ICRA Nepal has upgraded the long-term loan rating of IME Motors Private Limited (IMPL) to [ICRANP] LB+ from [ICRANP] LB- while reaffirming its short-term loan rating at [ICRANP] A4.

The upgrade reflects a significant improvement in IMPL’s financial profile, particularly after a major capital injection in the fourth quarter of FY2025 and continued growth in operating profitability through FY2026.

IMPL’s standalone gearing ratio improved sharply to around 2.3 times as of mid-July 2026, compared with 7.6 times during the previous rating cycle. Its Total Outside Liabilities to Tangible Net Worth (TOL/TNW) also declined to around 2.4 times, indicating lower leverage.

The company’s operating income increased to NPR 3.50 billion in FY2026, from NPR 3.27 billion in FY2025, representing around 7% growth. This followed a much stronger 39% increase in operating income in FY2025, supported by demand across commercial vehicle segments.

Debt-servicing indicators also strengthened. Interest coverage improved to 2.6 times, while the Debt-Service Coverage Ratio (DSCR) stood at 1.9 times in FY2026. The company has also maintained timely servicing of its debt obligations over the past year.

IMPL’s association with the IME Group remains another credit strength, providing support from a diversified Nepalese business group with interests in banking, remittance, insurance and energy.

However, the upgrade comes with several risks. The government’s halt on new commercial vehicle registrations since May 2026 could weigh on IMPL’s FY2027 business volumes, particularly if restrictions continue into the peak festive season.

Liquidity also remains stretched. Net Working Capital to Operating Income stood at around 71%, largely because of longer debtor collection periods, while working-capital drawing power utilization was close to its limit at approximately 98%.

Competition and the shift toward electric commercial vehicles are additional challenges. IMPL is the sole authorized dealer of Ashok Leyland in Nepal but competes with established brands such as Tata Motors, Eicher and BharatBenz. Its limited presence in the growing electric commercial vehicle segment could also put pressure on future market share.