| D-Link India Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its rating on the long-term bank facility of D-Link India Limited (D-Link) at 'CRISIL A/Stable’.
D-Link's 9MFY21 performance was impacted on account of lower sales in Q1FY21 due to the pandemic-induced disturbances. However, sales picked from Q2FY21. With most offices and public places remaining shut and orders from the project segment (smart city and office networking projects) getting deferred, overall demand in fiscal 2021 is expected to remain subdued even while demand for routers and internet connectivity related products has improved. D-Link is expected to witness lower sales in fiscal 2021 when compared to fiscal 2020. Margins are however expected to be stable at 5-6%.
Despite lower cash inflow, company’s liquidity should remain adequate to manage its fixed expenses. The company had around Rs 30 crore in the form of unutilised bank lines and surplus cash of Rs 57 Cr as on Sep 30th 2020. Liquidity should also benefit from the flexible credit period that the company enjoys from its parent (D-Link Corporation) which allows it to delay payments if required. Company’s debt free balance sheet should further help cushion any business shock.
The rating continues to reflect D-Link’s established market position and strong distribution network across India, and healthy financial risk profile. These strengths are partially offset by exposure to intense competition, parent company’s weak business profile and exposure to input price and currency volatility. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of D-Link and its wholly owned subsidiary, Team F1 Networks Private Limited (Team F1).
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
D-Link is the one of the leader in shipment of switches and wireless local area network products, with a share of around 30% and 40%, respectively. D-Link had introduced a series of high-end products for its enterprise business including unmanaged long-term POE/POE plus switches, new generation layer 3 stackable managed switches with advance hardware and software enhancements for better performance, flexibility and easy management and industrial grade switches.
Net worth is estimated at over Rs 240 crore as on March 31, 2021 which is expected to increase over the medium term with steady accretion to reserves, while debt was nil. Return on capital employed, is estimated at 15-17% in fiscal 2021. In the absence of any debt funded capex financial risk profile should remain healthy over the medium term.
Weakness:
D-Link mainly operates in the home and small and medium enterprises segments of the networking industry, where profitability is lower than that in the institutional sales segment. The latter is dominated by other market players. Profitability in the retail segment is constrained by intense competition and commoditised nature of products.
Price of copper, the key input for manufacturing cables, is an open market commodity traded globally on exchanges. Copper price has been volatile in the past. Further, currency volatility also impacts profitability as the company imports its products. Complete and immediate pass on of cost increases is difficult given the intense competition. Hence, operating margin will remain susceptible to any adverse fluctuation in raw material prices and currency. D-Link hedges the currency exposure upto 2 months by entering into forward contracts.
Revenues of parent, D-Link Corporation have decreased from NTD 30.3 billion in calendar year 2014 to NTD 15.00 billion in calendar year 2020. However, cash surpluses have been at NTD 6.4 billion as on Dec 31, 2020. Despite parent’s weak performance, CRISIL believes that it will not depend on D-Link India for financial support. |
Liquidity: Adequate Liquidity is adequate. In the absence of capex plans and repayment obligations, cash accrual, expected at Rs 20-30 crore each in fiscals 2021 and 2022 will support liquidity. Company also had around Rs 30 crore in the form of unutilised bank lines and surplus cash of Rs 57 Cr as on Sep 30, 2020 which should be adequate to fund company’s fixed expenses. Cash surplus is also expected to remain healthy over the medium term. |
Outlook: Stable CRISIL Ratings believes D-Link will benefit from its established market position and strong distribution network over the medium term. However, performance of D-Link has not seen growth for last few years. Also fiscal 2021 is expected to see lower sales than last year. |
Rating Sensitivity factors Upward Factors
Downward Factors
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About the Company Incorporated in 2008, D-Link is a step-down subsidiary of D-Link Corp and markets networking products of the parent and also procure from third party vendors. Product profile comprises network switches, wireless local area networks, routers, modems, storage devices, and cameras. In 2010, D-Link began marketing structured cabling products procured from third party vendors.
In January 2014, D-Link acquired Team F1, a company that specialises in providing network and security software for embedded devices. The consideration for the acquisition was in the form of D-Link’s equity shares, which resulted in D-Link Corp’s equity stake in D-Link reducing to 51% from 60%.
D-Link Corp, set up in 1986, is a multinational company that designs, markets, and manufactures networking equipment, with presence across over 100 countries. |
Key financial indicators of D-Link
Year to Date Financials
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||
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Criteria Details
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