Kathmandu. The Varnawas Museum Hotel, which was temporarily closed after vandalism and arson under the cover of the Gen G movement, has been placed on a watch list. Rating agency Care Ratings Nepal Limited has included this hotel in its credit watch list with negative impacts on issuer ratings and bank facility valuations.
The decision, announced in a press release by Care Ratings, comes against the backdrop of the hotel’s heavy losses during the recent political turmoil. The hotel, which was constructed at the cost of over Rs 1 billion and came into operation only last year, has been destroyed due to the fire.
After the closure of the hotel, the initial share issue (IPO) proposed by the company has also become uncertain.
The hotel operator Varnabas Museum Hotel Limited has been given a share issue rating of ‘Care NP B minus’ and a long-term loan for bank facilities is currently under the scrutiny of ‘Care NP B Minus’ and short term ‘Care NP AFO’.
A share issuer rated “CARE NPB minus” indicates a situation of “high risk of overtime” in terms of repaying its financial liabilities on time in Nepal.
The Barnabas Museum Hotel, Baluwatar, owned by Nepali Congress lawmaker Rajendra Bajgain, was vandalized and set ablaze during the riots on September 7. These protests, which led to political regime change, caused extensive damage to both public and private property.
Care Ratings also mentioned serious structural damage from the fire that spread throughout the multi-storey building of the hotel, according to the press release. The unimaginable damage caused to private property under the cover of the agitation has caused financial loss to the hotel operators and the hotel has also been shut down indefinitely.
A full assessment of the damage and the timeline for reopening the hotel is still uncertain. Even before the riots, the hotel was going through a weak financial situation.
The hotel, which was opened in February 2024, will be open for fiscal year 2080. The five-month period of 81 and the fiscal year 2081. During the entire period of ’82, we faced a low occupancy of just 3 percent. In that year, its income was only Rs 2.70 crore.
The company had been incurring losses in both the years of its operation. As a result, the cash liquidity situation remained highly stressed. The amount received from the income of the hotel was not enough to pay the installment and interest of the predetermined bank loan. To overcome this financial crisis, the directors had to invest additional self-capital in the last fiscal year.
Despite the challenges facing the company, there are some strengths. The company’s hotel can benefit from its strategic location as it is located in Baluwatar. It is also located a short distance from the international airport and major tourist attractions.
The credit rating (rating) has expressed confidence that the growth in tourist arrivals in Nepal’s hospitality sector will rebound. Government support for the tourism sector, including FY 2082. 83 to 2092. 93 has been declared as the Tourism Decade.
In the last fiscal year, financial support from the promoters through additional self-capital investment has provided some relief to meet the operating and financial needs.
