VIS Credit Ratings Affirms Stable Outlook for Digital World Pakistan

Karachi, VIS Credit Ratings Company Ltd. has reaffirmed the entity ratings for Digital World Pakistan (Pvt.) Limited at A-/A-2, adjusting the outlook from 'Negative' to 'Stable' due to improved financial indicators and stable liquidity conditions.

According to VIS Credit Rating Company Limited, the medium to long-term rating of ‘A-’ for Digital World Pakistan reflects its robust credit quality with adequate protection factors, despite potential economic fluctuations. The short-term rating of 'A-2' underscores the company’s solid fundamentals and liquidity, ensuring good certainty of timely payment.

Digital World Pakistan, established on April 6, 2000, focuses on the manufacturing and sale of consumer home electronic products. The company operates from its registered office located on Zafar Ali Road, Gulberg-V, Lahore, Pakistan. The assigned ratings take into account the medium to high business risk profile of the household appliances industry, which is susceptible to economic cycles and exchange rate risks.

The ratings also consider various aspects of the company's financial health. Despite a revenue decline in FY23 caused by import restrictions and reduced local demand, improvements in gross margins from inventory gains were noted. However, net margins suffered primarily due to elevated finance costs. The capitalization profile saw improvements with reduced short-term borrowings, though a slight increase in leverage occurred in the third quarter of FY24. The company maintained adequate liquidity and coverage profiles despite some pressure on debt service coverage.

The positive change in outlook reflects a consolidation of Digital World Pakistan's major financial indicators and healthy cash reserves, despite ongoing challenges in the market. Future ratings will be contingent on the company's ability to sustain or improve its profitability and financial coverage ratios in line with the stable outlook.