Care Rating assigns BB and A4 rating to the long term and short term bank facilities of Mega Cement Industries respectively

Fri, Sep 28, 2018 1:19 PM on Corporate, Latest,

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 Mega Cement Industries Private Limited (MCPL).

Detailed Rationale & Key Rating Drivers

The ratings assigned to the bank facilities of MCPL are constrained by the implementation and post-implementation stabilization risk associated with its large size project whereby even financial closure is yet to be achieved, small scale of operations, lack of backward integration, raw material price volatility risk, exposure to volatile interest rates and foreign exchange fluctuation risk. The ratings are further constrained by its presence in a highly fragmented & competitive cement industry.

The ratings, however, derive strength from the promoters’ experience in cement industry, steady performance in the first full year of its existing operations, expected growth in demand of cement in the country, locational advantage of the plant site and product diversification & own brand. Timely financial closure of the project, completion of the enhanced project within the envisaged cost and time estimates, satisfactory operations thereafter and the ability of the company to pass through the changes in raw material prices to the finished products and managing the foreign exchange fluctuation risks related to raw materials are the key rating sensitivities.

About the Company

Mega Cement Industries Private Limited (MCPL) is a private limited company, established in 2014, promoted by the individuals involved in cement industry and trading of hardware items, for setting up clinker grinding plant at Jhapa District of Nepal. The company is engaged in manufacturing and selling of cement with grinding capacity of 200 metric tons per day and is planning to expand its grinding capacity to 1100 metric tons per day which is expected to come in operation during October 2019. Around 80% of sales come from dealers and rest is from government projects and direct marketing. It has now planned to expand its capacity by 900 metric tons per day at a total cost of Rs. 735.18 Million.