Fitch Ratings has revised Crompton Greaves Ltd’s (CGL) outlook to negative from stable. Its national long-term rating has been affirmed at ‘Fitch AA+(ind)’.
CGL manufactures power and distribution transformers as well as electrical products for industrial and consumer use.
The outlook revision reflects the recent significant increase in CGL’s net financial leverage from FY12 levels. This is driven by a sharp rise in its debt levels amid the declining trend of its operating margins.
Fitch has included CGL’s liquid investments, debt-oriented mutual funds as cash equivalents, and bills discounted as part of debt.
Fitch estimates debt levels to have risen 60 per cent to 70 per cent from FY12 (year-end March) levels following the acquisition of ZIV group (Spain) in July 2012. The Euro 150 million acquisition was funded by a mix of debt and internal accruals.