Approx Rs 12 arba loan ratings of Chandragiri Hills, Hulas Steels Industries and Hulas Auto Craft Private Limited on the Watch with Negative Implications by ICRA Nepal
Fri, Jul 10, 2020 2:26 PM on Credit Rating, Latest,
Chandragiri Hills Limited
ICRA Nepal has assigned an issuer rating of [ICRANP-IR] BB@(pronounced ICRA NP issuer rating double B) to Chandragiri Hills Limited (CHL). ICRA Nepal has also assigned a long-term rating of [ICRANP] LBB@(pronounced ICRA NP L double B) to the long-term loans and a short-term rating of [ICRANP] A4+@(pronounced ICRA NP A four plus) to the short-term loans of CHL. The ratings assigned are on Watch with Negative Implications.
Credit strengths
- Financially resourceful promoters
- Unique tourist attraction contributing to good revenue base over a short period of time
- Tourism sector remains a priority for the Government
Credit challenges
- Covid-19 pandemic would have significant impact on the hospitality sector
- Weak financial profile with high leverage and sub-par coverage ratios
- Limited track record of operations for cable car; project stabilisation risk high for the resort
- Fragmented hotel industry and increasing competition
About the company
Established in 2009, Chandragiri Hills Limited (CHL) is the operator of the integrated tourist complex located in Chandragiri Hills, Thankot, Kathmandu. The project includes a cable car service to the peak of the hill with religious importance, amusement parks and restaurants therein. The company also operates a 100-room boutique resort, and several other visitor activities at the property. The cable car project started operations on August 8, 2016.The soft launch of the resort was made in July 2019, while the formal launch is yet to be made. CHL was initially registered as Kathmandu Fun Park Private Limited and was converted into a public limited company on July 16, 2014. Its name was changed to the current oneon May 16, 2016. The company is promoted by 15 individuals with Mr. Hem Raj Dhakal and Mr. Chandra Prasad Dhakal as the largest shareholders with 21.8% ownership each. Mr. Chandra Prasad Dhakal is currently the Chairman of the company.The company proposes to issue an IPO shortly (~NPR 184 million), which would dilute its promoter holding to 88%.
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Hulas Steels Industries Limited
ICRA Nepal has assigned a long-term rating of [ICRANP] LBBB- (pronounced ICRA NP L triple B minus) to the fund-based long-term limits of NPR 240.8 million of Hulas Steels Industries Limited (Hulas). ICRA Nepal has also assigned a short-term rating of [ICRANP] A3 (pronounced ICRA NP A three) to the short-term fund-based limits of NPR 5,702.5 million (including embedded non-fund based limit of NPR 3,069.2 million) and short-term non-fund based limits of NPR 1,825.8 million.These ratings are kept on watch with negative implications amid the Covid-19 pandemic’s impact and its likely implications on Hulas’liquidity position and debt coverage indicators.
Credit strengths
- Established track record, strong brand, and tested distribution network
- Relatively healthy operating profit margin in consolidated and duty-protected sheets segment
- Healthy capitalisation and low gearing levels
Credit Challenges
- Near-term growth and margins to be challenged by Covid-induced externalities
- High working capital intensity resulting in stretched liquidity
- Regulatory risk
- Inherent cyclicality of the industry
- Pricing and exchange volatility risk
About the company
Hulas Steel Industries Limited was established in 1981 as a private limited company and converted into a public limited company in 2006.At present, Charnley Development Company Limited holds 50.0% stake in Hulas while the balance stake is held by the Golchha family viz. Mrs. Jayshree Golchha (~24.5%), Hulas Metal Craft (~7.7%), and Mr. Dinesh Kumar Golchha (~3.9%) among others. Hulas is a secondary steel producer, which manufactures steel sheets (galvanised and colour coated)and pipes among other products. It mainly imports hot rolled (HR) steel sheets as raw material input, from primary steel manufacturers in India. Hulas also imports zinc used for galvanisation and occasionally the cold-rolled (CR) sheets. The company has in-house cold-rolling mills to convert the HR sheets into CR sheets which largely meets its requirement for sheet products. It mainly caters to the domestic market.
Hulas currently has an annual installed capacity of ~399,100 metric tonnes, including ~20,000 metric tonnes per annum capacity for pipes (black and galvanised), ~329,400 MT of sheets (plain and corrugated/GPI/GCI) and balance 49,700 MT comprising other ancillary products such as aluminium structures, welded structures, pipe fittings, etc. Pipes and sheets jointly account for ~88% of the installed capacity and ~93% of FY2019 sales for Hulas. Moreover, the Galvalume project, for sheets production with a capacity of 330 metric tonnes per day is in the final stage of commissioning with the commercial production planned for the beginning of FY2021.
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Hulas Auto Craft Private Limited
ICRANepal has assigned a long-term rating of [ICRANP] LBBB-@ (pronounced ICRA NP L triple B minus) to the long-term loans of Hulas Auto Craft Private Limited (HAC). ICRA Nepal has also assigned a short-term rating of [ICRANP] A3@ (pronounced ICRA NP A three) to the short-term loans (including non-fund-based limits) of HAC. These ratings remain on watch with negative implications.
Credit strengths
- Part of the Golchha Organization with experienced promoters
- Leading market position of Bajaj brand vehicles in Nepalese 2W market
- Strong operational profile
Credit challenges
- Externalities brought in by Covid-19 could affect key operating parameters
- Limited track record and high dependence on short-term borrowings
- Financial profile to witness pressure
- Exposed to regulatory risks
- High dependence on variants from a single model
- Tight liquidity and high borrowing rates could deter final customers and hence impact revenue growth
About the company
Established in 2013, Hulas Auto Craft Private Limited (HAC) is the authorised assembling unit of Bajaj brand two-wheelers and three-wheelers. The assembled vehicles are solely sold to its sister concern, Hansraj Hulaschand and Company Private Limited (HHC), the authorised distributor of those products in Nepal. HAC’s registered office is in Ganabahal, Kathmandu, with its assembly unit in Ramgram, Nawalparasi. The company is a part of the Golchha Group,which has operations across various manufacturing and trading sectors in Nepal. As of now, the company’s shares are held by Mr. Shekhar Golchha (80%)and Mr. Akash Golchha (20%). Mr. Shekhar Golchha is the sole director of the company.
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