Pioneer Moto Corp Rs 1.51 billion loan Rating downgraded to [ICRANP] A4+, placed on watch with negative implications
Thu, Jun 18, 2020 3:23 PM on Credit Rating, Latest,
ICRA Nepal has downgraded the short-term rating of Pioneer Moto Corp (Pvt.) Ltd.(PMC)to [ICRANP] A4+@(pronounced ICRA NP Afour plus) from [ICRANP] A3(pronounced ICRA NP Athree).The rating has also been placedon watch with negative implications.
The downward revision in rating mainly factors in the sharp decline in PMC’s operating margins in recent years, along with the rise in leverage, which has led to weakening of coverage indicators. With the decline over the years, interest cover stood barely adequate at 1.2x for FY2019, while the gearing remained high at ~6.1x as of mid-July 2019. High dividend payout for FY2018 (~92%) and lower-than-anticipated accruals in FY2019 had led to the weaker capitalisation profile. The rating is further constrained by the intense competition from established players/brands in the automobile dealership industry, wherein PMC is a relatively new player.
Credit strengths
- Improving market presence and healthy sales growth
- Financial flexibility as part of the Sharda Group
Credit Challenges
- Declining operating margins and weak capitalisation profile
- Externalities brought on by Covid-19 could affect key operating parameters
- Limited track record in auto dealership business and intense competitive pressure
- High working capital intensity and stretched working capital cycle
- Increased taxes, reduced bank financing ratio and increasing borrowing rates could further impact demand growth
About the company
Incorporated in August 2014, Pioneer Moto Corp (Pvt.) Ltd. (PMC) is Nepal’s sole authorised dealer for Nissan and Datsun brand vehicles. PMC was promoted by Mr. Sandeep Kumar Sharda,who is also the sole shareholder and managing director of the company. The company is also involved in selling the genuine spares/accessories and servicing of the Nissan and Datsun brand vehicles. PMC has three showrooms/sales outlets of its own (two in Kathmandu and one in Biratnagar) and 13 dealership outlets across major cities of Nepal.
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