Arihant Polypacks Limited Rs 98.3 crore loan ratings is assigned with LB/A4 ratings by ICRA Nepal

Tue, Jun 30, 2020 4:02 PM on Credit Rating, Latest,

ICRA Nepal has assigned along-term rating of [ICRANP] LB (pronounced ICRA NP LB) to the long-term loans of Arihant Polypacks Limited (APL). ICRA Nepal has also assigned a short-term rating of [ICRANP] A4 (pronounced ICRA NP A four) to APL’s funded and non-funded short-term loans.

The  ratings  of  APL  remain  constrained  by  its  weak  financial  profile  characterised  by lower  profitability, high  gearing, stretched coverage indicators and tight liquidity position. Gearing is high due to higher utilisation of long-term loans for expansion of capacity and addition of new product lines while the net worth growth is low amid lower net profitability. Lower  net  profitability  is  the  result  of  higher  financial  burden  on  account  of gearing. These  factors  coupled  with  high working capital intensity of the business, primarily driven by high debtor and inventory levels have resulted in stretched liquidity position.This  has  led  to  a  sustained  need  for  external  financing  through  promoter  loan  and  occasional over utilization of its drawing power along with mismatch in short term loans resulting in current ratio of lower than 1x.Moreover,the company’s operations  and  profitability  are  also susceptible  to raw  material  pricing along  with  the associated  forex  fluctuation  risks. Similarly, the company’s revenue growth and profitability are exposed to external factors such as low entry barriers and changes in government regulations including taxes and import regulations.

Credit strengths

  • Experienced promoters and management team
  • Diversified customer and supplier base
  • Diversified  Product  Lines:

Credit challenges

  • High  financial  leverage, lower  net profitability and weak  coverage metrices
  • Stretched liquidity  position
  • Exposure to raw  material  price  fluctuation  risk  and forex  fluctuation  risk
  • Highly  competitive  intensity  limits  pricing  flexibility

About the company 

Incorporated  on  February  18,  2008,  Arihant  Polypacks  Limited  (APL)  is  a manufacturing  unit  that  manufactures polypropylene (PP) and high-density polyethylene (HDPE) woven fabrics (with or without lamination), non-woven fabrics(with or without lamination),woven sacks, non-woven shopping bags.leno fabrics and tarpaulins primarily for industrial packaging. The tarpaulins are being manufactured under the brand name of “Blue Horse”,” Hulas” and “Relaxo”. The approved installed capacities are 6,000MT for PP/HDPE Woven Fabric (with and without lamination), 200MT for PP/HDPE Woven  Bag  (with  and  without  lamination),  900  MT  for  PP Non-Woven  Fabric  and  600MT  for  PP  Non-Woven  Bag.  The company has been established by a group of 11 individual shareholders people from diverse businesses.The factory is situated at Biratnagar of Morang District, Province 1, Nepal.

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