CARE Nepal assigns BB and A4 ratings to long term and short term bank facilities of Mega Cement Industries; Rating on notice of withdrawal

CARE Nepal has published the following notice regarding credit rating of Mega Cement Industries: "CRNL has been seeking information from Mega Cement Industries Private Limited (MCPL) to monitor the rating(s) vide e-mail communications/letters dated July 23, 2019, August 20, 2019, September 04, 2019 and September 18, 2019 and numerous phone calls. However, despite our repeated requests, the company has not provided the requisite information for monitoring the ratings. In line with the extant Securities Board of Nepal (SEBON) guidelines, CRNL has reviewed the rating on the basis of the best available information which however, in CRNL’s opinion is not sufficient to arrive at a fair rating. If after the monitoring of the rating there is no cooperation from the Client, then thereafter, CRNL may withdraw the rating. The  rating on Mega Cement Industries Private Limited bank facilities will now be  denoted as CARE-NP BB/CARE-NP A4; ISSUER NOT COOPERATING* (Notice of Withdrawal).  "

Key Rating Weaknesses

• Project implementation and stabilization risk associated with its large-size planned capex
• Funding risk - financial closure for the enhanced project cost yet to be achieved and exposure to volatile interest rates
• Lack of backward integration, Raw material price volatility risk and foreign exchange fluctuation risk
• Presence in highly fragmented and competitive cement industry

Key Rating Strengths

• Experienced promoters in the related field
• Comfortable financial risk profile in the first full year of operation
• Demand of cement products in the country expected to grow
• Locational advantage of the plant site
• Product diversification and own Brand

About the Company

Mega Cement Industries Private Limited (MCPL) is a private limited company, established in 2014, promoted by the individuals involved in cement industry and trading of hardware items, for setting up clinker grinding plant at Jhapa District of Nepal. The company is engaged in manufacturing and selling of cement with grinding capacity of 200 metric tons per day. The company is planning to expand its grinding capacity to 1100 metric tons per day which is expected to come in operation during October 2019. MCPL principally manufactures Portland Pozzolana Cement (PPC) and Ordinary Portland Cement (OPC) cement under five brands. Namaste, Kabeli and Sky are PPC brands and Namaste Gold and Topcem are OPC brands.

(Rs. in Million)

UA: Un-Audited

Details of Bank Facilities

*Issuer did not cooperate; Based on best available information