BPL Limited in trouble as turnover, profit declines by 50 per cent

Uma Shankar

Thanks to the growing competitiona and considerable exposure to group companies, the BPL group is facing severe financial problem, resulting in the downgrading of its outstanding credit rating. During the half year ended September 30, 2001, BPL reported a 22.5% decline in turnover due to high degree of competitive pressures coupled with industry slowdown. While the operating profit levels are comparable to the previous year, increased interest cost expenses have resulted in an almost 50% drop in the company's net profit levels.

The ratings assigned to the various outstanding Non-Convertible debenture programmes of BPL Limited (BPL) have been downgraded to "A-" (pronounced 'A minus') from "A+" (pronounced 'A plus'). The rating assigned to the Rs 1000 Mn Commercial Paper programme of BPL has been downgraded to "P2" (pronounced 'P two') from "P1" (pronounced 'P one'). The rating assigned to the fixed deposit programme of the company has also been downgraded to "FA" (pronounced "F A") from "FA+" (pronounced 'F A plus').

The outstanding ratings of BPL have been downgraded because the anticipated correction in the company's financial risk profile has not fructified within the envisaged time frame. The company's net margins and interest coverage indicators have weakened in the half-year ended September 30, 2001 on account of continued high working capital requirements and no significant debt reduction. The ratings are also tempered by the increased competitive pressures and the company's overall moderate market position in the white goods industry. However, the ratings continue to favourably incorporate the company's market leadership position in the CTV industry and its established presence in the frost-free segment of the refrigerators market, strong brand equity, extensive distribution network and high degree of operating efficiencies & backward integration. The ratings further factor in the expected improvement in BPL's cash flows on account of the envisaged divestment of BPL's non-core businesses.

BPL Limited is engaged in the manufacture and marketing of colour televisions (CTVs), black and white TVs (B & W TVs) and alkaline batteries. The company also undertakes the marketing of a number of other consumer durables and appliances manufactured by group companies under the BPL brand. While CTVs accounted for around 56% of its sales in FY 2000-01, the balance is accounted by a host of other consumer durable products. During 2000-01, the company reported a Profit after Tax (PAT) of Rs. 811.5 million on an operating income of Rs. 15514.6 million. During the half year ended September 2001-02, the company reported a net profit of Rs. 205.5 mn on sales turnover of Rs. 6295.9 mn vis-à-vis Rs. 412.2 mn on sales turnover of Rs. 8124.6 mn in the corresponding period last year.

During the half year ended September 30, 2001, BPL reported a 22.5% decline in turnover due to high degree of competitive pressures coupled with industry slowdown. While the operating profit levels are comparable to the previous year, increased interest cost expenses have resulted in an almost 50% drop in the company's net profit levels.This has resulted in further deterioration in company's interest coverage and cash flow protection measures. While BPL continues to have high degree of exposure to group companies, it has further invested Rs 581.6 mn in its subsidiary, BPL Display Devices Ltd in 2001-02. Also, the envisaged reduction in absolute debt levels has not materialised with the company refinancing its long-term debt at higher costs. CRISIL expects that the company's profitability, net margins and accrual generation would remain under pressure in FY 2001-02. However, the envisaged divestment of BPL's non-core businesses before 31st March 2002 is expected to result in some improvement in the company's cash flow position.

December 22, 2001

Rs. 1000 Million Non-Convertible Debenture Issue A- (downgraded from A+)

Rs. 313 Million Non-Convertible Debenture Issue A- (downgraded from A+)
Rs. 1000 Million Commercial Paper Programme P2 (downgraded from P1)
Fixed Deposit Programme FA (downgraded from FA+)

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