Maruti Cements looking to obtain long term and short term bank facilities worth Rs.6160.27 Million; Care Ratings assigns satisfactory grade

CARE Ratings Nepal Limited (CRNL) has assigned rating of “CARE-NP A-” to the long term bank facilities worth NPR 5089.80 Million and “CARE-NP A2+” to the short term bank facilities wort NPR 1070.47 Million of Maruti Cements Limited (MCL).

The ratings assigned to the bank facilities of MCL derives strength from established track record of operations and brand presence of the company along with strong operational and financial profile characterized by high profitability, healthy growth in sales, profit & internal cash accruals during FY18 (refers to 12 months period ended mid-July 2018). The ratings also factor in comfortable gearing levels and debt service coverage indicators of the company, competitive advantage over standalone grinding units, locational advantage of the project site, accessibility to limestone mines and demand of cement products in the country expected to grow in the long term.

The ratings are however, constrained by the project implementation and stabilization risk associated with large-size planned debt funded capex, foreign exchange fluctuation risk and raw material price volatility risk. The rating also factors in working capital intensive nature of operations, although low reliance on bank finance for funding, exposure to volatile interest rates and presence in highly fragmented & competitive market and cyclical nature of cement industry.

Timely completion of the proposed project within the cost estimates and satisfactory operations and capacity utilizations thereafter are the key rating sensitivities. Also, satisfactory generation of operational cash flows from the existing plant to fund the equity component of the proposed expansion are the key rating sensitivities.

Maruti Cement Limited (MCL) was incorporated in October 31, 1994 and the current management took over the company in 2005. MCL is managed by industrialists and traders of Nepal, belonging to the Rathi group and Goyal group of companies and all the shares of the company are held by the promoters. The company is presently engaged in manufacturing and selling cement with clinker capacity of 1500 MTPD and grinding capacity of 2000 MTPD located in Mirchaiya, Siraha District of Nepal. MCL is one of the oldest private sector integrated cement manufacturing plant in Nepal. The company is presently engaged in manufacturing and selling Ordinary Portland Cement (OPC) under the “Maruti” brand in Nepal.

Source: Care Ratings Nepal