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

Karachi, May 04, 2015 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Indus Dyeing and Manufacturing Company Limited (IDMCL) at ‘A+/A-1’ (Single A-Plus/A-One). Outlook on the medium to long term rating is ‘Stable’. The previous rating action was announced on January 1, 2014.

The assigned ratings reflect IDMCL’s position as one of the leading players in the domestic spinning sector. The ratings also reflect healthy capitalization level and adequate liquidity profile and coverage ratios. While leverage indicators and liquidity and coverage ratios have shown some weakness, they are still commensurate with the outstanding ratings. Debt servicing coverage has remained over 1x despite reduced cash flows. Ratings are constrained by weak spinning sector fundamentals in the backdrop of roll-back of China’s aggressive procurement policy resulting in pressure on margins and profitability.

The shift in textile paradigm from aggressive demand to competitive phase would challenge the business dynamics of spinning sector players. Inventory planning and margin management alongwith forward marketing would be key driver for business stability and growth.

Revenues of the company witnessed healthy growth during 1HFY15 on the back of enhancement in spinning capacity during FY14. In line with industry trend, gross margins witnessed pressure in FY14 and 1HFY15. Going forward, profitability of the company is expected to be favourably impacted by growth in turnover, decline in power related cost and lower financing cost due to decline in interest rates.

IDMCL has been in operations for over 5 decades. Majority shareholding is vested with the family members. Key management positions are also retained by the directors. During FY14, IDMCL completed acquisition of remaining shareholding of an associated company, Indus Homes Limited, making it a wholly owned subsidiary, while additional investment was also made in Indus Lyallpur Limited. Both these companies were profitable in FY14 and 1HFY15.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

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