ICRA Nepal has assigned the long-term rating of [ICRANP] LB+ to the NPR 258.68 Million long-term loans of Subha Shingal International Private Limited (SSI). ICRA Nepal has also assigned the short-term rating of [ICRANP] A4 to the NPR 303.20 Million fund-based and NPR 104 Million non-fund-based limits of SSI.
The assigned rating factors in the long track record of SSI (operating since 1992) and its experienced promoter group. The rating also factors in the healthy pace of sales growth maintained by SSI in recent years (CAGR 23% between FY2016 and FY2019), its diversified product portfolio, diversified supplier base and a good customer profile. Major proportion of SSI’s sales comes from the product lines, wherein the company has sole distributorship. This remains a positive for the future sustainability of the revenue. Hotels and retail shopping centers, the two major customer segments for SSI, are witnessing a rise in number which remains a positive for SSI’s demand outlook.
The ratings are, however, constrained by SSI’s small scale of operations and consequently lower scale economies. Coupled with moderate operating profit margins, it results in moderate cash flows for the company. Despite being in the fast-moving consumer goods (FMCG) business, SSI has high debtor days because of its concentrated customer profile, which affects its negotiating power with the customers. Since the company deals in a wide range of products from different suppliers, the inventory days of the company also remain on the higher side. This increases the working capital intensity for the business which affects the liquidity. At the same time, the company has undertaken a debt-funded capex for the construction of its corporate office-cum-warehouse complex, which is unlikely to significantly aid its revenue profile over the near term.
As such, SSI is likely to remain under liquidity pressure and its moderate cash flows are likely to remain stretched to cover the debt-related obligations over the next one to two years. High debtor days and relatively unsecured debtor also remains a rating concern. Also, the market remains fragmented with low entry barriers, which makes the competitive landscape unpredictable.
Subha Shingal International Private Limited (SSI), established as a proprietorship firm in 1992 and later converted into a private limited company in May 2016, is an importer and trader of FMCG products. The company supplies these products in a B2B model, to hotels, restaurants and retail stores and serves as a one-stop solution for groceries and consumables.
The company is the authorized sole importer of brands/companies like Fragata-Spain (olives and olive oils), Selbourne-Malaysia (chocolate products), Foster Clarks-Malta (instant juice powder, mayonnaise), Dongxing-China (hotel room amenities), etc. and also acts as an aggregator for other local and foreign brands. Through contract manufacturing, SSI has also been producing and selling products of its own brand of products under the brand Bhanbhori.
SSI is a family-owned venture where the entire stake is held by Mr. Sunil Kumar Bansal (~34% stake), his brother Mr. Sunny Bansal (34%) and his wife Mrs. Poonam Kumari Goenka (32%).
Source: ICRA Ratings Nepal