Infomerics Credit Rating Nepal Limited has assigned credit ratings to the bank facilities of Lumbini Palace Resort Limited, the developer of the upcoming Lumbini Marriott Resort and Spa in Rupandehi. The rating agency has assigned an IRN BB (Double B) rating to the company’s long-term bank facilities worth NPR 5.29 billion and an IRN A4 rating to short-term bank facilities worth NPR 203.94 million. The total rated bank facilities amount to NPR 5.50 billion.
The ratings reflect the company’s experienced board and management team, its long-term Hotel Management Agreement with global hospitality company Marriott International, improving financial performance, strengthening capital structure and the strategic location of its proposed resort.
However, Infomerics has also highlighted significant risks, including the ongoing construction of the resort, pending financial closure of the remaining debt requirement, intense competition in Nepal’s hospitality sector and the cyclical nature of tourism demand.
Marriott Partnership Strengthens Project’s Market Position
A major factor supporting the ratings is Lumbini Palace Resort’s long-term Hotel Management Agreement with Marriott International for the development and operation of the Lumbini Marriott Resort and Spa. The association with Marriott is expected to strengthen the resort’s international market positioning through access to the company’s global reservation platform, Marriott Bonvoy loyalty network, internationally recognized service standards and operational expertise.
According to the rating agency, the combination of a strategic location and affiliation with a globally recognized hospitality brand could support healthy occupancy levels, stronger average room rates and relatively stable operating performance once the resort begins commercial operations.
The resort is being developed in Siyari Rural Municipality of Rupandehi, within the broader Lumbini tourism corridor. The project is located near Lumbini, a UNESCO World Heritage Site, Gautam Buddha International Airport and the Indo-Nepal border at Sunauli. The location is expected to attract a mix of domestic tourists, international visitors, religious pilgrims and travellers crossing the Nepal-India border.
First Phase Expected to Begin Operations in January 2027
Lumbini Palace Resort is developing the hotel project at an estimated total cost of approximately NPR 10.997 billion. As of May-end 2026, the project had achieved around 45% physical progress and approximately 35% financial progress. The first phase of the project, comprising 200 rooms, is expected to commence full commercial operations from January 2027. The entire project, with a total capacity of 450 rooms, is expected to be completed by FY30.
The rating agency has identified timely completion of the project as a key factor that will determine the company’s future financial performance. The company must also complete the remaining project financing arrangements. Infomerics has specifically noted that the pending financial closure of the debt requirement exposes the project to funding risks. Any delay in securing the required financing, cost overruns or construction delays could affect the project’s financial profile and expected commencement timeline.
Financial Performance Shows Gradual Improvement
Despite being in the process of developing a major hospitality project, Lumbini Palace Resort has recorded gradual improvement in its operating performance. The company’s total operating income increased from approximately NPR 72 million in FY22 to NPR 101 million in FY23, NPR 119 million in FY24 and NPR 141 million in FY25. This represents a compound annual growth rate of approximately 22% during FY22–FY25.
The growth has been supported by the recovery of tourism activities and improved contributions from accommodation and banquet segments. During the first 10 months of FY26, the company recorded total operating income of approximately NPR 145 million. However, its EBITDA margin moderated to approximately 44% in FY25, compared to around 55% in FY24 and 54% in FY23. The decline was primarily attributed to higher procurement costs following a reduction in in-house agricultural production.
Despite the decline in EBITDA margin, the company’s profit after tax margin improved to approximately 11% in FY25, compared to around 4% in FY24. The improvement was supported by increased operating scale and lower interest expenses. Gross cash accruals also improved to approximately NPR 26 million in FY25, up from around NPR 16 million in FY24, indicating improved internal cash generation.
Capital Structure Strengthens Significantly
The company’s capital structure has improved considerably in recent years. Lumbini Palace Resort’s overall gearing ratio declined from approximately 3.84 times in FY23 to 2.67 times in FY24 and 1.28 times in FY25. The ratio further improved significantly to approximately 0.25 times as of mid-May 2026.
The improvement was mainly driven by the strengthening of the company’s tangible net worth following substantial equity infusion and advance share capital. Similarly, the total outside liabilities to tangible net worth ratio declined from 3.91 times in FY23 to 2.76 times in FY24, 1.35 times in FY25 and approximately 0.30 times as of mid-May 2026.
The improvement indicates a stronger solvency position compared to previous years. The company’s interest coverage ratio also improved from 1.18 times in FY23 to 1.33 times in FY24 and 1.74 times in FY25. It stood at approximately 1.61 times during the first 10 months of FY26. Likewise, the debt service coverage ratio improved to 1.64 times in FY25, compared to 1.30 times in FY24 and 1.19 times in FY23. Although the indicators have improved, Infomerics has described the company’s coverage metrics as moderate.
Experienced Board and Management Team
The rating agency has also highlighted the experience of the company’s board of directors and professional management team. The board is chaired by CA Deepak Pandey, former President of the Association of Chartered Accountants of Nepal. He has experience in banking, finance, hospitality and corporate governance.
The board also includes CA Roshan Kumar Neupane, former Chief Executive Officer of NIC Asia Bank Limited, along with directors with experience in banking, insurance and business management. Infomerics has stated that the company is supported by a professional management team with expertise across various sectors. The experience of the board and management is expected to support the execution of the large-scale hospitality project and the eventual operation of the resort.
Hospitality Competition and Tourism Cycles Remain Key Risks
Despite the positive factors, the rating agency has identified several risks facing the company. Nepal’s hospitality sector remains highly competitive, with local and international hotel operators offering a wide range of pricing and service models. The premium and luxury hotel segment, in particular, faces competition from established hotels and new properties entering the market.
The sector is also highly sensitive to seasonal tourism patterns, global travel trends, natural disasters and geopolitical developments. Any decline in tourist arrivals or disruption to international travel could affect hotel occupancy, room rates and profitability.
The company may also face challenges in stabilizing operations after the resort begins commercial operations. Hotels typically require a relatively long period to recover fixed costs and achieve stable profitability. The rating agency has therefore identified the company’s ability to complete the project on time and within the estimated cost, achieve timely financial closure and successfully stabilize operations as key rating sensitivities.
Company Transitioned from Private to Public Limited Status
Lumbini Palace Resort was originally established as a private limited company on December 24, 2018. The company was converted into a public limited company on December 8, 2025, following which it changed its name to Lumbini Palace Resort Limited. The company has entered into a Hotel Management Agreement with Marriott International and plans to operate the property under the Lumbini Marriott Resort and Spa brand after completion of the project.
According to the rating report, Terras Ink Company Private Limited was the company’s major shareholder, holding approximately 12.15% of the company’s shares as of mid-May 2026. The proposed resort is expected to become a significant addition to Nepal’s hospitality infrastructure, particularly in the Lumbini tourism corridor. Its strategic location, global brand association and planned large-scale capacity could provide a strong platform for attracting both domestic and international visitors.
However, the project’s future performance will largely depend on successful completion of construction, securing the remaining financing, managing project costs and achieving sustainable occupancy after the resort begins operations. With the first phase targeted for commercial operation in January 2027, the project’s execution and financial closure will remain closely monitored as Lumbini Palace Resort moves from its development phase toward becoming a major branded hospitality destination in Nepal.
