For this reason, Fitch said it was affirming Abans’ National Long-Term rating at ‘A-(lka)’ with a stable outlook. The rating also factors in the improved financial performance of Abans Financial Services Ltd (AFS) in 2011, partly in line with the performance of the domestic non-bank financial institutions.
“The rating is constrained by Abans’ relatively weak corporate governance compared with listed peers. This includes (but is not limited to) concerns such as the lack of key board sub-committees, the existence of a complex group structure, and the presence of a high level of related party transactions with companies outside the Abans consolidated group,” the Fitch statement said.
Liquidity is adequate with unutilised debt facilities of Rs 2.2 billion and cash of Rs 1.86 billion as at end-9months of 2012, compared with the current portion of long-term debt of Rs 1.34 billion (excluding AFS debt). At end-2011, the company had Rs 5.5 billion of debt for short-term working capital financing.
However, Fitch does not expect a structural weakening in Abans’ working capital cycle given its strong bargaining power with distributors and the strength of its main supplier – LG Corp.