CARE Nepal assigns rating of A3+ to short term bank facilities of United Traders Syndicate

CARE Nepal (CRNL) has assigned rating of ‘CARE-NP A3+’ to the short term bank facilities of United Traders Syndicate Private Limited (UTSPL). 

Detailed Rationale & Key Rating Drivers

The ratings assigned to the bank facilities of United Traders Syndicate Private Limited (UTSPL) derives strength from established and long track record of operations, strong brand value of Toyota Motor Corporation, Japan and sole authorised distributor in Nepal. Further, the rating is supported by experienced & resourceful promoters, geographical coverage through dealer network, healthy financial performance, although volatile, over the period ended FY18 (refers to 12 months period ended Mid-July 2018) and comfortable debt coverage indicators.  

The rating, however, constrained by deteriorating financial performance during H1FY19 (UA, refers to 6 months period ended mid-January 2019), leveraged capital structure, fortunes linked to performance of Toyota and working capital intensive nature of operations and exposure to volatile interest rates. The ratings are also constrained by foreign exchange fluctuating risk, cyclic nature of auto industry and competition from other automobile players and exposure to regulatory risk related to automobile industry. 

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

Key Rating Strengths

1. Established and long track record of operations
2. Strong brand value of Toyota Motor Corporation, Japan and sole distributor in Nepal
3. Experienced & Resourceful Promoters
4. Geographical coverage through dealer network
5. Healthy financial performance, although volatile, over the period

Key Rating Weaknesses

1. Deteriorate overall financial performance during H1FY19
2. Leveraged capital structure although comfortable debt coverage indicators
3. Working capital intensive nature of operation and exposure to volatile interest rate
4. Foreign exchange rate fluctuation risk
5. Cyclical nature of the auto industry and high competition from other automobile players
6. Exposure to regulatory risk related to Automobile industry 

About the Company

United Traders Syndicate Private Limited (UTSPL) was incorporated in June 18, 1971 by Dr. Vijay G. Vaidya as a sole distributor of Toyota vehicles for Nepal. The company is involved in trading Toyota vehicles, spare parts and services since 1967. In cars segment, they have variants of Etios car. In SUV segment, they have variants of Rush, Land Cruiser, Prado, Rav4, Fortuner and Innova Crysta. In commercial segment they deal with different variants of Hilux and Hiace. Share of the company is hold by three shareholders, Mr. Suraj Vaidya (60%), Mrs. Ritu Singh Vaidya (30%) and Mrs. Susan Vaidya Shrestha (10%).

Brief Financial Performance during last 3 years:                                                  (Rs in Mn)