Samtel Color's rating downgraded

ICRA has downgraded the ratings assigned to the long term NCD and the fixed deposit programme of Samtel Color (SCL) from LA and MA to LA minus and MA minus respectively. While the revised ratings continue to indicate adequate safety, the degree of safety has however, declined since the earlier ratings.

SCL has the largest installed capacity in India to produce 3.1 million CPTs per annum. Line 1 with a capacity of 1.3 million CPTs per annum is being used to manufacture 20 inch, 21 inch FST (flat square tubes) and 21 inch FFST (full and flat square tubes) CPTs. Line 2 has a capacity to manufacture 1.8 million CPTs per annum and has been dedicated exclusively for the manufacture of 14 inch CPTs.

SCL is setting up a new line to manufacture computer display tubes and super flat tubes at a cost of about Rs. 300 crores. This project besides increasing the financial risk also exposes SCL to the technology risk to a certain extent, as these tubes are mainly developed in-house and will be manufactured for the first time in India. The technology risk is mitigated to a certain extent on account of the demonstrated technical skills of SCL in the past.

Although the downgradation also factors in the sluggish CPT market growth in 2000-01, the rating agency acknowledges SCL's dominant position in the domestic colour picture tube (CPT) industry and its steadily increasing market share for the past three years. While ICRA expects SCL to generate healthy cash accruals from operations in the medium term, funding requirement for the new project besides the debt repayments would keep the coverage indicators at adequate safety levels. SCL has group companies with substantial debt in their books in relation to their cash accruals.

In 1999-2000, SCL declared a PAT (profit after tax) of Rs. 37.3 crores on a gross sales of Rs. 658.50 crores. This is an improvement over the previous year mainly on account of improved capacity utilisations with stabilisation of the second line and reduced material and fixed costs. In the first nine months of 2000-01 net sales have increased by 6 per cent as compared to its corresponding nine month period in the previous financial year, though there has been a drop in operating margins on account of hardening of glass prices worldwide.

Corporate Bureau

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