Press Release

VIS Reaffirms Entity Ratings of Indus Sugar Mills Limited

Karachi, October 16, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Indus Sugar Mills Limited (‘ISML’ or ‘the Company’) at 'A-/A-1' (‘Single A minus/A-One’). Medium to long term rating of 'A-' indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A-1' suggests strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous ratings action was announced on December 7, 2023.

Indus Sugar Mills Limited was incorporated as unlisted Public Limited Company on Dec 13, 1980 under the Companies Act 1913. The Company is primarily engaged in the production and sale of crystal sugar and related by-products. Its manufacturing facilities are located at Kot Bahadur, Tehsil & District Rajanpur.

Assigned ratings incorporate the moderate business risk profile of the sugar industry in Pakistan, characterized by low exposure to economic cyclicality and notable impacts from seasonal variations. This includes the influences of fluctuations in sugarcane production and quality, compounded by cyclicality in crop yields and raw material prices. The competitive risk within the sugar sector is considered from medium to low, with minimal threat of substitutes due to the essential nature of sugar albeit high industry fragmentation.

Assigned ratings also consider the Company’s weakened profitability profile, with margins constrained by rising procurement costs. Liquidity remains strong as reflected by adequate current ratio. The Company has historically maintained a conservative capitalization profile, although gearing and leverage ratios increased at the end of the current review period due to seasonal short-term borrowing. The Company’s coverage profile remains sound, supported by healthy debt service coverage ratios. Despite the challenges, historical performance reflects the Company’s adequate capacity in managing its debt obligations.

Going forward, key business and financial risk indicators that could impact the assigned ratings include continuous rise in sugarcane prices. The Company’s ability to manage the procurement costs amid softening of the sugar prices will be critical for the assigned ratings.

For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.












Applicable Rating Criteria:
Industrial 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 .