Care Rating Nepal Has Assigned A2 Ratings To Rs 712 Crore Loan of United Distributors Nepal Pvt Ltd

CARE Ratings Nepal Limited (CRNL) has reaffirmed the rating of ‘CARE-NP A2’ assigned to the short-term bank facilities of United Distributors (Nepal) Private Limited (UDN).

The extended operation cycle, exposure to foreign exchange fluctuation risk and volatile interest rate risk, competitive character of the market with the existence of both domestic and international players, and exposure to regulatory risks constrain the ratings given to the bank facilities of UDN.

The rating given to UDN's bank facilities continues to be supported by the company's proven track record of success, strong promoters, an accomplished management team, a diversified distribution network, partnerships with well-known brands, a sufficient liquidity profile, and liquid investments in listed shares. The grade also takes into account a stable increase in the size of activities with acceptable profitability margins, a cozy capital structure, and evidence of rising debt service coverage.

During FY21, the company's operating income rose by 26% year over year (YoY) to Rs. 12,231 Mn. The margin for the same during the previous fiscal year was 10.61 percent, while the PBILDT Margin has improved to 11.68 percent.

Despite the company's expanding operations, the overall gearing ratio was 0.64 times at the end of FY21. In addition to overall gearing, the company's interest coverage ratios significantly improved in FY21, rising to 7.83 times from 3.23 times in the same period the previous year.

Key Rating Strength

• Established track record of operations along with strong promoters and experienced management team
• Diversified distribution network and association with established brands
• The satisfactory financial risk profile
• Liquidity profile supported by liquid investments in listed shares.

Key Rating Weakness

• Elongated operating cycle
• Exposure to volatile interest rate risk and foreign exchange fluctuation risk
• Competitive nature of the industry with the presence of both domestic and international players
• Exposure to regulatory risks

About the Company

The private limited business United Distributors (Nepal) Private Limited (UDN) was established in April 2003. UDN engages in the import and trading of Fast-moving consumer goods (FMCGs) and has its registered office at Kathmandu-22, Khichapokhari. Currently, UDN is the exclusive distributor in Nepal for the majority of the more than 1,350 different product kinds that are distributed by 12 FMCG businesses from across the world under more than 70 brands.

Over a period of around 15 years, this company has been successful in bringing the world-leading and favorite brands to consumers in Nepal. More than 300 employees (directly or indirectly) work at UDN, and they are involved in all areas of distribution. They have established a solid reputation as a reliable partner because of their devotion and attention to distributing various FMCG brands throughout Nepal. The corporation has a strong track record of commitment and execution that has been commended by principal companies as well as rivals, the government, and other organizations.