ICRA Nepal reaffirmed A3 rating to Short-term loans and withdrawn of long term loan of R.M.C. Cement Private Limited

Wed, Jun 3, 2020 1:58 PM on Credit Rating, Latest,
ICRA Nepal...

ICRA Nepal has reaffirmed the short-term rating of [ICRANP] A3(pronounced ICRA NP A three) to the short-term loans of R.M.C.Cement  Private  Limited  (RCPL).Further, ICRA  Nepal  has  withdrawn  the long-term  rating  of  [ICRANP]  LBBB- (pronounced ICRA NP L triple B minus)assigned to the long-term loans of RCPL, considering their prepayments.

The rating action factors in the company’s adequate track record of operations in the industry (since 2011) along with its experienced  promoters  and  management  team. RCPL is a part of the RMC Group which has more than 25 years’ experience in the manufacturing and selling of construction materials. The Group’s risk averse philosophy is reflected in the company’s low gearing  levels,which  stood  at  nil  as  of  mid-July  2019.  This  has  led  to comfortable  debt  service indicators  with an interest  cover of 4.6 times in FY2019,  despite  the  decline  in  sales.The  company  also  has  adequate financial flexibility in terms of sizeable unutilised working capital limits, to manage any liquidity stress over the near term. The rating also considers the low-cost availability of clinkers within the country, which has slightly offset the impact of lowering sales realisation per MT.Additionally, the Group’s own greenfield unit is also operational now, which reduces the concerns arising from RCPL being a standalone grinding unit, while the industry is gradually being dominated by mine-based units.

Credit strengths

  • Experienced  promoters;  operational  synergies being promoted  by  RMC  Group
  • Healthy capitalisation profile
  • Adequate financial flexibility

Credit challenges

  • Externalities  brought  on  by  Covid-19  could result  in  subdued  demand  outlook
  • Lowering  scale  of  operations leading  to  subdued  profitability
  • High working  capital intensity
  • Intense competition
  • Vulnerability  to  cyclicality  and  seasonal  demand 
  • Risk of regulatory changes

About the company  

Established in 2009, R.M.C. Cement Private Limited operates a cement grinding unit with an installed capacity of ~0.2 million  MTPA.  The  company  has  been  producing  the Portland slag  cement (PSC) and ordinary  Portland  cement (OPC) since 2011, with rising share of OPC segment in recent years. The plant is located at Simara ofBara district, while RCPL’s registered  office  is  in the Central  Business  Park,  Thapathali,  Kathmandu.  RCPL  is  a  family-owned  business,  with  Mr. Shrawan Agrawal and his two sons, Mr. Rajesh K. Agrawal and Mr. Vishnu K. Agrawal, holding the entire equity stake. RCPL  is a part  of  the  RMC  Group,  which  has a  nearly 25-years’ presence in  the  construction  materials  manufacturing sector, mainly steel pipes and sheets.

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