CARE Ratings Nepal provides BBB- and A3 to long term and short term loans of Reliance Spinning Mills

CARE Ratings Nepal Limited (CRNL) has assigned rating of ‘CARE-NP BBB-’ to the long term bank facilities and ‘CARE-NP A3’ to the short term bank facilities of Reliance Spinning Mills Limited (RSML). 

Key Rating Strengths

• Established track record of operations of the company with resourceful and experienced promoters in manufacturing industries
• Healthy operational and financial profile characterized by growth in sales and moderate profitability parameter at the end of FY19 and H1FY20
• Moderate debt service coverage indicators of the company at the end of FY19 and H1FY20, however exposed to project related risk
• Established presence both in domestic and export market
• Diversified product profile
• Support from the government policies stimulating export sales

Key Rating Weaknesses

• Project risk associated with entirely debt-funded capex leading to high gearing levels, where implementation is yet to start, financial closure is yet to be achieved and the size of the project is ~1.9 x its net worth as on midJuly, 2019
• Exposed to contingent liability from Nepal Electricity Authority (NEA)  
• Working capital intensive nature of operations, with high reliance on bank finance for funding & Non-Fund based) against the drawing power of the company for last 12 months ending mid- January, 2020 was at 78%.
• Exposure to Volatile Interest Rate . 
• Exposed to global competition as major sales are exports oriented

About the Company

Reliance Spinning Mills Limited (RSML) is a public limited company established in the year 1994 and is the largest spinning mill in Nepal. RSML is engaged in manufacturing of Polyester, Viscose, Acrylic/Blended & Polyester Textured Yarns. The company has two factories: Unit A located at Khanar, Sunsari and Unit B located at Duhabi, Sunsari, Nepal. Currently, the total installed manufacturing capacity of the company is 36,000 MT per year. The company is now planning to expand its capacity in two phases by setting up a synthetic spun yarn unit of 4,680 MT and cotton spun yarn unit of 4,680 MT capacity as part of its expansion program and is expected to come in operation during July 2020 and July 2021 respectively.

Brief Financial Performance during the last 3 years is as follows:

(Rs. In Million)

*Audited

Details of the Facilities rated

 Source: https://careratingsnepal.com/

Read the full report here.