Kathmandu. Rating agency, Infomerics Credit Rating Nepal Limited (Infomerics Nepal), has awarded IRN Triple B Mine Issuer Rating to Air Service Provider Shree Airlines Limited (SAL) for the proposed initial public offering (IPO).
This rating reflects the company’s stable market position, diversified income sources and rising dividends. The rating agency noted that the company’s debt structure and fuel price volatility also pose challenges.
As per the provisions of the Nepal Securities Board Regulations, a company must compulsorily get the rating done before issuing shares to the general public. The rating provides the basis for the general public to decide whether or not to invest in an IPO. However, it has been repeatedly confirmed that fake financial reports or over-coloured financial reports influence ratings and defraud the general public in Nepal’s financial market.
In a press release issued after the rating of Shree Airlines based on the evaluation of the financial capabilities of Shree Airlines by Infomerics Nepal, the information mentioned about the strengths and weaknesses of the airlines has been summarized here.
Ratings of Shree Airlines: ##inline_tags_PLACEHOLDER_8#
1. Stable market situation: Shree Airlines is the third largest air service provider in Nepal in terms of market share. It last fiscal year 2080. As of mid-1981, domestic air services accounted for 16 per cent of the business.
2. Adequate aircraft: Shree Airlines has a total of 18 aircraft (10 aircraft, 8 helicopters). In recent times, it has started service on new routes like Pokhara and Surkhet from Kathmandu
Its income is expected to increase with this. Shree Airlines aircraft are considered suitable for long-distance flights rather than short distances.
2. Revenue and margin growth: With the addition of the new Q-400 aircraft, the company’s revenue increased by 27 percent to Rs 2.57 billion in the first half of the current financial year. Yo
During this period, the operating margin has reached 34 percent.
3. Experienced Management: Under the leadership of Executive Chairman Sudhir Mittal, the company has diversified into both fixed-wing and helicopter sectors.
4. Low foreign exchange risk: Airlines are protected from currency exchange rate fluctuations as the burden of foreign currency loans is low.
चुनौतीहरूः
1. High debt level: After investing 3 billion Nepali rupees for the purchase of new aircraft, the company’s debt ratio has reached 3.24 times.
2. Over-dependency: Despite having 10 large aircraft, the bulk of its revenue depends on two air routes (Kathmandu-Nepalgunj, Kathmandu-Dhangadhi). According to the rating agency, income from both these routes accounted for 59 percent of the total revenue. There is a risk that the company’s financial health may deteriorate immediately if flights on any of these routes are stopped.
3. Fuel price volatility: Since fuel costs have reached 53 percent, crude oil prices can affect its profits.
4. Regulatory challenge: Civil Aviation Authority regulations and the presence and competition of 9 other competing domestic air service providers have increased the pressure.
Founded in 1999, this air service company started its service by helicopter flights. After its conversion into a public limited company in July 2023, it plans to issue an IPO. Its chief promoter is businessman Sudhir Mittal. He owns 99.89 per cent stake in the company.
