VIS reaffirms entity ratings of Interloop

June 06, 2022 (MLN): Interloop Limited (PSX: ILP) has informed that the VIS Credit Rating Company Ltd. (VIS), a 'Full Service' rating agency, has reaffirmed the entity ratings of `A+/A-1' assigned to the company.

The outlook on the assigned ratings is 'Stable'. A long-term rating of 'A +' signifies good credit quality with adequate protection factors. The risk may vary slightly from time to time because of economic conditions, said in its press release issued on June 03, 2022.

The short-term rating of 'A-1' indicates high certainty of timely payment, and excellent liquidity factors supported by good fundamental protection factors. While the risk factors are minor.

The previous rating action was announced on April 20, 2021.

ILP is a vertically integrated multi-category full family clothing company, manufacturing Hosiery, Denim, Knitted Apparel and Seamless Activewear, for top international brands and retailers, besides producing Yarns for a range of textile customers.

The ratings incorporate a prominent market position in the hosiery segment that contributes around four-fifth of the sales revenue of the company. ILP is primarily an export-oriented company as export sales constitute more than 90% of the total revenues.

The company's clientele includes major global brands and retailers such as Nike, Adidas, Puma, Target, H&M, C&A, Amazon, Guess, Hugo Boss, Mustang and Uniqlo.

The assigned ratings incorporate sound governance and control framework as indicated by the presence of seasoned professionals on the Board of Directors, an experienced senior management team and an independent audit function. Recovery in industry-wide exports post ease in CON-ID-19 lockdown measures supports the business risk profile of the company. Long-term established relationships with key customers across all business segments enable the company to largely pass on the increase in raw material prices to the customers.

Financial assessment includes healthy profitability indicators and a strong liquidity profile. Profitability has witnessed improvement in FY21 primarily due to an increase in topline, and economies of scale, currency devaluation and operational efficiencies yielding higher margins.

Going forward, the management envisages profitability to improve against the backdrop of higher projected revenue and economies of scale, post-expansion. Healthy cash flow generation has resulted in a strong liquidity profile.

Albeit on account of projected debt drawdown on a timeline basis, overall long-term and short-term debt coverages are expected to remain adequate.

Moreover, despite further debt mobilization for expansion purposes in the medium term, leverage indicators are expected to remain manageable given projected equity growth through equity injection and profit retention, it added.

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