CARE Ratings Nepal Ltd. (CRNL) has assigned rating of “CARE-NP BB” to the long-term bank facilities worth NPR 89.25 Million and “CARE-NP A4” to the short-term bank facilities worth NPR 2375 Million of Shree Krishna Steel Industries Private Limited (SSPL).
The ratings assigned to the bank facilities of SSPL are constrained by subdued performance in FY 19 (audited, refers to 12 months period ended mid-July 2019) leading to net loss coupled with leveraged capital structure and weak debt service coverage indicators. The ratings also factor in SSPL’s working capital intensive nature of operations, raw material price volatility and foreign exchange fluctuation risk, exposure to volatile interest rates coupled with presence in highly fragmented and competitive nature of steel industry.
The ratings, however, derive strength from strong presence of the promoter group in steel sector supported by experienced management team, diverse product range catering to wide spectrum of industries, established brand and marketing network of the group with country wide presence, demand of steel products in the country and locational advantage with scope of export. Ability of the company to pass through changes in raw material prices to the customers to improve the operating profit margins and rationalization of its debt through efficient working capital management will be the key rating sensitivities.
Shree Krishna Steel Industries Private Limited (SSPL) is a private limited company incorporated on February 28, 1995 for manufacturing Pipes, Sheets, Shutter Patti, having plant in Chhatapipra, Bara, Nepal and is in operation for more than two decades. SSPL is part of the Keyal group of companies of Nepal and all the shares of the company are held by individual promoters from Keyal group.
Source: Care Ratings Nepal