Tara Air Private Limited to obtain loans worth NPR 968.46 Million and USD 6.16 Million; ICRA Nepal grades the issue

Fri, Apr 10, 2020 2:50 PM on Credit Rating, External Media, Latest,

ICRA Nepal has placed the ratings assigned to the bank loan limits of Tara Air Private Limited (Tara or the company) on watch with negative implications. These ratings include the rating of [ICRANP] LB@ assigned to the company’s long-term loans and the rating of [ICRANP] A4@ assigned to the company’s short-term loans (including non-fund based limits). The graded facilities are worth NPR 968.46 Million and USD 6.61 Million.

The ratings for Tara have been placed on watch with negative implications, given the expected impact of Covid-19 on the Nepalese tourism sector and hence the domestic aviation sector. The initially assigned ratings drew comfort from the Government initiatives in celebrating 2020 as a Visit Nepal Year which has been cancelled recently, amid the global coronavirus outbreak. The outbreak resulted in a marginal decline in tourist arrivals in January-February 2020, with a sharp decline expected in the months to follow. The period of March-May is considered the second peak season for tourism-related activities in Nepal, given the conducive environment. Hence, the seasonality in revenues for tourism sector entities is likely to accentuate the level of impact.

Additionally, a decline in the arrival of foreign tourists would result in lower USD earnings, which offer better margins to the players. For short take-off and landing (STOL) sector players like Tara, revenues are highly seasonal and the dependence on USD earnings is very high. Tara also carries a sizeable USD loan and operational cost obligations and hence this would add up to forex risks as well.

Incorporated in 2008, Tara Air Private Limited (Tara) is a domestic airlines company, which operates in STOL destinations with a fleet of four Twin Otter and two Dornier aircraft. It is currently the largest company in the STOL segment, both in terms of the number of fleet ownership as well as passenger volume. Tara is part of the Thamserku Group, which has a presence in multiple tourism-related sectors including domestic and international aviation, expeditions, adventure travel, trekking, hotels/lodges, travel agencies, etc. The company was promoted by Mr. Lhakpa Sonam Sherpa and the Late Ang Tshiring Sherpa, both renowned tourism sector entrepreneurs of Nepal. Mr. Lhakpa Sonam Sherpa is currently the Chairman of Tara while Mrs. Chanda Sherpa is the Managing Director. Tara was started as a spin-off from its current sister concern, Yeti Airlines Private Limited, which operates in trunk routes. Tara’s fleet is based out of Tribhuvan International Airport, with secondary hubs at the Surkhet and Nepalgunj airports. The company operates scheduled flights and chartered flights as well.

Source: ICRA Ratings Nepal