Press Release

VIS Reaffirms Entity Ratings of Indus Motor Company Limited

Karachi, June 12, 2020: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Indus Motor Company Limited (IMC) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). Long-term rating of ‘AA+’ signifies high credit quality and strong protection factors. Risk is moderate but may vary slightly from time to time because of economic changes. Short-term rating of ‘A-1+’ signifies high certainty of timely payments; short-term liquidity including internal operating factors and/or access to alternative sources of funds is outstanding and safety is just below risk free Government of Pakistan’s short term obligations. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on June 17, 2019.

The assigned ratings to IMC reflect its competitive position in local auto manufacturing industry, robust financial profile and sound business risk profile. Ratings also incorporate Company’s strong sponsor profile and ongoing efforts to enhance product competitiveness and strengthen operating performance. While profitability levels have depicted noticeable decline, IMC has maintained robust financial profile and low leveraged capital structure despite challenging macroeconomic environment. The ratings take into account IMC‘s strong balance sheet and abundant liquidity, elements that provide the company with financial flexibility and support its rating.

Automobile sales, which were already on a downward trajectory since the beginning of current fiscal year, have slumped further post March’20 as government imposed nation-wide lockdown to curb Covid-19 pandemic. Sales are expected to depict gradual recovery; quantum of recovery is dependent on duration and breadth of the pandemic. Moreover, reduction in interest rates may help auto-financing pick up pace over the medium-term.

Business risk profile is considered sound given solid franchise, high brand value and strong competitive position in the product segment in which IMC operates. Strong dealer network and declining trend in imported car sales further support the business risk profile whereas significant rupee devaluation is a drag on profitability (although prices have been increased regularly to offset pressure on margins). Cyclicality in sales due to slow down in GDP growth and frequent policy changes are key business risk factors. IMC’s sales mix also benefits from healthy mix of urban and rural segment (where the agricultural economy has been relatively less impacted vis-à-vis large scale manufacturing). While the recent announcement of agriculture package along with higher sugar cane prices (during MY20 season) and aggressive wheat procurement program bodes well for farmer income levels, losses due to locust attacks to crop poses a risk. Long-term demand outlook for automobile sales is considered favorable given low motorization rate (18 vehicles per 1000 people) and projected rise in per capita income.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) or the undersigned (Ext. 306) at 021-35311861-70 or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (April 2019)

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