Press Release

VIS Reaffirms Entity Ratings of Indus Motor Company Limited

Karachi, October 02, 2023: VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of ‘AA+/A-1+’ (Double A Plus / A-One Plus) to Indus Motor Company Limited (IMC). Outlook on the assigned ratings is ‘Stable’. The medium to long term rating of ‘AA+’ signifies high credit quality and strong protection factors. Risk is modest but may vary slightly from time to time because of economic changes. Short Term Rating of ‘A-1+’ signifies highest certainty of timely payments; Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding and safety is just below risk-free Government of Pakistan’s short-term obligations. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on June 29, 2022.

IMC is the sole importer, assembler, manufacturer and distributor of Toyota vehicles in Pakistan. IMC is a joint venture between Toyota Motor Corporation (TMC) and Toyota Tsusho Corporation (TTC) of Japan, as well as House of Habib (HOH) connected companies. The sponsors' strong financial profile is reflected in the assigned ratings.

All segments of Pakistan’s automobile sector were hit by the economic downturn in the country. The outlook remains constraint in the short to medium term owing to weak macroeconomic conditions, high inflationary pressures, high raw material & CKD unit costs, intermittent import restrictions, foreign exchange fluctuation and high financing rates. The addition of EV and hybrid vehicles in the automobile sector have changed the dynamics of the global automobile industry while Pakistan automobile sector remains slow to respond to the changing consumer preferences. Reforms in the industry, targeted policy efforts towards allowing import of parts and tax incentive on EV and hybrid vehicles will help in reviving the outlook of the Pakistan automobile sector.

During FY23, IMC’s net sales declined by 36% and the gross margin decreased mainly due to considerably lower margins in the manufacturing segment. The company invested surplus liquidity in TDRs, PIBs, T-Bills and mutual funds which helped in generating handsome amount of interest income. Despite increase in other income and rationalization of operating expense, net margins stood lower in FY23 on account of lower gross margins and higher tax incidence. According to the management, sales volume may witness some improvement in FY24 given ease in import restrictions, though prices escalation of automobiles may continue to dampen the demand dynamics before customer price acceptability can be seen industry-wide. Cash flows and coverages, though declined, remain adequate in FY23. The company’s sound capitalization profile is reflected in the ratings. Gearing, in line with historical levels, remained minimal; leverage ratio declined on a timeline basis. In the current macroeconomic environment, the business risk has enhanced while the company has been able largely maintain its low financial risk profile mainly on the back of operating model based on advances from customers.

For further information on this rating announcement, please contact the undersigned at 021-35311861-64 (Ext. 201) or email at

Javed Callea

VIS Entity Rating Criteria: Industrial Corporates (May 2023)

VIS Rating Scale:

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