VIS Revises Entity Ratings of Inbox Business Technologies Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- June 08, 2021 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

Quote

VIS Credit Rating Company Limited (VIS) has revised the entity ratings of Inbox Business Technologies Limited (IBTL) from 'BBB-/A-3' (Triple B Minus/A Three) to 'BB+/A-3' (Double B Plus/A-Three). Medium to long-term rating of 'BB+' denotes that obligations deemed likely to be met. Protection factors are capable of weakening if changes occur in the economy. Overall quality may move up or down frequently within this category. Short-term rating of 'A-3' denotes timely payment of obligations coupled with satisfactory company fundamental and liquidity factors. Outlook on the assigned entity rating has been revised from 'Stable' to 'Rating Watch-Developing'. Previous rating action was announced on March 18, 2020.

The ratings downgrade incorporates significant attrition in IBTL's capitalization levels given sizeable write-offs of irrecoverable debts, advances and obsolete inventories in 2019 while higher depreciation losses booked due to pandemic-induced slowdown and delays in projects in the outgoing year led to further increase in accumulated losses turning the equity into negative. In addition to this, further revision in ratings has been restrained given strong sponsor profile (Patek private Limited which is a private investment holding company with shareholding vested in family members of Hussain Dawood Group) and the demonstrated financial support (in form of previous capital injection and liquidity support in terms of interest bearing long-term loan in the ongoing year).

The negative equity would continue to impact the resource mobilization and contract getting ability. Ratings take note of the turnaround witnessed in profitability in 1Q'21 on the back of notable recovery posted in gross margins. Cash flow coverages, post two years of significant deterioration, have also depicted improvement in line with the positive bottom-line reported. Ratings also cover the developments seen in corporate...