Press Release

VIS Upgrades Entity Ratings of Indigo Textile (Private) Limited

Karachi, Jun 21, 2021: VIS Credit Rating Company Limited (VIS) has upgraded the entity rating of Indigo Textile (Private) Limited (ITPL) from ‘A-/A-2’ (Single A Minus/ A-Two) to ‘A/A-1’ (Single A/ A-One). The long-term rating of ‘A’ signifies good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, liquidity factors are excellent and supported by good fundamental factors. Risk factors are minor. Outlook on the rating has been revised from ‘Rating Watch - Developing’ to ‘Stable’. Previous rating action was announced on April 24, 2020.

The assigned ratings incorporates business risk profile of the denim sector, wherein gross margins of sector participants are exposed to volatility in cotton yarn prices. During FY20, the industry has undergone a slowdown, as global consumer spending on garments was affected by pandemic-induced lockdowns globally. However, despite the slowdown experienced by peers, ITPL managed to post contrary trend, wherein topline grew by 11%, mainly being driven by increase in pricing.

Sales offtake in H1’FY21 has posted strong improvement and the management expects the topline growth to remain strong in FY21. The revenue-driven improvement in cash flow coverage indicators, consistent improvement in cash conversion cycle and improved current ratio has been incorporated into the rating action. Given strong internal cash generation and full retention during FY20, the Company’s equity base has posted strong growth, and capitalization metrics are aligned with peers. With capacity enhancement on the anvil, growth in topline is expected to increase, which has been incorporated into the rating assessment. The assigned rating remains dependent achievement of growth in topline, as envisaged, and maintenance of business and financial risk metrics in line with the threshold for the rating.
For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 216) or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk.



Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates - April 2019
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

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