Press Release
VIS revises Ratings of Digital World Pakistan (Pvt.) Limited
Karachi, July 13, 2020: VIS Credit Rating Company Limited (VIS) has revised entity ratings of Digital World Pakistan (Pvt.) Limited (DWPL) from ‘A-/A-2’ (Single A Minus /A- Two) to ‘BBB+/A-2’ (Triple B Plus /A-Two). The long term rating of ‘BBB+’ signifies adequate credit quality with reasonable protection factors. Risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and fundamental protection factors. The previous rating action was announced on February 27, 2019.
The assigned ratings of DWPL take into account sponsors’ industry experience, particularly in the end-to-end supply chain management, strong brand recognition and loyalty among customers in the consumer durable industry and long-standing business relations with the vendors and dealers. The ratings incorporate pre-covid sizeable scale of operations with steadily growing sales, sustained gross margins, considerable geographic diversification and positive demand for air conditioners and refrigerators. Financial risk profile of the company is considered moderate in line with augmentation of equity base resulting in improved leverage indicators coupled with adequate debt service coverage. The ratings factor in significant dependence on distribution rights of Gree-branded products; hence ratings will remain sensitive to the maintenance of strategic relations with Gree Electric Appliances Inc.
The ongoing geopolitical scenario, global economic landscape and slowdown in domestic economic activity amidst the COVID-19 pandemic is likely to pose financial risk to the company impacting revenues, profitability, liquidity and debt repayment capacity. Therefore, the ratings incorporate dynamic consumer preferences for electronics goods, high price sensitivity and vulnerability to foreign exchange risk amidst low pricing power. The company’s ability to maintain scale of operations, improve profit margins and contain leverage indicators around current levels would be the key ratings sensitivities. Further, disruption in operations due to coronavirus outbreak may be a key business risk factor.
For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8005) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk .
Faryal Ahmad Faheem
Deputy CEO
Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx