Pioneer Moto Corp Rs 1.51 billion loan Rating downgraded to [ICRANP] A4+, placed on watch with negative implications

ICRA Nepal has downgraded the short-term rating of Pioneer Moto Corp (Pvt.) Ltd.(PMC)to [ICRANP] A4+@(pronounced ICRA NP Afour plus) from [ICRANP] A3(pronounced ICRA NP Athree).The rating has also been placedon watch with negative implications.

The downward revision in rating mainly factors in the sharp decline in PMC’s operating margins in recent years, along with the rise in leverage, which has led to weakening of coverage indicators. With the decline over the years, interest cover  stood  barely  adequate  at  1.2x  for  FY2019,  while  the  gearing  remained  high  at  ~6.1x  as  of  mid-July  2019.  High dividend payout for FY2018 (~92%) and lower-than-anticipated accruals in FY2019 had led to the weaker capitalisation profile. The rating is further constrained by the intense competition from established players/brands in the automobile dealership industry, wherein PMC is a relatively new player. 

Credit strengths

• Improving market presence and healthy sales growth
• Financial flexibility as part of the Sharda Group

Credit Challenges

• Declining operating margins and weak capitalisation profile 
• Externalities brought on by Covid-19 could affect key operating parameters
• Limited  track  record  in  auto  dealership  business  and  intense  competitive  pressure
• High working capital intensity and stretched working capital cycle
• Increased taxes, reduced bank financing ratio and increasing borrowing rates could further impact demand growth

About the company 

Incorporated in August 2014, Pioneer Moto Corp (Pvt.) Ltd. (PMC) is Nepal’s sole authorised dealer for Nissan and Datsun brand  vehicles.  PMC  was  promoted  by  Mr.  Sandeep  Kumar  Sharda,who  is  also  the  sole  shareholder  and  managing director  of  the  company. The  company is  also involved  in  selling  the  genuine  spares/accessories  and  servicing  of  the Nissan  and  Datsun  brand  vehicles.  PMC  has  three  showrooms/sales  outlets  of  its  own  (two  in  Kathmandu  and  one  in Biratnagar) and 13 dealership outlets across major cities of Nepal.

For detailed report, click here

https://www.icranepal.com/