Press Release

JCR-VIS Upgrades Entity Ratings of Indus Dyeing and Manufacturing Company Limited

Karachi, January 1, 2014: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Indus Dyeing and Manufacturing Company Limited (IDMCL) from ‘A/A-2’ (Single A/A-Two) to ‘A+/A-1’ (Single A-Plus/A-One). Outlook on the medium to long term rating is ‘Stable’.

The upgrade takes into account the improvement in risk absorption capacity of the institution in recent years. Strong internal capital generation has allowed the company to maintain a conservative capital structure, with most of the CAPEX in recent years also having been financed through internal sources. Cash flow position of the company depicts strong capacity to meet debt obligations.

The company posted healthy growth in revenues largely emanating from export sales. Moreover, gross margins improved notably on the back of better yarn prices and local currency depreciation. While the margins achieved in FY13 may not recur in the on-going year, addition in spinning capacity may allow the company to post growth in revenues.

The company is in the process of enhancing production capacity of the Muzaffergarh unit by 24,000 spindles, expected to be completed by March 2014. The estimated project cost is Rs. 1.8b. The CAPEX has been partially funded through long term loans while the remaining portion is being met through internal sources. IDMCL had acquired Indus Lyallpur Limited (ILL) (previously MIMA Cotton Mills Limited) in FY12; investment in this company was enhanced in the out-going year. The subsidiary has started generating profits in FY13. Moreover, the company has acquired complete shareholding of Indus Home Limited (IHL) making it a wholly owned subsidiary; previously, IHL was a joint venture between IDMCL and an international towel manufacturer. Operations of IHL are proposed to be expanded, going forward. These initiatives are likely to strengthen the company’s position in the textile sector.

The company is implementing an ERP system which would provide a platform for integrated core operations. A contract has been executed with a third party vendor in this regard; the project is still in initial stages.

For further information on this rating announcement, please contact Mr. Javed Callea or Ms. Sobia Maqbool, CFA at (92-21) 35311861-70.

Jamal Abbas Zaidi
Deputy CEO

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-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. JCR-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. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-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 2013 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited