Press Release

VIS Upgrades Entity Rating of Interloop Limited

Karachi, July 18, 2024: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Interloop Limited (‘ILP’ or ‘the Company’) from A+/A-1’ (‘Single A Plus/A-One’) to AA-/A-1 (‘Double A minus/A-one’). Long-term rating of ‘AA-’ reflects high credit quality; Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short term rating of ‘A-1’ indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings remains Stable. Previous Rating action was announced on May 10, 2023.

Interloop Limited (ILP), a prominent textile entity on the Pakistan Stock Exchange, leads with its vertically integrated structure and diverse product portfolio. Specializing in Hosiery, Denim, Knitted Apparel, and Seamless Active wear, ILP serves global brands and retailers. With a strong yarn production segment, the Company caters to various clients in the textile sector. ILP maintains a significant presence in key markets such as the Netherlands, China, Japan, USA, and Sri Lanka, supported by a workforce exceeding 35,000 individuals.

Assigned ratings incorporate the medium business risk profile of the textile sector in Pakistan, marked by exposure to economic cyclicality and intense competition. The sector's performance is notably influenced by broader economic conditions, rendering it susceptible to demand fluctuations driven by economic factors. Furthermore, as a substantial contributor to total exports, the textile industry faces exposure to global economic cyclicality, geopolitical challenges, and liquidity constraints due to lengthy process of sales tax refunds. Supply-side risks, including local cotton crop production and reliance on imported raw materials, expose the sector to significant exchange rate risk.

Upgraded ratings consider the Company’s business updates wherein in FY23, Interloop Limited made investments to diversify its revenue sources by expanding its capacity within the apparel segment and the board has further approved investments across various segments. Moreover, in FY23, ILP surpassed the Rs. 100 billion sales milestone, reaching a total of Rs. 119.2 billion, reflecting a year-on-year growth of 31%. Gross Profit and Net Profit margins showed improvement during review period. Moreover, ILP has achieved a milestone by becoming Pakistan’s top exporter for FY24.

Upgradation of ratings also take into account the Company’s financial risk profile. ILP's equity grew to Rs. 43.8 billion amid strong internal cash generation. Total debt increased to Rs. 59.6 billion with both long-term and short-term borrowing rising. ILP's gearing and leverage ratios registered marginal improvement during the review period. Additionally, ILP maintained a healthy Debt Service Coverage Ratio (DSCR) above 4.5x in FY23 while liquidity profile also remained adequate.

For further information on this ratings announcement, please contact at 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

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .