Hansraj Hulaschand and Company Rs 5.79 billion loan Ratings placed on Watch with Negative Implications
Sun, Jun 14, 2020 1:43 PM on Credit Rating, Latest,
ICRA Nepal has placed the ratings assigned to the bank loan limits of Hansraj Hulaschand and Company Private Limited (HHC or the company)on Watch with Negative Implications.These ratings include the long-term rating of [ICRANP] LBBB+@(pronounced ICRA NP L triple B plus) assigned to the company’s long-term loans and the rating of [ICRANP] A2@(pronounced ICRA NP A two) assigned to the company’s short-term loans (including non-fund-based limits).
The ratings for HHC have been placed on Watch with Negative Implications amid business disruptions caused by the Covid-19 triggered lockdown and the expected impact of the pandemic on the Nepalese economy.The disruptions due to the Covid-19 lockdown are likely to slow down economic growth and may alter the consumer spending pattern to an extent.Discretionary purchases like cars and two wheelers may be deferred in the near to medium term, resulting in demand contraction and lower sales for the automobile dealership industry. However, HHC derives the major portion of its revenues from the two-wheeler (2W) segment, which is likely to witness lower demand decline compared to the three-wheeler segment (3W), and hence remains a comfort.However, the expected subdued demand and lower economies of scale would create pressure on margins, increase working capital intensity,and deteriorate the capitalisation and coverage indicators. HHC’s working capital intensive nature of operations are likely to witness further elongation in the overall working capital cycle. HHC’s ability to manage the expected liquidity pressure over the near to medium term remains to be seen.However, ICRA Nepal takes comfort from the company’s experienced management team and reputation of the promoter group (Golchha Organisation), which has diverse presence, mainly in manufacturing and trading sectors.
Credit strengths
- Long track record and strong market presence
- Diverse revenue base; 2W segment likely to witness lower demand constraints
- Part of the Golchha Organisation
Credit challenges
- Covid-19 induced lockdown to result in lower revenues in FY2020 and FY2021
- Margins and financial profile expected to remain under pressure
- Working capital intensive operations
- Intense competition and high dependence on variants from a single model
About the company
Established in 1959, Hansraj Hulaschand and Company Private Limited (HHC) is the authorised dealer of Bajaj two-wheelers and three wheelers, KTM brand two-wheelers, TVS brand tyres and Servo lubricants for Nepal. Its registered office is in Biratnagar, Morang. The company operates through three showrooms of its own in Kathmandu (one Bajaj showroom and two KTM showrooms),along with 148 regional dealerships. HHC is a part of the Golchha Group,which has a long and diverse presence across various manufacturing and trading sectors in Nepal. As of now, the company’s shares are held by 19 members of the Golchha family with a majority stake held by Mr. Shekhar Golchha (53.8%),while the rest of the shareholders hold 3.75% or less. Mr. Shekhar Golchha is the Chairman of the company.
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