January 15, 2014
Mumbai
Centum Rakon India Private Limited
 
Rating outlook revised to 'Positive'; ratings reaffirmed
 
Total Bank Loan Facilities Rated Rs.390 Million (Enhanced from Rs.290 Million)
Long Term Rating CRISIL BBB/Positive (Outlook revised from 'Stable' and rating reaffirmed)
Short Term Rating CRISIL A3+ (Reaffirmed)
(Refer to Annexure 1 for Facility-wise details)

CRISIL has revised its rating outlook on the long-term bank facilities of Centum Rakon India Pvt Ltd (CRIPL; part of the Centum group) to 'Positive' from 'Stable', while reaffirming the rating at 'CRISIL BBB'. The rating on the company's short-term facilities has been reaffirmed at 'CRISIL A3+'. The revision in rating outlook follows a similar revision by CRISIL in its rating outlook on CRIPL's parent, Centum Electronics Ltd (Centum; rated' CRISIL BBB+/Positive/CRISIL A2').
 
The ratings reflect the strong support that CRIPL receives from its parent companies, Centum and Rakon (Mauritius) Ltd (Rakon). The ratings also factor in the extensive experience of CRIPL's promoters in the frequency control products (FCP) industry. These rating strengths are partially offset by the company's exposure to risks related to shifts in technology, and susceptibility of its revenues to offtake by the Rakon group of companies, its key customers.

Outlook: Positive

CRISIL believes that CRIPL will continue to benefit over the medium term from its promoters' experience and technical expertise in the FCP industry. The ratings may be upgraded if the company records higher revenue growth, while maintaining its healthy profitability and prudent working capital management. Conversely, the outlook may be revised to 'Stable' if CRIPL's capital structure and liquidity deteriorate, most likely because of large debt-funded capital expenditure or significant decline in its revenues or profitability. Moreover, any action on the ratings of CRIPL's parent, Centum, may also translate into a similar action on the ratings of CRIPL.

About the Company

CRIPL is a 51:49 joint venture between CEL and Rakon Mauritius Ltd (Rakon), a subsidiary of Rakon Ltd, New Zealand. CRIPL manufactures FCPs such as crystal oscillators as a contract manufacturer for Rakon group companies. Its manufacturing unit is in Bengaluru (Karnataka).
 
CEL was set up as a public limited company in 1993 by Mr. Apparao Mallavarapu. It manufactures modules and sub-systems, which are used in the aerospace, defence, telecommunication, and industrial electronics sectors. CEL's electronics manufacturing services division manufactures printed circuit board assemblies, and is in the repair-and-return business.
 
Rakon Ltd is a world leader in the development of frequency control solutions. It has a leading position in the supply of crystal oscillators to the global positioning system, telecommunications network timing/synchronisation, and aerospace markets.
 
CRIPL reported a profit after tax (PAT) of Rs.154.1 million on net sales of Rs.1.07 billion for 2012-13 (refers to financial year, April 1 to March 31), against a PAT of Rs.37.3 million on net sales of Rs.832.2 million for 2011-12.

Annexure 1 - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Million) Rating Facility Amount (Rs.Million) Rating
Bank Guarantee$ 25 CRISIL A3+ Bank Guarantee** 60 CRISIL A3+
Cash Credit* 130 CRISIL BBB/Positive Cash Credit 30 CRISIL BBB/Stable
Letter of Credit@ 35 CRISIL A3+ Packing Credit 200 CRISIL A3+
Packing Credit 200 CRISIL A3+ -- 0 --
Total 390 -- Total 290 --
** Fully interchangeable with letter of credit
* Sublimit for export packing credit / foreign bill discounting to the extent of Rs.70.00 million / Rs.60.00 million.
@ Fully interchangeable between letter of credit and bank guarantee
$ Fully interchangeable between letter of credit and bank guarantee
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January 15, 2014

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