Press Release

VIS Credit Rating Company Reaffirms Entity Ratings of Indus Dyeing and Manufacturing Co Ltd.

Karachi, May 09, 2019: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Indus Dyeing and Manufacturing Co Ltd (IDMC) at ‘A+/A-1’ (Single A Plus/A-One). Long Term Rating of ‘A+’ denotes good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ signifies high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’. The previous rating action for IDMC was announced on July 31, 2018.

Assigned ratings to IDMC incorporate the company’s established track record in the spinning sector and strong financial profile. Ratings also take into account high business risk profile due to cyclical and competitive nature of the local spinning industry. However business risk profile is supported by expected elevated cotton prices, strong local demand (a number of players in the value added segment are undergoing expansions) and favorable Government policies for textile sector. Ratings remain dependent on maintaining strong financial risk profile over the rating horizon.

IDMC operates through three manufacturing facilities located in Karachi, Hyderabad and Muzaffargarh. The spinning segment operates through 178,896 spindles and has continued to operate at high capacity utilization levels. Further expansion in installed capacity is planned through addition of new spindles which are projected to be operational by June’2019. The Company also plans to diversify operations through investment in a 50MW wind power plant.

Assessment of financial profile depicts improving profitability and liquidity profile and healthy capitalization indicators. Gross margins of the company have witnessed an upward trajectory attributable largely to currency devaluation and inventory gains. Margins are expected to revert to normal levels in the absence of inventory gains and sizeable rupee depreciation. Liquidity profile of the company is considered strong with healthy cash flow coverage of outstanding long-term obligations and sufficient cushion of short term borrowings through stock in trade and trade debts. Equity base of the IDMC has increased over time on the back of internal capital generation. With limited projected increase in debt levels for expansion and investment in wind power project, leverage and gearing levels are expected to remain within manageable levels over the rating horizon.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 (10 lines) or fax to 35311873.

Javed Callea

Applicable Criteria: Industrial Corporates (May 2016)

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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 .

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