Press Release

VIS Reaffirms Entity Ratings of Indus Home Limited

Karachi, July 24, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Indus Home Limited (IHL) at ‘A-/A-2’ (Single A Minus/A-Two). Medium to long-term rating of ‘A-’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in economy. Short term rating of ‘A-2’ indicates good certainty of timely payment supported by sound liquidity and company fundamentals. Access to capital market is good and risk factors are small. Outlook on the assigned ratings remains ‘Stable’. Previous rating action was announced on August 01, 2022.

Ratings are underpinned by IHL’s 15+ year track record in towel production and export, strong sponsor strength (Indus Dyeing and Manufacturing Company Limited), vertically-integrated structure, renowned retailers and distributors as key customers, and dedication to eco-friendly manufacturing practices. In FY22, IHL undertook a capital expansion initiative to achieve backward integration by establishing a spinning unit. The facility, comprising 2,880 rotors, commenced operations in May’22 and initially had a daily yarn production capacity of 510 bags, which has recently been raised to 600 bags. Nearly half of the yarn output is utilized in-house, while the rest is sold in the local market.

Ratings reaffirmation reflects strong revenue growth in FY22; however, recent demand slowdown affected sales volume this fiscal year. This was offset by currency devaluation and addition of local yarn sales. Despite backward integration positively impacting gross margins, rising operating overheads, high financial charges and reduced other income led to thinner net margins, indicating room for improvement relative to competitors. While cash flows improved, debt coverage metrics still lag behind peers. Leverage ratios have exhibited a weakening trend, marked by a significant increase during the review period on account of recent capex. Nevertheless, liquidity profile received sizeable support from redemption of short-term investments and sale of exposure in an associate entity. Business risk profile takes into account industry-wide growth in exports in FY22; however, recent floods across the country, high-interest rate situation, inflationary pressures, higher electricity costs and demand slowdown in the current year pose risks to the sector over the medium term. The same is reflected in ~14% YoY decline in 10 months textile export proceeds (in value terms). Ratings are constrained by the current weak macroeconomic environment globally and locally.

Over two-thirds of export revenue come from bathrobes, bath towels, and body sheets, with other terry products making up the rest. Yarn sales and lower-grade towels mainly comprise local sales. The addition of a spinning unit caused a shift in sales mix, with local sales contribution increasing from 4% in FY21 to 17% this fiscal year. The surge in local sales was fueled by a significant rise in yarn sales due to regional shortages. Roughly, 15% of sales revenue is attributed to institutional clients such as hospitals and hotels, while the rest serves retails customers. Exports spread across 22 countries, with only UK, Singapore, and USA accounting for over 10% of sales, thus limiting geographic risk. Yet, client concentration is high, with top ten clients generating over half of total revenues. Ratings remain dependent on the improvement of margins, debt coverage, and leverage ratios.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 206) or the undersigned (Ext: 207) at (021) 35311861-4 or email at

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (May 2023)

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