Press Release

VIS Maintains Entity Ratings of Indus Home Limited

Karachi, May 25, 2021: VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Indus Home Limited (IHL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the rating has been revised from ‘Rating Watch- Developing’ to ‘Positive’. Long term entity rating of ‘A-’ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ indicates good certainty of timely payment, liquidity factors and company fundamental factors are sound. Previous rating action was announced on April 29, 2020.

The revision in rating outlook, given prevailing pandemic situation, captures overall performance of the company in FY20 and in the ongoing fiscal year. Both topline and margins witnessed an improvement driven by volumetric growth and cost efficiencies. Cash flow coverages and debt servicing ability remains sound while deferment of principal repayment for a period of one year (under Covid-19 related debt relief scheme by SBP) provides support to overall liquidity profile. IHL is well placed in peer group given it's healthy margins, strong capitalization indicators along with its equity level. Ratings also take note of strong financial profile of a reputable parent company (Indus Dyeing and Manufacturing Company Limited) and its extensive experience in the textile sector.

During the period under review, IHL acquired land adjacent to its existing manufacturing facility in order to set up a spinning unit (with annual capacity of ~14.4m lbs) to cater around four-fifth of raw material requirement by in-house production. Total estimated cost of the project is Rs. 1.8b; of which one-third will be funded by internal capital generation while remaining is planned to be financed through a 10-year long term financing facility (LTFF). The project is expected to come online in FY22. Going forward, the expansion is projected to result in reduced cost of production and improved margins in the medium term. While leverage indicators are expected to increase given the planned debt draw down for setting up a spinning plant, same are likely to remain within manageable levels over the rating horizon.

Business risk profile of the company is supported by favorable sector dynamics given the surge in demand from export destinations. Assessment of financial profile also draws comfort from almost entire borrowings being mobilized on concessionary rates, sizeable liquid assets (in terms of cash and short-term investments) and sound operating cash flows to cover debt repayments. Gross margins have consistently grown on a timeline basis largely owing to efficient procurement (both cotton and yarn), higher quantum of value added products and cost reduction initiatives which primarily includes replacement of looms with more energy efficient ones. Ratings remain dependent on continued maintenance of sound performance and financial indicators.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 204) or the undersigned (Ext. 201) at 021-35311861-70 or email at .

Javed A. Callea

Applicable Rating Criteria: Industrial Corporates (April 2019)

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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited