India Ratings has assigned mobile phone charger manufacturer Salcomp Manufacturing India Private Limited (SMIPL) a National Long-Term rating of ‘IND BBB+'. The Outlook is Stable. The agency has also assigned SMIPL’s INR600m fund-based working capital limits National Long-Term 'IND BBB+’ and National Short-Term ‘IND A2+’ ratings.
The ratings also factor in the financial and technical support from SMIPL’s ultimate parent Salcomp Plc, Finland. Salcomp Plc, which holds 100% of SMIPL, has guaranteed SMIPL’s bank facilities, and had provided loans of USD5m and EUR4.55m during FY07-FY08 for setting up the latter’s manufacturing facility, which have since been fully repaid. SMIPL is Salcomp Plc’s second-largest manufacturing facility globally. The parent supplies mobile phone chargers to most of the global top 10 mobile phone manufacturers and reported a consolidated turnover of EUR305m in 2011 (2010: EUR299m).
SMIPL’s ratings are further supported by its comfortable credit metrics. SMIPL reported EBITDA interest cover of 3.3x in FY12 (FY11: 8.2x) and net debt/EBITDA of 2.8x (1.8x). Revenue grew significantly at a CAGR of 139% over FY08 to INR3,453m in FY12 (FY11: INR3,218m).
The ratings are, however, constrained by the concentration of SMIPL’s business in a single product segment, i.e. mobile phone chargers, combined with relatively lower operating margins (FY12: 4.3%, FY11: 5.0%). India Ratings expects SMIPL’s profitability to improve as it is upgrading its product portfolio and is also planning to increase automation of some of its production lines. The planned capex is expected to be funded by internal accruals and the net debt/EBITDA is likely to remain at around the current levels.
