Press Release

VIS Upgrades Entity Ratings of Indus Lyallpur Company Limited

Karachi, August 18, 2022: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Indus Lyallpur Company Limited (ILCL) to ‘A-/A-2’ (Single A Minus/A-Two) from ‘BBB+/A-2’ (Triple B Plus/A-Two). Outlook on the ratings has been revised from ‘Positive’ to ‘Stable’. Long Term Rating of A- reflects good credit quality; protection factors are adequate. Risk factors may vary variable with possible changes in the economy. The short term rating of A-2 indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good and risk factors are small. The previous rating action was announced on June 15, 2021.

The upward revision in ratings reflect timely commencement of expansion plan in the spinning segment and improvement in overall financial risk profile of the Company. Revenue of ILCL more than doubled in FY21, and further growth was experienced during 9MFY22 on account of a rise in both volumes and average selling prices. Export sales (direct and indirect) continued to account for a major proportion of revenue, with China being the major destination for direct exports. Margins of the Company have also depict an increase on a timeline due to inventory gains, economies of scale and rising yarn prices internationally and locally. As per management, impact of rise in policy rate over the rating horizon is expected to be off-set by projected revenue growth. With expectancy of price stabilization in the medium term, these high level of margins may not be sustainable over the rating horizon. Therefore, maintaining the same within manageable levels to commensurate with the assigned ratings is considered important.

Ratings also factor in strengthening of liquidity profile of the Company, despite elevated debt levels, supported by higher profitability. Retention of profits, coupled with the injection of equity by related company through right shares to finance expansion, led to growth in the equity base of the Company. Consequently, despite the drawdown of long-term debt to finance capacity expansion project and higher utilization of short-term financing lines, leverage and gearing indicators have trended downwards on a timeline basis. Going forward, with limited additional drawdown of debt expected, further improvement in capitalization indicators is expected. Maintaining adequate profitability and capitalization profile is considered important, going forward.

For further information on this rating announcement, please contact Ms. Asfia Aziz (Ext: 212) or the undersigned (Ext. 207) at 021-35311861-70 or email at info@vis.com.pk.


Sara Ahmed
Director


Applicable Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .