Credit rating agency, Fitch Ratings has revised HCL Infosystems (HCL) outlook to negative from stable. Its national long-term rating has been affirmed at 'Fitch AA-(ind)'.
The outlook revision reflects Fitch's view that HCL's net interest coverage could deteriorate further in the near term, based on its falling EBITDA margins since 9MFY12 and a persistent revenue decline since FY11. Besides, the negative outlook also reflects the company's underperforming systems integration business and a loss of its market share in the computing and telecom distribution segments.
The ratings continue to be underpinned by HCL's established position in the commercial desktops segment, long-term relationship with Nokia, strong 'HCL' brand name and a wide distribution network. The ratings are also supported by the company's strong liquidity position, as reflected in the largely unused fund-based working capital limits as on March 31, 2012. Fitch expects HCL's liquidity to remain comfortable with no immediate capital commitments, low-to-moderate working capital intensity of overall business and low debt maturities.
Further, the ratings factor in management's initiatives for improving profitability via focusing on increasing revenue contribution from its high-margin service and learning business and widening of its product distribution portfolio. However, the improvement is expected in the long term as the current pool of these businesses is small in relation to consolidated business profile.
HCL Infosystems is one of the leading ICT system integrator and distribution company. It has wide range of products and services such as IT products, solutions and related services, which include PCs, servers, imaging, voice and video solutions, networking products, TV and FM broadcasting solutions, communication solutions, system integration, ICT education and training, digital lifestyle solutions and peripherals.
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