ICRA Nepal assigns Grade 5 rating to the proposed 1:3 right share of Shree Ram Sugar Mills

ICRA Nepal Limited, Nepal’s only credit rating agency, has assigned an “[ICRANP] IPO Grade 5” to the proposed rights offering of Shree Ram Sugar Mills Limited (SRS), indicating poor fundamentals. SRS is proposing to come out with 300% rights issue of 89,03,949.81 units right shares of face value Rs 100 each to be issued to its existing shareholders at par. Currently, the rights issue is pending approval from Securities Board of Nepal (SEBON). As per ICRA Nepal, the assigned grading takes into account the weak operational and financial profile of SRS which has operating capacity of 3000 TCD (tonnes crushed per day) sugar mill and 40 KLPD (kilo litres per day) distillery in Rautahat district. Sustained losses and liquidity crunch has resulted in delayed payments to farmers which in turn has resulted in steep decline in cane availability for the company. Shree Ram Sugar Mills posted a net loss of Rs 11.6 crore over net sales of Rs 36.7 crore during the first nine months of FY 2073/74 as against net loss of Rs 15.6 crore over net sales of Rs 58.3 crore during FY 2072/73. The cane crushed during sugar season 2073/74 was the lowest in the last 12 years at 66421 MT. Shree Ram Sugar Mills Limited, incorporated in 1992, is involved in manufacturing of sugar and allied products. The company was initially promoted by Golcha group (prominent business group in Nepal). The factory is located in Rautahat district in the Central Development region of Nepal in close proximity of the Indo-Nepal border. The company has a crushing capacity of 3000 TCD and distillery capacity of 40 KLPD where it manufactures rectified spirit and Extra Neutral Alcohol (ENA). In the recent period, Golcha group has diluted their ownership from 53% to 29% by selling it to Vishal group, which now owns 23% stake in the company. The capital of the company is distributed among promoter and public in the ratio of 91:9. Furthermore, there are other institutional promoters as well as foreign company who have made investment in SRS. ICRA Nepal assigns IPO grading on a scale of IPO Grade 1 through IPO Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals.