Press Release

VIS Reaffirms Entity Ratings of Indus Dyeing & Manufacturing Company Limited

Karachi, October 25, 2024: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Indus Dyeing and Manufacturing Company Limited’s (‘IDMC’ or ‘the Company’) at 'A+/A-1' (Single A plus/A-One). Medium to long term rating of 'A+' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A-1' indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the rating is “Stable’’. Previous rating action was announced on September 28, 2023.

IDMC is the flagship company of “Indus Group of Companies”, ’which is one of the well-established textile groups in the country. The group has extensive experience of more than six decades and operates through five different entities. Alongside, the group also has a presence in the power sector through exposure in wind power project of 50MW. IDMC is primarily engaged in the production and sale of yarn. All production units primarily operate on gas-based power generators with grid-based power is an alternate stand-by energy source.

Assigned ratings take into account the medium to high business risk profile of the textile sector in Pakistan, influenced by challenging local and global economic conditions, intense competition, and high exposure to economic cyclicality. The sector’s performance remains susceptible to demand fluctuations, global geopolitical challenges, and liquidity constraints due to delays in government sales tax refunds. Additionally, supply-side risks, including local cotton crop production and reliance on imported raw materials, expose the industry to exchange rate risk.

Ratings also incorporate the Company's financial risk profile. Revenue growth was supported by an increase in exports and improved pricing in local sales. However, the gross margins were affected by higher input costs, which could not be fully transferred to customers. The Company maintained a conservative capitalization profile with stable gearing and leverage ratios, benefiting from lower debt utilization due to improved internal cash generation. While financial coverage was impacted by rising financial charges and a one-time excess tax payment, liquidity remained sufficient to meet short-term obligations.

Going forward, the assigned ratings will remain sensitive to the Company’s ability to improve its profitability and coverage profiles. The ability to recover margins will remain critical. Any significant deterioration in key financial metrics may impact on the assigned ratings.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.










Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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