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Rating agency CRISIL has downgraded rating for bank loans to NELCO Ltd, a Tata group entity, from “A” to “A-” on continued pressure on the operating performance due to delays in receipt of orders and approvals from its clients.
The operating margin of NELCO and its subsidiary has declined significantly. Its operating income for nine months ended June 2013 declined to Rs 98.79 crore from Rs 126 crore in October 2011-June 2012. The operating profit also declined sharply to Rs 50 lakh from Rs 11 crore in nine months ended June 2012.
CRISIL in a statement said this (weak operating profile) is expected to result in substantial weakening of its debt protection metrics. The interest coverage ratio is expected to be less than one time during 2012-13 ended September 2013.
NELCO’s financial year begins on October 01 to End on September 30. For purpose of ratings, CRISIL has combined the business and financial risk profiles of Nelco and its wholly owned subsidiary Tatanet Services Ltd (TSL).
CRISIL also downgraded rating NELCO’s the commercial paper to “A2+” from “A1”.
The ratings continue to reflect the strong support that the Nelco group receives from its parent, The Tata Power Company Ltd and other Tata group companies, and moderate business risk profile of its network systems segment.
The rating strengths are partially offset by the Nelco’s weak financial risk profile, marked by low operating profitability, and small scale of its operations.
Nelco, a subsidiary of Tata Power provides electronic systems, solutions and services for enterprise, infrastructure, and defense. It has two business units: A&C and network systems. Nelco’s subsidiary, TSL, provides bandwidth and other services related to very small aperture terminal (VSAT) operations, thereby, complementing Nelco’s operations.
