ICRA Nepal has assigned a short-term rating of [ICRANP] A4 to the Rs. 6.4 billion short-term loan limits of C.G. Motors Private Limited (CGM), citing pressure from falling revenues, shrinking margins and elevated working capital requirements.

C.G. Motors, the automotive arm of Chaudhary Group (CG), benefits from the conglomerate’s established brand presence and nationwide distribution network. The company operates 10 company-owned showrooms, 21 service centers and 75 dealership locations across Nepal.

Despite these strengths, ICRA Nepal has highlighted several challenges facing the company, particularly following the discontinuation of key vehicle brands.

CGM’s revenue declined by approximately 21% on an annualized basis during the first nine months of FY2026 (9MFY2026). The decline was largely linked to the discontinuation of NETA V in May 2025 and KYC in January 2026. These two brands had together accounted for 68% of the company’s revenue in FY2024.

The shift in its product mix has also put pressure on profitability. Two-wheelers accounted for approximately 57% of sales in 9MFY2026, increasing the company’s exposure to a lower-margin segment. Along with higher distribution expenses and competition, this contributed to a decline in the operating profit margin from 15.1% in FY2024 to 6.8% in 9MFY2026.

Working capital remains another area of pressure. High debtor collection periods and elevated inventory levels resulted in net working capital intensity of around 45%. The company’s bank credit facilities were also periodically overutilized, reaching approximately 105% in mid-July 2025, before easing to around 88% by mid-April 2026.

At the same time, CGM’s debt structure has improved significantly. Its total debt-to-tangible net worth ratio fell to around 2.4 times as of mid-April 2026, from approximately 7.2 times in mid-July 2024. ICRA Nepal attributed the improvement to capital infusions during FY2025 and lower working capital requirements.

The company’s financial performance also reflects the changing operating environment. Operating income increased from Rs. 2.06 billion in FY2023 to Rs. 15.02 billion in FY2025, but stood at Rs. 8.89 billion in the first nine months of FY2026. Meanwhile, the OPBDITA-to-operating-income ratio declined from 15.1% in FY2024 to 7.6% in FY2025 and 6.8% in 9MFY2026.

The debt service coverage ratio stood at 1.9 times in FY2025 and 9MFY2026, compared with 3.0 times in FY2024.

ICRA Nepal said CGM’s future rating trajectory will depend on its ability to stabilize revenues, improve operating margins and maintain control over its working capital cycle amid continued competition in Nepal’s automotive market.