Kathmandu. Infomerics Credit Rating Nepal Limited (Infomerics Nepal) has upgraded the credit rating of Jagdamba Auto Group Pvt. Ltd (JAPL) based on the significant improvement in its financial performance.
The company’s long-term bank facility rating has been upgraded from ‘Double B Plus’ to ‘Triple B Minus’. According to Infomerics Nepal, this rating will be applicable to long-term bank loan facilities worth Rs 39.67 crore. Similarly, the short-term bank facility rating has been upgraded to ‘A3’, which was earlier ‘Four Plus’. This rating will be valid for short-term loans worth Rs 1.457 billion. Both these ratings reflect the company’s relative ability to meet its financial obligations on time.
As mentioned in the statement issued by Infomerics, JAPL has made significant financial improvements in the fiscal year 2080.81. Its revenue from vehicle sales has almost doubled last year. Its total operating income reached Rs 4.85 billion in the last fiscal year. In the previous fiscal year 2079.80, it had earned Rs 2.73 billion from the sale of motorcycles, scooters and three-wheelers.
Recently, it has guaranteed the availability of spare parts, including promotions, vehicle exhibitions and time-bound deliveries. Apart from this, it has also provided the facility of collecting and delivering scooters and motorcycles for servicing from the customer’s home and office. It has tried to win the trust of the customer in after-sales service by promising to provide the spare part requested by the customer free of cost if it is not available within 60 minutes. Apart from this, it is also providing motorcycles and scooters at zero interest rate and zero down payment. Due to such an aggressive strategy, it has been successful in promoting sales despite the prevailing economic slowdown.
During this period, the company’s total debt has decreased from Rs 710 million to Rs 538 million. This has reduced the company’s gearing ratio to 0.92, which was 2.01 in the previous year. Similarly, the interest expense ratio has also increased from 1.64 to 4.36.
There has also been an improvement in working capital management. The company’s reserve period has reduced from 76 days to 54 days, while the operating cycle has also reduced from 121 days to 75 days. This has reduced the company’s dependence on short-term debt.
JAPL is a company under the Shankar Group. This company is led by Shahil Agarwal. This company has been assembling and manufacturing two-wheelers and three-wheelers under the TVS brand in Nepal. The company sells motorcycles and three-wheelers through its subsidiary Jagdamba Motors Pvt. Ltd., which imports goods only from TVS India and sells only to Jagdamba Motors, is highly dependent on supply and customers.
The company is competing with international brands such as Honda, Bajaj, Hero, Yamaha, Suzuki in the two-wheeler and three-wheeler market in Nepal. Due to stiff competition, this may affect the company’s profit margins. The government’s untimely changes in import policy and tax increases may affect the business. The Nepal government has provided some relief as it has given tax exemptions on imports and production to encourage the vehicle assembly industry.
