Press Release

VIS Reaffirms Entity Ratings of Indus Motor Company Limited

Karachi, June 07, 2021: 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 12, 2020.

The assigned ratings reflect IMC’s leading market positioning in the domestic automotive 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 margin of IMC came under pressure in FY20, 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 displayed a sharp decline during the year FY20 due to challenging macro-economic conditions, high interest rates and pandemic-induced lockdown. However the industry sales registered strong uptick during H1’FY21, as interest rates bottomed out at 7%, thus bolstering consumer auto-financing. IMC introduced “Yaris” to it product catalogue in Mar’20, which has been well received in the market and continues to post strong MoM sales.

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). Sensitivity of product offtake to macroeconomic growth and 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).

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 216) or the undersigned (Ext. 201) at 021-35311861-70 or email at

Javed 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