Care Nepal assigned BB+ and A4+ rating to the long term and short term bank facility of worth Rs 11.77 arba to Aarti Strips Private Limited
Wed, May 27, 2020 12:32 PM on Credit Rating, Latest,
CARE Ratings Nepal Limited (CRNL) has assigned rating of 'CARE-NP BB+ to the long term bank facilities and 'CARE-NP A4+ to the short term bank facilities of Aarti Strips Private Limited (ASPL).
The ratings assigned to the bank facilities of ASPL are constrained by negative implications of COVID-19 on the operations and financials of the company in the short term period,dependence of the company on one raw material supplier with weak financial standing and raw material price volatility risk along with foreign exchange fluctuation risk.The ratings also factor in working capital intensive nature of operations, exposure to volatile interest rates and presence in highly fragmented &competitive nature of steel industry.The ratings however, derives strength from strong operational and financial performance of the company characterized by growth in sales however,with decline in profitability margins, moderate capital structure and debt service coverage indicators in FY19 (audited,refers to 12 months period ended mid-July 2019). The ratings also factors in long track record of operations in Nepal with experienced professional management team, established brand with country wide market presence and large scale of operation, diverse product range catering to wide spectrum of industries with strong marketing setup and expected demand of steel products in the country post COVID-19 crisis and ability of the company to export steel products.
Key Rating Weaknesses
- Negative implications of COVID-19 on the operations and financials of the company in the short term period
- Dependence on one raw material supplier with weak financial standing
- Raw material price volatility risk and foreign exchange fluctuation risk
- Working Capital Intensive Nature of Operations
- Exposure to volatile interest rates
- Presence in highly fragmented and competitive nature of steel industry
Key Rating Strengths
- Established and long track record of operations in Nepal with experienced professional management team
- Strong operational and financial performance characterized by growth in sales however with reduced profitability margins in FY19
- Moderate capital structure and debt service coverage indicators
- Established brand with country wide market presence and large scale of operation
- Diverse product range catering to wide spectrum of industries and strong marketing setup
- Proximity to Indian border leading to savings in freight cost and generating export sales
- Demand of steels products in the country
About the Company
AartiStrips Pvt. Ltd. (ASPL) is a private limited company which was incorporated on January 21, 2001 for setting up a wet flux galvanized plain and corrugated sheets manufacturing facility at Biratnagar, district Morang, Nepal. The company is into manufacturing wide range of steel products with total installed plant capacity of 340,000 Metric Tons Per Annum (MTPA) in FY19 and is one of the leading player in the industry.
For full report, click here
