MUMBAI, May 14: Credit Analysis & Research Ltd (CARE) has downgraded the Rs 30 crore non-convertible debenture (NCD) issue of Philips India Ltd (PIL) to `AA-' from the earlier rating of `AA+'.

The credit rating agency said that the change in rating took into account the operations of the company in the first half 1996 and the increasing competition for the company's products.

CARE, however, observes that despite stiff competition, PIL was able to unlock substantial funds from its inventories and debtors, and managed working capital quite efficiently.

``PIL is overstaffed with 8,500 employees and operations are affected by aggressive unions,'' says CARE. The company's management is restructuring its operations and reducing dependence on imported components. ``However, there is no let up in the level of competition and the pressure on margins is likely to continue,'' says CARE.

In the first half of 1996, the lighting and consumer electronics divisions accounted for 85 % of PIL's total income. There was a general decline in the number of products sold in the first half 1996 due to tight liquidity conditions and increasing competition following the entry of some internationally well-known brands into the Indian market, CARE said.PIL's total income declined by 2.3 % in the first-half 1996, with a 9.6 % drop in the sale of consumer electronic items. PBILDT margin declined marginally from 5.8 % in first half 1995 to 5.4 % in the first half 1996. PIL was, however, able to protect its market share.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.