ICRA Nepal has assigned a long-term rating of [ICRANP] LBB to the existing and proposed long-term loans worth NPR 240.30 Million of Ganpati Vanaspati Private Limited (Ganpati). ICRA Nepal has also assigned the short-term rating of [ICRANP] A4 to the existing and proposed short-term loans (including non-fund-based limits) of Ganpati worth NPR 2759.70 Million.
The assigned ratings factor in Ganpati’s long track record of operations (over 20 years), leading to good brand recognition and its experienced promoter group, having established presence in various manufacturing, trading and services sectors in the country. The ratings also derive comfort from the steady growth in the company’s revenues as well as growing demand for edible oils in the country. Ganpati has an established distribution network with long-term relationships with dealers, developed over the years. The ratings also favorably view the company’s sizeable scale of operations, which has been further boosted by the exports of palm olein1 since the beginning of FY2019.
The ratings are, however, constrained by the modest financial profile of Ganpati, characterized by a high gearing and high working capital intensity, despite some improvement in FY2019. The improvement basically stemmed from a significant increase in revenues from export to India and was further aided by the increase in prices of its products, after the termination of VAT refund regime2 to oil producers starting FY2019. Export revenues remain vulnerable to regulatory changes and sustainability of increased price in a competitive market remains to be seen, which will be a key monitor able, going forward. Ganpati depends on imports for its raw material requirements, which exposes it to the risks arising from change in trade regulations. This also led to an elongated procurement cycle, resulting in long inventory days.
ICRA Nepal takes comfort from the fact that the company has been partially utilizing forex hedging mechanisms to mitigate these risks. Concerns also emanate from the fragmented edible oil market and low entry barriers, resulting in intense competition. Being an agro-based industry, Ganpati is exposed to the volatility in revenue streams arising from climatic conditions. The company is also exposed to the regulatory risks associated both with the imports as well as the exports.
Established in 1998, Ganpati Vanaspati Private Limited (Ganpati) is the producer/refiner of various types of edible oils viz. sunflower, soybean, palm oil, mustard oil as well as vegetable ghee under the brands Safari, Safari Health and Chhakra. Its registered office is in Tripureshwor, Kathmandu while its factory is located in Simara, Bara. The company is a part of the Lucky Group, which has operations across various manufacturing, trading, services, finance sector, among others. As of now, the company’s shares are held by five individuals from the Group (Mr. Amit More being the largest shareholder with a 31.4% stake). Mr. Rajiv More is the Chairman of the company.
Source: ICRA Ratings Nepal