Three subsidiary companies of Vishal Group set to raise total long-term and short-term banking facilities worth Rs.7.45 Arba; Care Ratings grades each facility

Care Ratings Nepal (CRNL) has rated the short-term and long-term bank facilities of three companies’ part of Vishal Group. These three companies are, Advanced Automobiles Pvt. Ltd., Mainawati Steel Industries Pvt. Ltd. and V.G. Automobiles Pvt. Ltd.

The key rating drivers of each of the companies is as follows:

Advanced Automobiles Private Limited

CARE Ratings Nepal Limited (CRNL) has assigned rating of ‘CARE-NP BBB (Triple B minus)’ to the long-term bank facilities worth Rs.36.24 Million and ‘CARE –NP A3 (A Three)’ to the short-term bank facilities worth Rs.1,260 Million of Advanced Automobiles Private Limited (AAPL).

The ratings assigned to the bank facilities of AAPL derives strength from experienced & resourceful promoters and company being part of Vishal Group of Companies; sole distributor of Renault SAS in Nepal; strong brand value of Renault; established dealer network and moderate financial risk profile & debt service indicators during FY18 (UA, refers to the period ending July 16, 2018).

The ratings, however, are constrained by limited track record of operation; leveraged capital structure; working capital intensive nature of operation and exposure to volatile interest rates; intense competition from dealers of alternative automobile brands; cyclic nature of auto industry and exposure to regulatory risks.

Ability of the company to maintain the revenue growth, improvement in the profitability margin and its overall solvency position will be the key rating sensitivities.

Mainawati Steel Industries Private Limited

CRNL has assigned Rating of ‘CARE-NP BBB’ to the long-term bank facilities worth Rs.196 Million and ‘CARE-NP A3’ to the short-term bank facilities worth Rs.4,769 Million of Mainawati Steel Industries Private Limited (MSPL).

The ratings assigned to the bank facilities of Mainawati Steel Industries Private Limited (MSPL) derives strength from established and long track record of operations, strong promoters, being part of Vishal group of companies and experienced management team in the related field, comfortable financial risk profile and debt service indicators, diverse product range catering to wide spectrum of industries and established marketing setup, healthy capacity utilization and demand of steels products in the country.

The ratings, however, are constrained by exposure to volatile interest rates, raw material price volatility risk and foreign exchange fluctuation risk, high overall gearing level at the end of FY18 (refers to 12 months period ended mid-July 2018), working capital intensive nature of operations and presence in highly fragmented and competitive nature of steel industry.

The ability of MSPL to manage the growth in the operations & maintaining the profit margins and rationalization of its debt through efficient working capital management are the key rating sensitivities.

V.G. Automobiles Private Limited

CRNL has assigned rating of ‘CARE-NP BBB- (Triple B minus)’ to the long-term bank facilities worth Rs.7.46 Million and ‘CARE–NP A3 (A Three)’ to the short-term bank facilities worth Rs.1,188.50 Million of V.G. Automobiles Private Limited (VGAPL).

The ratings assigned to the bank facilities of VGAPL derives strength from experienced & resourceful promoters and company being part of Vishal Group of Companies; sole distributor of Suzuki Motorcycle India P Ltd., Atul Auto Ltd. and Motul Lubricants in Nepal; strong brand value of the distributorships; established dealer network; moderate track record of operation and moderate financial risk profile & debt service indicators during FY18 (UA, refers to the period ending July 16, 2018).

The ratings, however, are constrained by leveraged capital structure; working capital intensive nature of operation and exposure to volatile interest rates; intense competition from dealers of alternative automobile brand; cyclic nature of auto industry and exposure to regulatory risks.

Ability of the company to maintain the revenue growth, improvement in the profitability margin and its overall solvency position will be the key rating sensitivities.