CARE Ratings has assigned Rating of ‘CARE-NP BB’ and ‘CARE-NP A4’ to the long term and short term bank facilities of Godawari Steel Company respectively

CARE Ratings Nepal Ltd. (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 Godawari Steel Private Limited (GSPL).

Detailed Rationale & Key Rating Drivers

The ratings assigned to the bank facilities of GSPL are constrained by project implementation risk and stabilization risk thereafter coupled with promoters limited experience in the manufacturing industry. The rating also factors in GSPL’s exposure to volatile interest rates, raw material price volatility, foreign exchange fluctuation risk and its presence in highly fragmented & competitive steel industry. The ratings, however, derive strength from established business group and promoter’s experience in the related field of trading business, healthy demand of steels products in the country and locational advantage of its facilities. The rating also favorably factors in financial closure achieved for the initial project cost and threats of imports minimized by Import Parity Price.

Going forward, timely completion of the project within the time and cost estimates, ability of the company to achieve envisage revenue and profitability and pass through the changes in raw material prices to the customers and managing the foreign exchange fluctuation risks are the key rating sensitivities. Also ability of the company to tie up the debt for the increased project cost shall also be the key sensitivity.

About the Company

GSPL is a private limited company promoted by individual, who is engaged in manufacturing and trading businesses, to set up rolling mill to manufacture TMT & Plain Steel Bars in Rautahat district of Nepal. The project is located at Chandranigahapur, Rautahat of Nepal with expected operation date of October 2018. The company will manufacture TMT & plain Steel Bars by importing raw materials from India and China and selling them into Nepal’s market with production capacity of 600 MT of TMT & Plain Steel Bars per day. The entire capital of the company will be held by the sole promoter Mr. Munna Prasad Senuriya Baniya.