CARE Ratings Nepal Limited (CRNL) has reaffirmed the issuer rating of ‘CARE-NP BB-’ assigned to Nepalirika Hotel Public Limited (NHPL), citing its moderate scale of operations, experienced promoters and improving capital structure, while highlighting weak profitability, modest occupancy and debt-servicing challenges.
CRNL has also reaffirmed the ‘CARE-NP BB-’ rating for Nepalirika Hotel Public Limited (NHPL)’s long-term bank facilities and ‘CARE-NP A4’ rating for its short-term bank facilities. The company has total rated bank facilities of Rs. 787.56 million, comprising Rs. 767.56 million in long-term facilities and Rs. 20 million in short-term facilities. The total facility amount has declined from Rs. 818.46 million previously.
Revenue Declines Amid Operational Disruption of Nepalirika Hotel Public Limited (NHPL)
Nepalirika Hotel Public Limited, incorporated in May 2018 under the Companies Act, 2063, operates as a three-star hotel business with properties in Biratchowk, Morang, and Damak, Jhapa. The company operates 168 rooms in total, along with four banquet halls and facilities including restaurants, swimming pools, a gym and health club, and spa services. According to CARE Ratings, NHPL’s total operating income (TOI) declined to Rs. 137 million in FY2026 from Rs. 156 million in FY2025, compared with Rs. 119 million in FY2024.
The decline was primarily attributed to a fire incident at one of the company’s seminar halls during the Gen Z protests in September 2025. While the physical damage was not considered material, the subsequent restoration and reconstruction period disrupted business activities and affected revenue generation. The disruption particularly affected the company’s higher-margin food and beverage and event-related revenues.
Occupancy Rate Falls to 21.45%
Nepalirika Hotel Public Limited (NHPL)’s hotel occupancy rate also declined during FY2026. The occupancy rate fell to 21.45% from 24% in the previous year, reflecting continued challenges in stabilizing operations. The decline in occupancy, coupled with weaker event and seminar income, resulted in a significant deterioration in operating profitability. The company’s PBILDT margin fell to 15.25% in FY2026 from 38.60% in FY2025.
With high depreciation and interest expenses continuing to weigh on earnings, Nepalirika Hotel Public Limited (NHPL) reported a net loss of Rs. 45 million in FY2026. CARE Ratings has identified the company’s ability to restore occupancy levels, improve average room rates and strengthen event-related income as important factors for improving its financial performance.
Capital Structure Shows Gradual Improvement
Despite weak profitability, Nepalirika Hotel Public Limited (NHPL)’s capital structure has shown gradual improvement, supported by regular equity infusion from promoters and scheduled repayment of term loans. The company’s overall gearing ratio improved to 1.43 times in FY2026 from 1.48 times in FY2025, primarily due to an increase in tangible net worth.
However, debt protection indicators remain weak. The company’s interest coverage ratio remained below one in FY2026, reflecting insufficient operating earnings to adequately cover interest expenses. CARE Ratings said the recent promoter equity support has provided some cushion to the company’s capital structure, but sustained improvement in profitability and cash generation will be necessary to strengthen its debt-servicing capacity.
Long Gestation Period Remains a Key Risk
CARE Ratings has also highlighted the operational stabilization risk associated with the hotel industry. Nepalirika Hotel Public Limited (NHPL) has invested in a full-service hotel infrastructure featuring accommodation, food and beverage facilities, swimming pools, conference and banquet facilities and health and wellness amenities. Such investments typically require a longer period to recover fixed costs and reach stable profitability.
According to the rating agency, hotel projects generally have a long gestation period, with construction of premium hotels potentially taking three to four years and stabilization of operations requiring another two to three years. Given NHPL’s relatively limited operating track record, its ability to attract customers, establish its brand, maintain occupancy and generate returns from its hotel assets will remain important rating considerations.
Intense Competition Adds Pressure
The fragmented nature of Nepal’s hospitality industry and the presence of a large number of organized and unorganized operators also remain key challenges for Nepalirika Hotel Public Limited (NHPL). Hotel occupancy and revenues are vulnerable to domestic and international economic conditions, changes in tourism demand and regional competition. Maintaining market position and improving operational efficiency will therefore remain critical for the company. CARE Ratings has emphasized that NHPL’s ability to improve occupancy and average room rates while maintaining healthy profit margins will be crucial to generating stronger cash accruals and improving debt-service coverage.
Experienced Promoters Provide Rating Support
The rating continues to receive support from Nepalirika Hotel Public Limited (NHPL)’s experienced and resourceful promoters and its association with the PLO Group. The group has interests across sectors including hospitality, education and automobiles. One of its major group companies, Purwanchal Lube Oil Limited, carries a CARE-NP BBB- (Issuer) rating. Nepalirika Hotel Public Limited (NHPL) is managed under the overall guidance of a seven-member Board of Directors chaired by Bholeshwor Dulal, who has more than two decades of experience in managing the PLO Group.
Tourism Sector Outlook Remains Positive
CARE Ratings has maintained a positive medium-term outlook for Nepal’s tourism sector, noting that tourism remains one of the government’s priority areas for economic growth. The government has continued to prioritize investments in heritage conservation, tourism infrastructure, trekking routes, destination development and aviation facilities. For FY2027, approximately Rs. 7.34 billion has been allocated for culture and tourism activities, while around Rs. 2.93 billion has been allocated for civil aviation development.
Major initiatives include the expansion of the Greater Lumbini Development Programme, promotion of Janakpur as a wedding destination, development of the Great Himalayan Trail and tourism corridors, heritage conservation and improvements to major airports including Tribhuvan International Airport, Pokhara International Airport and Gautam Buddha International Airport. CARE Ratings believes these initiatives could support Nepal’s tourism sector and provide a favorable operating environment for hospitality businesses over the medium term.
Improving Occupancy and Cash Flow Key to Rating
Going forward, NHPL’s ability to increase occupancy, improve average room rates, restore event and banquet revenues and maintain healthy operating margins will remain central to its financial recovery. Sustained improvement in operating cash flows and debt-servicing indicators, alongside continued support from promoters, will be important for strengthening the company’s credit profile and supporting any future improvement in its ratings. As of the latest rating assessment, NHPL’s Rs. 767.56 million long-term bank facilities carry a ‘CARE-NP BB-’ rating, while its Rs. 20 million short-term bank facilities carry a ‘CARE-NP A4’ rating.
