Press Release

VIS Credit Rating Company Assigns Initial Entity Ratings to Indus Home Limited

Karachi, May 8, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial long term entity rating of ‘A-’ (Single A Minus) and short term rating of ‘A-2’ (A-Two) to Indus Home Limited (IHL). Long Term Rating of ‘A-’ signifies good credit quality and adequate protection factors while risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ indicates good certainty of timely payment; sound liquidity while risk factors are small. Outlook on the assigned ratings is ‘Stable’.

The assigned ratings incorporate strong financial profile of the parent entity and extensive experience of the sponsor in the textile sector. Ratings also incorporate conservative financial profile of IHL as evident from low leveraged capital structure and strong liquidity profile. Business risk profile draws support from favorable government policies and increased opportunities for growth. Ratings remain dependent on maintaining low gearing levels and sound debt coverage ratios given sizeable Capex plans over the rating horizon. Moreover, further strengthening of sales channels and access to end-clients while improving capacity utilization, as planned, are considered important.

Sales have depicted growth in FY18 and in the ongoing year on the back of higher average selling prices. USA and Europe remain core markets with clients comprising a mix of institutional brokers and direct clients. Deepening in relationship with existing clients and diversification into non-traditional markets is planned to achieve volumetric growth in sales. Profitability has witnessed improvement in the ongoing year on the back of higher gross margins due to rupee depreciation. Going forward, management has rolled out a three year capex plan to enhance operational efficiency and expand business operations. Planned capex for 2019 and 2020 pertains to replacement of existing looms and dyeing machinery. Moreover, the company also plans backward integration of operations through setting up of spinning facility. The project is expected to come online in 2021. Entire expansion cost is to be financed through concessionary rate long-term financing facility (LTFF).

Part of Indus Group of Companies, IHL is a wholly owned subsidiary of Indus Dyeing and Manufacturing Company Limited (IDMC). The company is engaged in the production and export of griege and finished terry cloth and other textile products. At present, the company’s operations encompass weaving, dyeing and fabrication which are carried out through a towel manufacturing and finishing facility, located in Raiwind near Lahore. Product portfolio includes variety of bath towel, bathrobe, hand towel and body sheets. IHL has installed 120 air jet looms. Power requirement is met through a gas based captive power plant and national grid.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) at 021-35311861-70 or fax to 021-35311872.

Faryal Ahmad
Deputy CEO

Applicable Criteria: Industrial Corporates (May 2016)
http://www.vis.com.pk/docs/Corporate-Methodology-201605.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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .