ICRA Nepal assigns rating of LA- and A2+ to long term and short term loans of Buddha Air

ICRA Nepal has assigned a long-term rating of [ICRANP] LA- (pronounced ICRA NP L A minus) to the long-term loans of

Buddha Air Private Limited (Buddha or the company). ICRA Nepal has also assigned a short-term rating of [ICRANP] A2+ (pronounced ICRA NP A two plus) to the short-term loans (including non-fund-based limits) of Buddha. 

Credit strengths

• Long presence in Nepalese domestic aviation industry as the leader with experienced management
• Robust capitalisation and coverage indicators
• Healthy rise in domestic passengers along with expected boost from Government initiatives
• Fleet composition allows for better economies of scale while maintaining a high load factor
• Low working capital intensity despite a wide network of agents

Credit challenges

• Intense price competition in the industry pressures profitability
• High dependence on top two routes
• Sizeable liabilities and expenses in USD; proper forex cash flow management to remain crucial
• Inherent cyclicality of the industry with high seasonality in revenues
• Earnings susceptible to inherent volatility in fuel prices

About the company   

Incorporated in 1996, Buddha Air Private Limited (Buddha) operates primarily in the domestic trunk routes of Nepal, with limited presence in international aviation to two routes, namely Varanasi and Kolkata from Kathmandu, Nepal. Buddha is the largest and the longest operating private sector airline in Nepal. Mr. Surendra Bahadur Basnet is the company’s Chairman, and his son, Mr. Birendra Bahadur Basnet, is the Managing Director. 

 Key financial indicators 

Source: Company data

Instrument details 

 Source: ICRA Nepal