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ICRA places Xerox-Modicorp on rating watch

By Our Special Correspondent

NEW DELHI JULY 6. In another blow to the scam-affected Xerox Modicorp, the investment rating agency, ICRA has placed the company's Rs.65-crore medium term debenture programme on rating watch with negative implications. It had earlier given the programme an M A plus rating which is a term for "adequate safety.'' The downgrading takes into account disclosures by the U.S.-based copier giant Xerox Corporation to the U.S. Securities Exchange Commission (SEC) about improper payments made by its Indian subsidiary to Government officials over the years to push sales.

An ICRA release says the rating action also takes into account investigation of the Xerox Corporation's accounts by the SEC which has resulted in restatement of the company's accounts and net income reversal of around $1.4 billions for the five-year period from 1997 to 2000. At present, Xerox is rated B1 with negative outlook by Moody's Investor Service. Though the Indian joint venture's rating does not derive any financial support from the parent company, the ICRA has factored in the strong managerial, technical and product support.

The ICRA will continue to monitor developments both in this country and the U.S. before taking a final rating decision which would be announced "in due course.''

It notes that the outstanding "adequate safety'' rating of Xerox Modicorp takes into account its established position in the Indian copier market, a wide product portfolio and a large base of installed machines which will continue to provide stable service income. In the year ending December 2001, the company recorded a decline of 14 per cent in net sales which fell to Rs.530.5 crores. It reported a higher net profit of Rs.14.7 crores as against Rs.8.6 crores in 2000, ICRA states.

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