ICRA Nepal assigns LBBB+ and A2 rating to long term and short term loans of Sarbottam Cement

Sun, Dec 15, 2019 4:11 PM on Credit Rating, Latest,
ICRA Nepal...

ICRA Nepal has assigned the long-term rating of [ICRANP] LBBB+ (pronounced ICRA NP L triple B plus) and the short-term rating of [ICRANP] A2 (pronounced ICRA NP A two) to Sarbottam Cement Private Limited (Sarbottam). 

 Credit strengths

  • Strong operational profile
  • Diverse sales channel and good demand leading to high capacity utilisation and healthy sales growth
  • Healthy profitability indicators
  • Experienced promoters/management; operational synergies from being part of the Saurabh Group

Credit challenges

  • High working capital intensity
  • Decreased sales realisation and increased debts leading to moderation in coverage ratios
  • Intense competition in industry
  • Vulnerability to cyclicality and seasonal demand
  • Risk of regulatory changes

About the company   

Incorporated in October 2010, Sarbottam Cement Private Limited (Sarbottam) is involved in the production and selling of clinker and cement. Initially established as a plant with a clinkerisation capacity of 1,190 TPD, the capacity currently stands at 2,990 TPD for clinker and 1,200 TPD for grinding. The shareholding of the company is held by seven individuals, of which four promoters belong to the Saurabh Group (62% stake), a prominent business house of Nepal. Its factory is located at Ramnagar VDC-05, Nawalparasi district. The company currently manufactures OPC and PPC under the brand Sarbottam.

Key financial indicators  

 

FY2016   (Audited)

FY2017   (Audited)

FY2018 (Audited)  

FY2019

(Provisional)

Operating income-OI (NPR million)

3,048

4,813

6,268

7,049

OPBDITA/OI (%)  

28%

38%

32%

29%

Total debt/Tangible net-worth-TNW (times)

2.33 

1.68 

1.51 

1.65 

Total outside liabilities/ TNW (times)

2.61 

2.05 

1.77 

1.99 

Total debt/OPBDITA (times) 

4.60 

2.23 

2.56 

3.01 

Interest coverage (times) 

3.42 

5.94 

5.21 

4.49 

DSCR (times)

0.84 

1.94 

1.88 

1.76 

Net-working capital/OI (%)

22%

44%

58%

49%

Source: Company data

Instrument Details 

Instrument  

Limit 

(Amount in NPR Million)  

Ratings  

Fund-based, long-term Loans (A)

3,742.74

[ICRANP] LBBB+

 

 

 

Fund-based, short-term Loans

 

 

Existing working capital loan limits 

2,260.00

[ICRANP] A2

Proposed working capital limits

1,200.00

[ICRANP] A2

Bridge gap loans (to be converted to term loans)

297.60

[ICRANP] A2

Total fund-based, short term loans (B)

3,757.60

 

 

 

 

Non-fund-based facilities, Short-term

 

 

Letter of credit  

900.00

[ICRANP] A2

Bank guarantee

100.00

[ICRANP] A2

Total non-fund based (C)

1,000.00

 

 

 

 

Grand total (A+B+C)

8,500.34

 

Source: ICRA Nepal Rating