ICRA Nepal assigns LBB and A4+ to long term and short term loan facilities of Laxmi Steels

ICRA Nepal has assigned a long-term rating of [ICRANP] LBB (pronounced ICRA NP L double B) to the NPR 399-million long-term limits (including proposed limits of NPR 200 million) of Laxmi Steels Private Limited (LSPL). ICRA Nepal has also assigned a short-term rating of [ICRANP] A4+ (pronounced ICRA NP A four plus) to the existing short-term fund-based limits of NPR 3,910 million, the short-term non-fund based limits of NPR 580 million and the proposed short-term limits (interchangeable as fund based and non-fund based) of NPR 1,785 million.   

Credit strengths

• Strong promoter group and established track record in the industry
• Focus on infrastructure development supporting steel demand in Nepal; domestic players benefit from high import barriers

Credit challenges

• Intense competition and capacity overhang situation have adversely impacted profitability of steel players in Nepal
• Limited product diversification
• Financial profile characterised by high gearing, declining profits and weakening debt coverage indicators
• Vulnerability to inherent cyclicality of the industry and forex risk

About the company

Laxmi Steels Private Limited (LSPL) is one of the largest and established players in the iron and steel products manufacturing industry. It was set up in 2008 as a private limited company. It is owned by the Neupane and Agrawal families under the common group name – Saurabh Group. Both promoter groups belong to reputed business houses in Nepal with stakes in different sectors. 

LSPL is a secondary steel manufacturer that produces TMT bars, ribbed wire and binding wire, all under the brand Laxmi Steels. Its raw materials, mainly iron billets, are imported from primary steel manufacturers in India. The company also has an in-house capacity^[1] for producing billets/ingots that currently meets ~5% of the total raw material requirement. In the near future, LSPL plans to increase the capacity of in-house billet production to meet a larger proportion of its production requirements.    

 LSPL currently has an annual installed production capacity of ~2,00,000 metric tonnes for TMT bars and ribbed wire with ~50% capacity utilisation in FY2019.  

The company is jointly held by the Neupane and Agarwal families. The Neupane family (through Mr. Tikaram Neupane, Mr. Ankur Neupane and Mr. Bishnu Prasad Neupane) holds a ~65% stake while the Agarwal family (through Mrs. Mina Kumari Agarwal and Mrs. Neha Kumari Agrawal) holds the balance. Mr. Tikaram Neupane is the Managing Director of the company. 

Key financial indicators

 Instrument details 

Source: ICRA Rating Nepal