Press Release

VIS Reaffirms Entity Ratings of Indus Dyeing & Manufacturing Co Limited
 

Karachi, August 4, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Indus Dyeing & Manufacturing Co Limited (IDMC) at ‘A+/A-1’ (Single A Plus/A-One). Long term entity rating of ‘A+’ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, liquidity factors are excellent and supported by good fundamental factors. Outlook on the ratings is ‘Stable’. Previous rating action was announced on June 10, 2021.

Assigned ratings take into account double-digit growth in sales revenue, increasing margins, and strong liquidity profile. Noticeable growth in topline was observed on account of higher average selling prices due to rising international yarn prices along with increase in sales volumes. Exports continue to account for a major proportion of revenue, with China being the major destination. Inventory gains over the last two years have led to notable improvement in gross margins, which is expected to rationalize over time, in view of the cotton price dynamics and anticipated slowdown in international demand, although dollar devaluation may provide some margin uptick. Net margins are also expected to streamline on account of rising interest rates for current and projected incremental debt, however, as per management expansion led volume growth is likely to offset this impact. In addition, overall profitability profile was also supported by higher investment income in FY21.

Supported by substantial rise in profits, liquidity profile of the Company has strengthened with cash flows offering sufficient coverage against debt, while the debt servicing ability remains satisfactory. Further, the availability of short-term liquid investments also offers further support. Ratings take comfort from the growth in equity base account of higher profitability and profit retention. While rising debt levels to finance working capital needs and expansion plans may lead to elevated gearing levels, the same is expected to remain below 1.00x. Achievement of projected plans and maintenance of performance metrics in alignment with the benchmarks for assigned ratings will remain important for ratings.


For further information on this rating announcement, please contact Ms. Asfia Aziz (Ext: 212) or the undersigned (Ext. 207) at 021-35311861-70 or email at info@vis.com.pk.


Sara Ahmed
Director

VIS Entity Rating Criteria Methodology - Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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