KARACHI: VIS Credit Rating Company Limited has assigned an initial entity rating of 'A-/A2' to Image Pakistan Limited, highlighting both the company’s robust financial structure and the challenges it faces in the retail sector. The long-term rating of 'A-' suggests good credit quality, with adequate protection factors, though risk factors could fluctuate with economic changes. The short-term rating of 'A2' reflects a strong likelihood of timely repayment of obligations, supported by sound liquidity factors. The outlook on these ratings is stable.

Image Pakistan Limited, established in 1990 and formerly known as Tri-Star Polyester Limited, transitioned from polyester filament yarn production to the fashion retail industry in 2016. This strategic shift led to its rebranding in 2021. The company now focuses on the manufacturing and sale of embroidered garments for women, with significant ownership held by the founding family.

The assigned ratings recognize Image's strong capital structure, marked by minimal gearing and substantial sponsor support. The company's establishment in the embroidered clothing market is evidenced by its sales growth and above-market gross margins since its strategic pivot in 2021.

Despite these strengths, Image Pakistan Limited operates in a challenging retail environment in Pakistan. High inflation rates have reduced consumer purchasing power, and the informal sector's lower pricing pressures the organized market. The company's future ratings will depend on its ability to navigate these macroeconomic challenges while sustaining growth and maintaining its conservative gearing. Additionally, improving inventory management will be crucial, as current stock levels remain high relative to sales.