established fuel supply arrangements, with all domestic refineries
including Pak-Arab Refinery, Attock Refinery, Pakistan Refinery Limited, Byco Petroleum Pakistan
Limited and National Refinery. Apart from the fuel supply arrangements, HPL has developed a wellmanaged supply chain structure through which its products are transferred to all parts of the country.
The Company has also entered into the import market and has imported 3 cargos of Fuel Oil and Motor
Gasoline during the current year. The Company has also set up a fully integrated import supply chain at
both Kemari and Port Qasim.
Shield Against Circular Debt: HPL has carried a very defensive commercial sales strategy during the past
3 years due to the rising issue of circular debt pertaining to the Oil & Gas and Power sectors of Pakistan.
As an antidote to this risk, HPL has always secured its receivables from commercial sales to IPPs and
other debt burdened institutions through irrevocable financial instruments. As a result of these prudent
measures HPL has remained unharmed by the risk of circular debt and the resultant liquidity crunch
faced by most OMCs.
Strategically Placed Storage Facilities: The Company, under agreements with other OMCs, uses 5
different storage facilities that are strategically located in different oil supply hubs of the country. Apart
from this, HPL has recently commissioned its own storage Facility in Shikarpur, Sindh which is currently
being fully utilized by the Company while HPL will also commission another storage facility at Machike in
Punjab this year. The operational support of these purpose built state-of-the-art storage facilities will
provide significant volumetric growth in the sales of High Speed Diesel & Motor Spirit. With the shortage
of CNG in the country during the last 3 years the country-wide volume of Motor Gasoline has doubled.
HPL has hired a storage facility at Kemari on long-term basis to manage the imported products and
imported its first cargo in December 2013. The import facilities for fuel oil, motor gasoline and High
Speed Diesel have placed the Company strategically in a very strong position for the security of its
supplies.
Sponsor Profile & Management Prowess: The main sponsor of HPL, Mr. Mumtaz Hasan Khan, has an
experience of over 50 years in the Oil industry and has been associated with reputable brand names
such as Burmah Shell. Over the years HPL has gathered a team of well experienced team of individuals
who have significant expertise in the oil industry. The Company has a strong emphasis on recruiting and
retaining the best professionals who play the pivotal role in this business model. The Management has a
cumulative experience of 175 years pertaining to the Oil Marketing industry.
Recent Growth Track-Record: From 2010 onwards the Company has roughly doubled its sales volumes
at year on year basis. This growth has resulted in an increase of market share from 1.00% to 2.50% up to
October 2013. (Source: OCAC Oil Report)
Year
Sales of HPL
2010
PKR 9,202,000,000
2011
PKR 19,583,000,000
2012
PKR 29,775,000,000
2013
PKR 57,441,000,000

26

INFORMATION BRIEF
The current network of the Company has the capacity to further enhance the sales volumes after
completion of the Machike Storage Facility based in Punjab.
Growing Retail Network: The Company has a wide-spread network of 210 retail outlets across Pakistan
through which POL products are sold. The company plans to add 50 more retail outlets by the end of
this year, moreover the Company plans to add 91 fuel stations by the end of 2016 which would further
boast HPLs sales of HSD and MS. The province-wise break-up of HPLs 210 operational retail outlets is as
follows:
Avg. Monthly
Motor Fuels
Sale / Site
Province
No. of Sites
Quantity (Liters)
Punjab
101
111,619,392
92,095.21
Sindh
70
130,574,793
155,446.18
Khyber Pakhtun Khua
26
4,833,402
15,491.67
Baluchistan
07
3,596,000
42,809.52
Azad Jammu Kashmir
06
914,000
12,694.44
210
251,537,587
318,537
Attractive Floor Price: The floor price of PKR 20.00 per share represents an attractive discount of
64.70% on CY13 P/E Multiple of HPL i.e. 3.35 times versus the P/E Multiple of KSE-100 Index i.e. 9.49
times (Source: Bloomberg).
Moreover, we have also undertaken relative valuation based on comparison of HPL with leading oil
marketing companies of the country. For relative valuation we have considered Attock Petroleum
Limited, Pakistan State Oil & Shell Pakistan Limited. The following table highlights the financial highlights
and trading multiples of the above mentioned OMCs in comparison with HPL:
Indicators
Retail Outlets
Sales (PKR in 000')
PAT/ (LAT) (PKR in 000')
Shares (No. of shares)
EPS (PKR per share)
Market Price (As at 31-Dec-13)
Shareholder's Equity (PKR in 000')
Book Value (PKR per share)

PSO

SHELL

APL

HPL

3,760

798

362

210

1,294,503,247

244,316,875

191,181,800

57,441,365

12,557,945

(2,082,531)

3,906,534

391,407

246,987,217

85,609,886

69,120,000

65,600,000

50.84

(24.33)

56.52

5.97

333.22

190.43

499.69

20*

61,887,604

6,175,590

14,043,457

1,443,695

250.57

72.14

203.18

22.01

P/ E Ratio

6.55

N/A

8.84

3.35

P/ B Ratio

1.33

2.64

2.46

0.91

30-Jun-13

31-Dec-12

30-Jun-13

31-Dec-13

Financial Data Reporting Date

* Book Building - Floor Price

27

INFORMATION BRIEF
The floor price of PKR 20.00 per share represents an attractive discount of 56.49% based on CY13 P/E
Multiple of HPL of 3.35 times versus the Average P/E Multiple of the above mentioned OMCs of 7.70
times. Based on the above given peer comparison, HPL has an estimated value of PKR 45.94 when
viewed in line with the average P/E of 7.70x for PSO & APL.
Furthermore, when comparing the CY13 P/B Multiple of HPL of 0.91 times with the Average P/B Multiple
of the above mentioned OMCs of 2.14 times, the P/B Multiple presents a discount of 57.48%. Based on
the average P/B of 2.14x for the above mentioned OMCs the projected value of HPL is estimated to be
PKR 47.17.
Multiples
P/E
P/B

28

Average
Multiple
7.70x
2.14x

HPL (CY13)
EPS PKR 5.97
BVPS PKR 22.01

HPLs Projected
Price
PKR 45.94
PKR 47.17

INFORMATION BRIEF

SECTION VI
MANAGEMENT PROJECTIONS
&
VALUATIONS

29

INFORMATION BRIEF
Management Projections
HASCOL PETROLEUM LIMITED
PROJECTED BALANCE SHEETS
Balance Sheets
Amount in PKR '000
2013 (A)

2014 (E)

2015 (E)

2016 (E)

2017 (E)

2018 (E)

Non Current Assets

Property, plant and equipment
Intangible assets
Long term deposits
Long term investment
Deferred taxation - net

2,308,238

2,587,971

2,922,970

3,193,316

3,119,369

7,054

5,643

4,515

3,612

2,889

2,311

32,372

25,898

20,718

16,574

13,260

10,608

3,026,241

354,491

319,042

287,138

258,424

232,582

209,323

2,702,155

2,938,554

3,235,340

3,471,927

3,368,099

3,248,484

Stock-in-trade

3,177,692

3,578,063

4,674,853

5,846,939

6,001,056

8,298,955

Trade debts

2,088,097

2,736,166

3,739,883

4,872,449

5,648,053

7,054,112

464,647

441,415

419,344

398,377

378,458

359,535

40,585

44,644

49,108

58,929

70,715

84,858

41,025

47,179

54,256

62,394

71,753

Current Assets

Loans and advances

Trade deposits and short term prepayments

Sales tax receivable

Other receivables
Bank balances
TOTAL ASSETS

54
35,674
864,680

1,264,161

1,131,186

1,540,853

2,818,562

3,398,769

6,671,429

8,105,473

10,061,552

12,771,802

14,979,239

19,267,982

9,373,584

11,044,027

13,296,892

16,243,729

18,347,339

22,516,466

Non Current Liabilities

Liability against assets subject to Finance Lease

73,685

20,520

18,399

16,813

4,508

Deferred Liability - Gratuity

50,174

57,700

66,355

76,308

87,755

100,918

Long Term Loan - Summit Bank (150)

Long Term Loan - PAIR (100)

58,333

25,000

Long Term Loan FWBL - (200)

163,636

90,909

Long Term Loan - PAIR (150)

Long Term Deposits

(0)

139,286

85,714

42,857

90,872

99,959

109,955

120,951

133,046

146,350

436,701

412,854

282,545

258,515

237,613

251,776

Current Liabilities
Current Portion of Liabilities Against Assets Subject to Finance Lease
Finance Under M ark-up Arrangements

46,987

31,482

493,013

197,205

138,044

96,631

67,641

47,349
-

PAIR - (100)

41,667

HBL - (70)

70,000

PAIR - (350)

Commercial Paper (75)

75,000

Commercial Paper (150)

Trade & Other Payables

145,833
-

145,833
-

175,000
-

175,000
-

175,000
-

150,000

150,000

150,000

150,000

150,000

6,368,590

7,126,809

8,595,955

10,457,467

11,363,365

14,088,308

Accrued Interest

16,569

18,226

20,048

22,053

24,259

26,685

Sales Tax Payable

Provision for Taxation

381,362

407,479

455,107

379,015

337,495

368,977

Total Current Liabilities

7,493,188

8,077,035

9,504,988

11,280,166

12,117,761

14,856,318

TOTAL LIABILITIES

7,929,889

8,489,889

9,787,532

11,538,681

12,355,374

15,108,094

NET ASSETS

1,443,695

2,554,138

3,509,360

4,705,048

5,991,964

7,408,372

656,000

656,000

906,000

906,000

906,000

906,000

Shareholders' Equity
Share Capital
Further issue at Rs 10/ share (25m shares)
Share premium - Old
Share premium of Rs 10/ share (25 m shares)

3,300
-

250,000
3,300

3,300

3,300

3,300

3,300

250,000

250,000

250,000

250,000

250,000
5,901,949

Accumulated profits

426,019

1,038,712

1,996,185

3,194,123

4,483,290

Surplus on revaluation on fixed assets

358,376

356,125

353,875

351,624

349,374

347,123

1,443,695

2,554,138

3,509,360

4,705,048

5,991,964

7,408,372

30

INFORMATION BRIEF
HASCOL PETROLEUM LIMITED
PROJECTED PROFIT & LOSS ACCOUNTS
Profit & Loss Accounts
Amount in PKR '000
Description

2014 (E)

2015 (E)

2016 (E)

2017 (E)

2018 (E)

Sales - Gross

76,823,122

97,504,087

118,562,926

128,846,213

151,455,929

Sales - Net of Sales Tax

66,597,535

84,525,748

102,781,537

111,696,061

131,296,298

Cost of Sales

(65,032,134)

(82,566,407)

(100,446,724)

(109,148,115)

(128,555,807)

Gross Profit

1,565,401

1,959,341

2,334,814

2,547,946

2,740,492

Selling & Distribution Expenses

(621,784)

Administrative Expenses

(229,706)

Operating Profit

713,910

Finance Cost

(106,795)

Other Income
Profit Before Taxation
Taxation
Profit After Taxation
EPS

(639,705)
(249,201)
1,070,435
(101,692)

(705,548)
(275,858)
1,353,407
(125,652)

(763,697)
(306,121)
1,478,128
(154,395)

(797,313)
(340,398)
1,602,781
(132,036)

94,631

101,756

107,621

114,792

123,481

701,747

1,070,499

1,335,377

1,438,525

1,594,226

89,053

113,027

137,438

149,358

175,568

612,693

957,473

1,197,939

1,289,167

1,418,659

6.76

10.57

13.22

14.23

15.66

GP Margin

2.35%

2.32%

2.27%

2.28%

2.09%

NP Margin

0.80%

0.98%

1.01%

1.00%

0.94%

Current Ratio

1.00

1.06

1.13

1.24

1.30

Breakup Value with Revlauation

28.19

38.73

51.93

66.14

81.77

Breakup Value w/o Revlauation

24.26

34.83

48.05

62.28

77.94

31

INFORMATION BRIEF
Valuation Snapshot
Weighted Average Cost of Capital
Risk Free Rate
M arket Risk Premium

11.50% 5 - Year PIB Rate

6.00% Standard Convention by Consensus Analyst

Beta

1.07 Average OM C Beta (PSO & SHELL)

Cost of Equity
Terminal Growth Rate

17.92% Ke = Rf + (Rm-Rf)Beta
2.00% Sustainable Growth Rate

Tax Rate

35.00% Corporate Tax Rate

Cost of Debt

13.50% 1 - Year KIBOR + 3.00%

Debt to Equity

21.67% Debt to Equity Ratio

WACC

15.94% Weighted Average Cost of Capital

Free Cash Flow

(Amount in PKR '000)

FY14F

FY15F

FY16F

FY17F

FY18F
1,418,659

Profit After Tax

612,693

957,473

1,197,939

1,289,167

Add: Depreciation

106,913

96,752

129,323

148,349

137,529

(276,344)

(619,909)

(439,070)

(23,829)

(983,594)

Working Capital Changes

Add: Interest Expense (Net of Tax)

Terminal Yr.

69,416

66,099

81,674

100,357

85,823

Less: Capital Expenditure

(386,646)

(431,751)

(399,670)

(74,402)

(44,402)

Free Cash Flow

126,033

68,665

570,195

1,439,643

614,015

626,296

108,751

51,104

365,883

796,795

293,119

NPV of Free Cash Flow

Terminal Value
Terminal Growth Rate

2.00%

Terminal WACC

15.94%

Estimated Terminal Free Cash Flow (PKR)

626,296

Terminal Value (FY2018) (PKR)

4,493,335

Terminal Value (Current) (PKR)

2,145,032

DCF Valuation
NPV of Forecasts (PKR)

1,615,652

NPV of Terminal Value (PKR)

2,145,032

Enterprise Value / Cashflow Generated

3,760,684

Less: Net Debt (Net Cash as at December 31, 2013)

Equity Value (PKR)
No of Shares
Per Share Equity Value (PKR)

32

(157,642)
3,603,042
90,600,000
39.77