Press Release
VIS Reaffirms Entity Rating of Indus Lyallpur Limited
Karachi, December 26 2025: VIS Credit Rating Company Limited (VIS) reaffirms the entity ratings of Indus Lyallpur Limited at ‘A-/A2’ (Single A Minus/A Two). Long-term entity rating of ‘A-’ reflects good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A2’ reflects good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 25, 2024.
Indus Lyallpur Limited (‘ILL’), incorporated in 1992, is a public unlisted company and a wholly owned subsidiary of Indus Dyeing & Manufacturing Company Limited. The Company manufactures and exports yarn, with its registered office in Karachi and production facility in Faisalabad and operates as part of the Indus Group, a diversified textile-led group with interests in home textiles, wind energy and an associated textile company.
The business risk profile of the upstream textile spinning sector remains elevated in FY25–1QFY26, largely due to sustained pressure on margins. High energy tariffs (~12.3 cents/kWh versus ~6.3 cents/kWh in regional markets) continue to undermine cost competitiveness, while the 18% sales tax on imported inputs has tightened liquidity through higher working-capital lockups. Export performance also remained weak, with basic cotton yarn exports contracting by 28.8% to USD 680.7m in FY25. In addition, the shift from FTR to the NTR regime and the applicability of Super Tax have increased the effective tax burden to ~29%. Although monetary easing offers some relief, sector prospects remain dependent on energy cost rationalization and efficiency improvements.
The assigned ratings consider ILL’s position within the Indus Group, supported by its long-standing presence in textile spinning and a geographically dispersed manufacturing base. During FY25, the Company’s profitability improved following recovery in gross margins on account of lower procurement costs of imported cotton. Overall financial position, while manageable, is stressed by the increasing working capital requirements which led to an increase in gearing, however, the reduced interest rates have provided a breather for the Company in terms of lower finance costs when compared to last year. Going forward, in FY26 margins are expected to remain at FY25 levels, supported by energy cost efficiencies following the installation of solar power.
For further information on this ratings announcement, please contact 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria: Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf