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A3(pronounced ICRA NP A three) to the short-term loans of R.M.C.Cement Private Limited (RCPL).Further, ICRA Nepal has withdrawn the long-term rating of [ICRANP] LBBB- (pronounced ICRA NP L triple B minus)assigned to the long-term loans of RCPL, considering their prepayments.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.
- Experienced promoters; operational synergies being promoted by RMC Group
- Healthy capitalisation profile
- Adequate financial flexibility
- 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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