(ADPnews) - Oct 27, 2010 - India's rating agency CRISIL yesterday retained the A+/stable/P1+ ratings of Avon Cycles Ltd.
The agency issued the following press release:
Rs.420 Million Cash Credit Limit A+/Stable (Reaffirmed)
Rs.260 Million Term Loan* A+/Stable (Reaffirmed)
Rs.10 Million Letter of Credit P1+ (Reaffirmed)
Rs.130 Million Bank Guarantee P1+ (Reaffirmed)
*Including Rs.149.4 million proposed term loan.
CRISIL’s ratings on the bank facilities of Avon Cycles Ltd (Avon) continue to reflect Avon’s strong financial risk profile marked by low gearing and robust debt protection measures, and its established presence in India’s bicycle industry. These strengths are partially offset by Avon’s low backward integration vis-à-vis its competitors, and its increasing exposure to investments in unrelated businesses.
Outlook: Stable
CRISIL believes that Avon will maintain its established market position in the bicycle industry over the medium term on the back of its wide distribution, established brand name and product quality. Also its financial profile will remain at strong levels as it has only moderate capital expenditure plans in the medium term which will be mainly funded out of internal accruals. The outlook may be revised to ‘Positive’ in case the company successfully implements and stabilises its planned venture into bicycle tyre manufacturing. Conversely, the outlook may be revised to ‘Negative’ if Avon undertakes any large, debt-funded capital expenditure (capex) programme, or makes larger-than-expected investments in unrelated sectors.
About the Company
Avon, incorporated in 1951, manufactures bicycles and bicycle components for the domestic and export markets. The company manufactures only major components such as frames, forks, and mud-guards; the rest are procured from local suppliers. Avon ventured into e-bikes in 2006-07 (refers to financial year, April 1 to March 31) by setting up a manual assembly line. The company has also set up 10 windmills for power generation, five in Tamil Nadu, two in Gujarat, and one each in Maharashtra, Rajasthan, and Karnataka, with an aggregate capacity of 10.5 megawatts, and has entered into contracts with the respective state governments for sale of power. Avon also plans to venture into bicycle tyre manufacturing by setting up a greenfield unit in the medium term, involving a capex of up to Rs.400 million.
For 2009-10, Avon reported a profit after tax (PAT) of Rs.310 million on net sales of Rs.3.92 billion, as against a PAT of Rs.216 million on net sales of Rs.4.04 billion for the previous year.
(INR 100 = USD 2.249/EUR 1.628)
Rating agency website: www.crisil.com
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