ICRA Nepal assigns LB and A4 to long-term and shor-term loans of Tara Airlines; Find instrument details

Fri, Oct 4, 2019 11:59 AM on Credit Rating, Latest,
ICRA Nepal...

ICRA Nepal has assigned a long-term rating of [ICRANP] LB (pronounced ICRA NP L B) to the long-term loans of Tara Air Private Limited (Tara or the company). ICRA Nepal has also assigned a short-term rating of [ICRANP] A4 (pronounced ICRA NP A four) to the short-term loans (including non-fund based limits) of Tara. 

Credit strengths

  1. Adequate track record of operations in Nepalese aviation industry
  2. Government plans for 2020 likely to boost aviation industry growth
  3. Experienced promoters; operational synergies as a part of Thamserku Group

Credit challenges

  1. Weak financial profile
  2. Limited financial flexibility, high working capital utilisation compared to drawing power
  3. High fluctuations in profitability
  4. Inherent cyclicality of the industry with high seasonality in revenues
  5. High dependence on top two routes in the domestic aviation industry
  6. Declining market share, mainly from loss of aircraft through crashes  

About the company   

Incorporated in 2008, Tara Air Private Limited (Tara) is a domestic airlines company, which operates in STOL destinations with a fleet of four Twin Otter and two Dornier aircraft. It is currently the largest company in the STOL segment, both in terms of the number of fleet ownership as well as passenger volume. Tara is part of the Thamserku Group, which has a presence in multiple tourism-related sectors including domestic and international aviation, expeditions, adventure travel, trekking, hotels/lodges, travel agencies, etc. The company was promoted by Mr. Lhakpa Sonam Sherpa and the Late Ang Tshiring Sherpa, both renowned tourism sector entrepreneurs of Nepal. Mr. Lhakpa Sonam Sherpa is currently the Chairman of Tara while Mrs. Chanda Sherpa is the Managing Director. Tara was started as a spin-off from its current sister concern, Yeti Airlines Private Limited, which operates in trunk routes. Tara’s fleet is based out of Tribhuvan International Airport, with secondary hubs at the Surkhet and Nepalgunj airports. The company operates scheduled flights and chartered flights as well. 

 Key financial indicators  

 

FY2016   (Audited)

FY2017   (Audited)

FY2018 (Audited)  

FY2019

(Provisional)

Operating income – (OI; NPR million)

1,079

1,480

1,417

1,569

OPBDITA/OI (%)  

-2.3%

19.4%

20.2%

16.6%

Total debt/Tangible net worth (TNW; times)

7.3

9.2

9.6

8.0

Total outside liabilities/TNW (times)

8.2

10.9

11.1

9.9

Total debt/OPBDITA (times) 

-50.9

6.0

5.5

5.4

Interest coverage (times) 

-0.3

2.5

2.0

1.8

DSCR (times)

0.6

1.3

0.8

0.6

Net working capital/OI (%)

65%

38%

32%

24%

Source: Company data

 Instrument details 

Instrument

Currency

Limits to be Rated

(Amount in Million)

Rating Action

Non-fund-based facilities; Short term

 

 

 

Non-fund-based-Short Term (Bank guarantee)

NPR

94.07

[ICRANP] A4 

Non-fund-based-Short Term (Letter of credit)

NPR

75.00

[ICRANP] A4 

Fund-based facilities; Short term

 

 

 

Fund-based -Short Term (Demand loan)

NPR

470.00

[ICRANP] A4 

Fund-based -Short Term (Demand loan) 

USD

0.24

[ICRANP] A4 

Fund-based -Short Term (Overdraft) 

NPR

183.18

[ICRANP] A4 

Fund-based -Short Term (Trust receipt loan) 

USD

0.17

[ICRANP] A4 

Fund-based -Short Term (Hire purchase loan) 

NPR

9.13

[ICRANP] A4 

Fund-based facilities; Long term

 

 

 

Fund-based -Long Term (Term loans) 

NPR

137.08

[ICRANP] LB 

Fund-based -Long Term (Term loans) 

USD

5.75

[ICRANP] LB 

Total limits (NPR Million)

 

968.46

 

Total limits (USD Million)

 

6.16