-CRISIL changes Mirc Electronics' outlook.
6 December 2010 - CRISIL said Friday it had revised the outlook on the long-term bank facilities of Mirc Electronics Ltd (BOM:500279) to "stable" from 'negative".
The agency issued the following press release:
Rs.1500.0 Million Cash Credit A/Stable (Reaffirmed; Outlook revised from 'Negative')
Rs.250 Million Long-Term Unsecured Loans A/Stable (Reaffirmed; Outlook revised from 'Negative')
Rs.1025 Million Short-Term Unsecured Loans P1 (Reaffirmed)
Rs.3225.0 Million Letter of Credit and Bank Guarantee P1 (Reaffirmed)
CRISIL has revised its rating outlook on Mirc Electronics Ltd's (Mirc's) long-term bank facilities to 'Stable' from 'Negative', while reaffirming the rating at 'A'; the rating on Mirc's short-term facilities has also been reaffirmed, at 'P1'.
The outlook revision is driven by CRISIL's belief that Mirc will sustain its business risk profile over the medium term, despite intense competition, because of the company's increasing focus on the high-potential segments of liquid crystal display (LCD) television sets (TVs), air-conditioners (ACs), and mobile phones; new product launches; new advertising initiatives; and strengthening of its distribution channel. CRISIL also believes that Mirc will maintain its market share while sustaining its operating margin over the medium term because of healthy domestic demand, cost reduction measures, and brand positioning initiatives. Mirc's financial risk profile is expected to remain healthy owing to efficient working capital management and no significant capital expenditure (capex) plans over the medium term.
The ratings continue to reflect Mirc's established market position backed by strong brands, Onida and Igo, diversified revenue profile, and comfortable capital structure. These rating strengths are partially offset by Mirc's exposure to intense competition across its product categories, constraining its market share, and the company's susceptibility to volatility in raw material prices.
CRISIL believes that Mirc will sustain its business risk profile over the medium term, supported by aggressive promotional activities and increased focus on the high-potential segments of LCD TVs, ACs, and mobiles phones, despite intense competition across its product categories. The company's financial risk profile is expected to remain healthy in the absence of any major capex plans. The outlook could be revised to 'Positive' in case of a significant and sustained improvement in Mirc's business performance, leading to a higher market share and improved profitability, coupled with sustenance of its financial risk profile. Conversely, the outlook may be revised to 'Negative' in case of sluggish growth in Mirc's revenues and material decline in its profitability and market share, or if the company undertakes a higher-than-expected debt-funded capex programme, impacting its financial risk profile.
About the Company
Mirc, owned by the Mirchandani family, manufactures a range of consumer durables, including colour TVs, digital versatile disk (DVD) players, ACs, washing machines, microwave ovens and mobile phones. The company markets its products primarily under the Onida brand; its other brand, Igo, is targeted at the rural markets. Mirc has manufacturing plants in Wada (Maharashtra), Noida (Uttar Pradesh), and Roorkee (Uttaranchal). Operations at the Roorkee plant, which manufactures washing machines, commenced in 2009-10 (refers to financial year, April 1 to March 31).
Mirc reported a profit after tax (PAT) of Rs.183.7 million on an operating income of Rs.15.02 billion for 2009-10, as against a PAT of Rs.89.5 million on an operating income of Rs.14.3 billion for the previous year. For the six months ended September 30, 2010, the company reported a PAT of Rs.117.10 million on an operating income of Rs.8.91 billion, against Rs.82.3 million and Rs.7.71 billion, respectively, for the corresponding period of the previous year.
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