Press Release

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

Karachi, January 1, 2014: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Indus Dyeing and Manufacturing Company Limited (IDMCL) from ‘A/A-2’ (Single A/A-Two) to ‘A+/A-1’ (Single A-Plus/A-One). Outlook on the medium to long term rating is ‘Stable’.

The upgrade takes into account the improvement in risk absorption capacity of the institution in recent years. Strong internal capital generation has allowed the company to maintain a conservative capital structure, with most of the CAPEX in recent years also having been financed through internal sources. Cash flow position of the company depicts strong capacity to meet debt obligations.

The company posted healthy growth in revenues largely emanating from export sales. Moreover, gross margins improved notably on the back of better yarn prices and local currency depreciation. While the margins achieved in FY13 may not recur in the on-going year, addition in spinning capacity may allow the company to post growth in revenues.

The company is in the process of enhancing production capacity of the Muzaffergarh unit by 24,000 spindles, expected to be completed by March 2014. The estimated project cost is Rs. 1.8b. The CAPEX has been partially funded through long term loans while the remaining portion is being met through internal sources. IDMCL had acquired Indus Lyallpur Limited (ILL) (previously MIMA Cotton Mills Limited) in FY12; investment in this company was enhanced in the out-going year. The subsidiary has started generating profits in FY13. Moreover, the company has acquired complete shareholding of Indus Home Limited (IHL) making it a wholly owned subsidiary; previously, IHL was a joint venture between IDMCL and an international towel manufacturer. Operations of IHL are proposed to be expanded, going forward. These initiatives are likely to strengthen the company’s position in the textile sector.

The company is implementing an ERP system which would provide a platform for integrated core operations. A contract has been executed with a third party vendor in this regard; the project is still in initial stages.

For further information on this rating announcement, please contact Mr. Javed Callea or Ms. Sobia Maqbool, CFA at (92-21) 35311861-70.




Jamal Abbas Zaidi
Deputy CEO

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