Care Nepal assigned BB+ and A4+ rating to the long term and short term bank facility of worth Rs 11.77 arba to Aarti Strips Private Limited

CARE Ratings Nepal Limited (CRNL) has assigned rating of 'CARE-NP BB+ to the long term bank facilities and 'CARE-NP A4+ to the short term bank facilities of Aarti Strips Private Limited (ASPL). 

The ratings assigned to the bank facilities of ASPL are constrained by negative implications of COVID-19 on the operations and  financials  of  the  company in  the  short  term  period,dependence of  the  company on  one  raw material supplier with weak financial standing and raw material price volatility risk along with foreign exchange fluctuation  risk.The  ratings  also  factor  in  working capital  intensive  nature  of  operations,  exposure  to  volatile interest  rates  and  presence in  highly  fragmented &competitive  nature  of  steel  industry.The  ratings  however, derives strength from strong  operational and  financial  performance of the  company characterized  by  growth  in sales  however,with decline  in profitability  margins,  moderate  capital  structure  and  debt  service  coverage indicators in FY19 (audited,refers  to 12 months  period ended mid-July 2019). The ratings  also  factors  in long track  record  of  operations  in  Nepal  with  experienced  professional  management  team,  established  brand  with country wide  market presence and large  scale  of operation, diverse product range  catering to wide  spectrum of industries  with strong marketing  setup  and  expected  demand  of  steel  products  in  the  country post  COVID-19 crisis and ability of the company to export steel products.

Key Rating Weaknesses

• Negative implications of COVID-19 on the operations and financials of the company in the short term period
• Dependence on one raw material supplier with weak financial standing
• Raw material price volatility risk and foreign exchange fluctuation risk
• Working Capital Intensive Nature of Operations
• Exposure to volatile interest rates
• Presence in highly fragmented and competitive nature of steel industry

Key Rating Strengths

• Established and long track record of operations in Nepal with experienced professional management team
• Strong  operational  and  financial  performance  characterized  by  growth  in  sales  however  with  reduced profitability margins in FY19
• Moderate capital structure and debt service coverage indicators
• Established brand with country wide market presence and large scale of operation
• Diverse product range catering to wide spectrum of industries and strong marketing setup
• Proximity to Indian border leading to savings in freight cost and generating export sales
• Demand of steels products in the country

About the Company

AartiStrips  Pvt.  Ltd.  (ASPL)  is  a  private  limited  company  which  was  incorporated  on  January  21,  2001  for setting  up  a  wet  flux  galvanized  plain  and  corrugated  sheets  manufacturing  facility  at  Biratnagar,  district Morang,  Nepal.  The  company  is  into  manufacturing  wide  range  of  steel  products  with  total  installed  plant capacity of 340,000 Metric Tons Per Annum (MTPA) in FY19 and is one of the leading player in the industry.

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