Care Ratings grades short term and long term bank facilities of Ashok Steel Industries; facilities worth Rs.2.67 Arba rated

CARE Ratings Nepal Limited (CRNL) has assigned rating of “CARE-NP BB-” to the long term bank facilities worth NPR 515.57 Million and “CARE-NP A4” to the short term bank facilities worth NPR 2155 Million of Ashok Steel Industries Private Limited (ASPL).

The ratings assigned to the bank facilities of ASPL are constrained by highly leveraged capital structure and weak debt service coverage indicators, working capital intensive nature of operations and stressed liquidity position. The rating is also constrained by raw material price volatility, foreign exchange fluctuation risk, exposure to volatile interest rates and presence in highly fragmented and competitive nature of steel industry.

The ratings however, derives strength from established and long track record of operations and growth in operational and financial performance during last 2 years ended FY18 (refers to 12 months period ended mid-July 2018), however subdued performance in 6M FY19 (provisional, refers to 6 months period ended mid-January 2019). The rating also factors in experienced management team in the related field, established brand of the company and demand of steel products in the country.

The ability of ASPL to manage growth in the operations & maintaining profit margins and rationalization of its debt through efficient working capital management would be the key rating sensitivities.

Ashok Steel Industries Private Limited (ASPL) is a private limited company incorporated on February 22, 1984 for manufacturing TMT Bars and Ingot, having plant in Gadhimai Municipality-10, Bara, Nepal. Total installed capacity of the plant is 113,000 Metric Tons Per Annum (MTPA) out of which the capacity of TMT Bar which is the primary product is 80,000 MTPA. The company is currently undergoing capex to install induction furnace to melt scrap and manufacture ingots. The total project cost for the capex is estimated to be around Rs.371.18 Million and will be financed in debt-equity ratio of 80:20.

Source: Care Ratings Nepal