Press Release

JCR-VIS Reaffirms Entity Ratings of Indus Dyeing and Manufacturing Company Limited

Karachi, May 04, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Indus Dyeing and Manufacturing Company Limited (IDMCL) at ‘A+/A-1’ (Single A-Plus/A-One). Outlook on the medium to long term rating is ‘Stable’. The previous rating action was announced on January 1, 2014.

The assigned ratings reflect IDMCL’s position as one of the leading players in the domestic spinning sector. The ratings also reflect healthy capitalization level and adequate liquidity profile & coverage ratios. While leverage indicators and liquidity & coverage ratios have shown some weakness, they are still commensurate with the outstanding ratings. Debt servicing coverage has remained over 1x despite reduced cash flows. Ratings are constrained by weak spinning sector fundamentals in the backdrop of roll-back of China’s aggressive procurement policy resulting in pressure on margins and profitability.

The shift in textile paradigm from aggressive demand to competitive phase would challenge the business dynamics of spinning sector players. Inventory planning and margin management alongwith forward marketing would be key driver for business stability and growth.

Revenues of the company witnessed healthy growth during 1HFY15 on the back of enhancement in spinning capacity during FY14. In line with industry trend, gross margins witnessed pressure in FY14 and 1HFY15. Going forward, profitability of the company is expected to be favorably impacted by growth in turnover, decline in power related cost and lower financing cost due to decline in interest rates.

IDMCL has been in operations for over 5 decades. Majority shareholding is vested with the family members. Key management positions are also retained by the directors. During FY14, IDMCL completed acquisition of remaining shareholding of an associated company, Indus Homes Limited, making it a wholly owned subsidiary, while additional investment was also made in Indus Lyallpur Limited. Both these companies were profitable in FY14 and 1HFY15.

For further information on this rating announcement, please contact the undersigned (Ext: 501) at 35311861-70 (10 lines) or fax to 35311873.



Javed Callea
Advisor

Applicable Rating Criteria: Industrial Corporates (October 2003) http://www.jcrvis.com.pk/images/IndustrialCorp.pdf

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 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 May 04, 2015 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.