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-CRISIL lifts ratings on Indo-US MIM Tec to A/stable/P1.

BANKING AND CREDIT NEWS-December 16, 2010--CRISIL lifts ratings on Indo-US MIM Tec to A/stable/P1(C)2010 M2 COMMUNICATIONS

16 December 2010 - Indian rating agency CRISIL said Wednesday it has upgraded its ratings on the bank facilities of Indo-US MIM Tec Pvt Ltd to A/stable/P1 from BBB+/positive/P2+.

The agency issued the following press release:

Rs.370 Million Term Loan A/Stable (Upgraded from 'BBB+/Positive')

Rs.430 Million Cash Credit A/Stable (Upgraded from 'BBB+/Positive')

Rs.100 Million Letter of Credit/Bank Guarantee P1 (Upgraded from 'P2+')

CRISIL has upgraded its ratings on the bank facilities of Indo-US MIM Tec Pvt Ltd (Indo-US MIM) to 'A/Stable/P1' from 'BBB+/Positive/P2+'.

The upgrade reflects significant improvement in Indo-US MIM's financial risk profile, driven by more-than-expected profitability in 2009-10 (refers to financial year, April 1 to March 31) and in 2010-11 so far. The company's operating margin improved in 2009-10 to 36.5 per cent from 22.2 per cent in 2008-09, mainly driven by increase in revenues from its high-margin firearms business. Consequently, its gearing improved to 0.63 times as on March 31, 2010 from 1.24 times times as on March 31, 2009; gearing is expected to remain below 1 time over the medium term despite the company's large debt-funded capital expenditure (capex) of over Rs.1.4 billion because of healthy accruals. CRISIL further believes that Indo-US MIM's scale of operations is expected to increase with the company's planned capacity addition and diversification into automobile and aerospace segments.

The ratings reflect Indo-US MIM's established market position in the metal-injection molding (MIM) business, robust financial risk profile marked by healthy gearing and high profitability, and product and geographical diversification. These rating strengths are partially offset by the company's working-capital-intensive operations, and susceptibility to volatility in prices of raw materials and foreign exchange rates.

Outlook: Stable

CRISIL expects Indo-US MIM to maintain its credit risk profile backed by its established position in the MIM segment and will generate sizeable cash accruals over the medium term. The outlook may be revised to 'Positive' if Indo-US MIM, after capacity expansion, stabilises operations at the machining units of its aerospace business division, thereby leading to significant increase in its scale of operations and, consequently, in revenues. Conversely, the outlook may be revised to 'Negative' if the company's operating margin declines, its working capital borrowings increase, operations at its new capacities do not stabilise as per schedule, or its capital structure weakens because of more-than-expected debt contracted for the capex.

About the Company

Indo-US MIM (formerly known as AF Technologies India Pvt Ltd) was set up in 1996 by Mr. Krishna Chivukula. The company manufactures and supplies MIM parts, which are used in components for handguns and shotguns, firearm parts, hand and power tools, sporting goods, automotive components, and telecommunications and computer peripherals. Indo-US MIM has clients in about 20 countries. It derives about 90 per cent of its revenue from exports, of which the US contributes about 55 per cent, and the European and Asian countries account for the remainder. It has capex plans of Rs.1.4 billion for the next two years, Rs.360 million for the machining shop and the remainder for capacity additions in the MIM business division.

For 2009-10, Indo-US MIM reported a profit after tax (PAT) of Rs.251.9 million on net sales of Rs.1.46 billion, against a PAT of Rs.71.2 million on net sales of Rs.1.27 billion for 2008-09.

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Publication:M2 Banking & Credit News (BCN)
Date:Dec 16, 2010
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