M.A.W. Enterprises and MAW Earth Movers loan ratings placed on Watch with Negative Implications
Sun, Jun 14, 2020 1:29 PM on Credit Rating, Latest,
M.A.W. Enterprises Private Limited
ICRA Nepal has placed the short-term rating of [ICRANP] A3+@(pronounced ICRA NP A three plus) assigned to the bank loan limits of M.A.W. Enterprises Private Limited(MAW or the company)on Watch with Negative Implications.
The rating for MAW has 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 disruption due to the Covid-19 lockdown is likely to slow down economic growth and may alter the consumer spending pattern over the medium term.Discretionary purchases like cars and two wheelers may witness deferment in the near to medium term, resulting in demand contraction and lower sales for the automobile dealership industry. The passenger vehicle (PV) industry was already showing signs of stagnancy due to increased taxes and stringent financing norms. However, MAW derives the major portion of its revenues from the two-wheeler(2W) segment, which could witness lower demand decline compared to the PV segment 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. MAW’s working capital intensive nature of operations is likely to witness a further elongation in the overall working capital cycle.MAW’s ability to manage the expected liquidity pressure over the near to medium term, remains to be seen. ICRA Nepal takes comfort from the company’s experienced management team and reputation of the M.A.W.Group,which has diverse presence, mainly in the automobile sector.
Credit strengths
- Long track record and improving market presence
- 2W segment likely to witness lower demand constraints compared to other automotive segments
- Adequate financial profile
- Financial flexibility for being apart of M.A.W.Group
Credit challenges
- Business disruption due to Covid-19 induced lockdown to result in a decline in revenues for FY2020, impact likely in FY2021 as well
- Intense competition and high dependence on a few models
- Working capital intensive operations
About the company
Established in 1965 as a private firm and converted in to its present form in 2011, M.A.W. Enterprises Private Limited (MAW) is the authorised dealer of Yamaha 2Ws and Skoda PVs in Nepal (since 1975 and 2007,respectively). Its registered office is in Biratnagar, Morang with two self-owned showrooms (one for each brand) in Kathmandu and 88 regional dealerships (85 outlets for 2 Ws and the rest for PVs) across the country. The company is a part of the M.A.W. Group,which has operations across various trading and financial services sectors in Nepal. As of now, the company’s shares are held by three members of the Agarwal family. Mr. Vishnu Kumar Agarwal is the Managing Director of MAW as well as most Group companies.
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MAW Earth Movers Private Limited
ICRA Nepal has placed the short-term rating of [ICRANP] A3+@(pronounced ICRA NP A three plus) assigned to the bank loan limits of MAWEarth Movers Private Limited(MEPL or the company)on Watch with Negative Implications.
The rating for MEPL has 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 disruption due to the Covid-19 lockdown is likely to slow down economic growth and hence impact the demand for construction equipment (CE).The CE dealership industry was already showing signs of stagnancy in FY2019 due to the inherent cyclicality and slowdown in construction activities. Hence, 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. MEPL’s working capital intensive nature of operations is likely to witness a further elongation in the overall working capital cycle. MEPL’s ability to manage the expected liquidity pressure over the near to medium term, remains to be seen. ICRA Nepal takes comfort from the company’s experienced management team and the reputation of the M.A.W.Group,which has diverse presence, mainly in the automobile sector.
Credit strengths
- Fair track record of operations and strong market presence
- Financial flexibility for being apart of the M.A.W.Group
- Sales mix improving towards spare/servicing, which is expected to witness lower demand constraints
Credit challenges
- Revenues likely to remain muted over medium term
- Financial profile to witness stress
- Intense competition and high dependence on a few models
- High working capital intensity
- Tighter bank financing could impact cash flow streams
About the company
Incorporated in 2008, MAW Earth Movers Private Limited (MEPL) is the sole authorised dealer for the JCB brand construction equipment in Nepal. The company is promoted by M.A.W.Enterprises with a 65% stake and Mr. Vishnu Kumar Agarwal (Chairman of the Group as well as the company) with a 35% stake. The company is a part of the M.A.W. Group,which has an extensive experience in the automobile sector (>50 years) including dealerships of two-wheelers, commercial vehicles, construction equipment and private cars. The Group also has stakes in other diverse spheres such as hire purchase financing. MEPL has presence across the country through a network of 12 branches and 16 authorised retail outlets (AROs).
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