VIS reaffirms entity ratings of INDU

November 18, 2024 (MLN): VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Indus Motor Company Limited (INDU) at ‘AA+/A1+, according to the press release issued.

The medium to long-term rating of 'AA+' indicates high credit quality; protection factors are strong.

Risk is modest but may vary slightly from time to time because of economic conditions. A short-term rating of 'A1+' suggests a strong likelihood of timely repayment of short-term obligations with excellent liquidity factors.

Outlook on the assigned ratings remains ‘Stable’. The previous action was announced on October 02, 2023.

INDU, a key player in the local automotive industry, possesses a strong sponsor profile being a joint venture between Toyota Motor Corporation and Toyota Tsusho Corporation of Japan, as well as House of Habib.

Ratings draw support from INDU's strong liquidity position represented by substantial liquid assets, while improved cash flows strengthened the company’s financial position.

A higher equity base supported by sound profit retention, contributed to low financial risk profile.

Amid the economic slowdown during this year, automobile sales witnessed a sharp decline, wherein volumetric sales of passenger cars slumped by 16% during the period under review. 

However, during 2MFY25, with the rebound in the economic indicators and decline in interest rates, sales of the passenger cars segment improved by 28% compared to SPLY.

Amidst economic pressures and increased competition from new players, the market share of the Company was impacted in FY24. 

Volumetric decline in sales resulted in lower revenues, although gross margins continued to depict improvement as a result of higher prices. Higher gross margins and rising investment income led to a bottom-line increase of 56% during FY24. 

Going forward, maintaining strong margins, adequate coverages, and minimal debt levels will remain important for ratings.

Copyright Mettis Link News