Agni Incorporated short term and long term loan ratings of Rs 8.42 billion is placed on watch with negative implications
Wed, Jun 10, 2020 3:52 PM on Credit Rating, Latest,
ICRA Nepal has placed the ratings assigned to the bank loan limits of Agni Incorporated Private Limited (AIPL or the company) on watch with negative implications.These ratings include the long-term rating of [ICRANP] LA@(pronounced ICRA NP L A) assigned to the company’s long-term loans and the rating of [ICRANP] A1@(pronounced ICRA NP A One) assigned to the company’s short-term loans (including non-fund-based limits).
The ratings for AIPL have been placed on watch with negative implications in the backdrop of the business disruptions caused by the Covid-19 triggered lockdown and the expected impact of the pandemic on the Nepalese economy. The disruption due to the lockdown is likely to slow down economic growth and may alter the consumer spending pattern over the medium term.Discretionary purchases like cars and two-wheelers may witness deferment in the near to medium term, resulting in demand contraction and lower sales for the automobile dealership industry. Hence, the resultant subdued demand and lower scale economies are likely to create pressure on the margins, increase working capital intensity,and deteriorate the capitalisation and coverage indicators. AIPL’s working capital intensive nature of operations is likely to stretch the overall working capital cycle.However, AIPL generally has good financial flexibility with relatively low dependence on working capital borrowings; only ~62% of its drawing power was utilised as short-term loans as of mid-July 2019. This could help the company in managing the expected liquidity pressures over the near to medium term.
Credit strengths
- Long track record and strong market presence; experienced management
- Comfortable financial profile
Credit challenges
- Stagnant sales in last few years;Covid-19 to impact revenue streams
- Intense competitive pressure
- Working capital intensive operations
About the company
Incorporated in 1991, Agni Incorporated Private Limited (AIPL) is the sole authorised dealer of Mahindra automotive products (utility vehicles, passenger vehiclesand tractors)for Nepal. Mr. Cabinet Shrestha, Ms. Susan Vaidya Shrestha and Mr. Arjun Prasad Sharma are the shareholders as well as the directors of the company. AIPL has its presence across the country through an extensive network comprising five showrooms/sales outlets of its own (four within Kathmandu valley and one in Birgunj) and 22 regional dealership outlets.
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