Kathmandu. Care Ratings Nepal has re-rated TG Auto Group Pvt Ltd, a subsidiary of Triveni Group, as a banking loan facility of Rs 1 billion.
CARE Ratings Nepal upgraded TG Auto Group to ‘Care NP A3 Plus’ in its financial viability assessment for short-term banking loans. TG Auto Group, the sole assembler and dealer of Royal Enfield motorcycles in Nepal, has released this rating.
According to the rating report, the board of TG Auto Group is headed by Birendra Kumar Sanghai, promoter of Triveni Group. Sanghai Pariwar and Triveni Group have the main investment and control of IGI Prudential Insurance with around 5% promoter shareholding in Care Ratings Nepal. It is considered unethical and suspicious to check the financial health of a company with another sister or major control of the company that lays the foundation and shares the profits of the rating agency Care Ratings Nepal.
Rule 34 Sub-rule (2) of the Credit Rating Regulations, 2068 BS of the Securities Board of Nepal (SEBON) has completely prohibited the credit rating agencies from rating the major shareholder affiliated companies. This includes the direct or indirect interests of the promoters, directors of rating agencies or other institutions with major investments.
As per the provisions of the Act, Birendra Kumar Sanghai, the chief promoter of the insurance company, who is the shareholder of the rating agency, and another company of Triveni Group are rated by Care Ratings. In such a situation, there is a high risk that the rating agency will influence its shareholders to increase the rating score or hide commercial weaknesses.
However strong TG Auto Group’s business and financial position may seem, procedurally and legally, this rating is subject to a conflict of interest. According to market analysts, the Securities Board’s turning a blind eye to such institutional settings and cross-holdings threatens to increase public distrust of the overall capital market credibility.
Earlier, Care Ratings Nepal had rated Ghorahi Cement as an issuer for the purpose of issuing shares at a premium due to direct conflict of interest. Thousands of people have been cheated by Care Ratings on the basis of a fake report made by Ghorahi Cement by hiding the expenses of deduction and other expenses. The Securities Board of Nepal (SEBON) had slapped a fine of Rs 50,000 on Care Ratings Nepal.
