ICRA Nepal has reaffirmed the short-term loan rating of Bottlers Nepal (Terai) Limited (BNTL) at [ICRANP] A1 while retaining the company under “Watch with Negative Implications”, as a significant tax dispute involving its parent company continues to create uncertainty around its financial outlook.

The primary concern is an estimated NPR 12.8 billion tax dispute involving Bottlers Nepal Limited (BNL), BNTL’s parent company. The dispute relates to an offshore ownership transfer of BNL in 2014.

Although BNTL resolved a separate NPR 2.8 billion tax dispute in FY2025 through a government amnesty scheme, the parent company’s unresolved tax exposure continues to pose indirect risks to BNTL. Under the settlement, BNTL paid NPR 781 million in principal, while interest and penalties were waived.

The disputed amount at the parent-company level is substantial, equivalent to around 212% of the group’s consolidated net worth as of mid-April 2026.

ICRA Nepal has also highlighted pressure on BNTL’s operating profit margin (OPM) from elevated operating expenses and exposure to foreign exchange movements. The company also remains exposed to the impact of declining sales volumes following the discontinuation of export operations after FY2024.

However, BNTL has shown signs of operational recovery during the first nine months of FY2026. The company reported 13% year-on-year revenue growth to NPR 5.63 billion, supported by a 6% increase in sales volume and improved product pricing.

Profitability also improved during the period. BNTL’s operating profitability margin recovered to 15.0%, compared with 13.7% in FY2025, helped by lower prices for key raw materials, including sugar and concentrate.

The company continues to benefit from strong ownership support. Bottlers Nepal Limited holds a 91% stake in BNTL, while the ultimate backing comes from The Coca-Cola Company (TCCC).

BNTL also maintains a relatively strong liquidity position. Its debt-to-equity ratio stands at around 0.7x, while approximately NPR 2.0 billion of credit facilities remain unutilized, equivalent to around 72% of its available drawing capacity.

Established in 1987, BNTL also benefits from an extensive distribution network and a strong market position across Nepal outside the Kathmandu Valley.

Going forward, the company's rating outlook will depend on its ability to stabilize operating margins, manage competition and maintain sales growth, while limiting the financial impact of the unresolved tax dispute involving its parent company.

The continued “Watch with Negative Implications” status indicates that while BNTL's operating performance has started to recover, uncertainty surrounding the parent company's tax litigation remains a key credit concern. Any material deterioration in the group's financial position or weakening of BNTL's standalone performance could place further pressure on its rating.