Ericsson India's Operating Income at $1.8 Billion in 2008

Indian debt ratings agency, ICRA has reaffirmed Ericsson's Indian subsidiary at A1+, the highest-credit-quality rating assigned by ICRA to short-term debt instruments.

The ratings factor in Ericsson India's established position in the domestic telecom equipment market, its strong order book position and its moderate gearing levels.

While assigning the ratings, ICRA took cognizance of the technological obsolescence risks that manufacturers of wireless telecom equipment including Ericsson India face and the working capital intensive nature of business which has resulted in relatively high gearing levels for the company in the past. ICRA, however, draws comfort from Ericsson India's association with its parent namely Ericsson of Sweden and the latter's demonstrated support to its Indian subsidiary.

ICRA reported that in calendar year 2008, Ericsson India reported an Operating income of Rs.87.5 billion (US$1.8 billion) and Profit after tax of Rs. 3.8 billion (US$78 million)

Going forward, ICRA expects Ericsson India's revenue growth to remain buoyant given the strong demand potential of the domestic wireless telecom industry. This coupled with Ericsson India's limited capital expenditure plan and reliance on debt only to meet working capital requirements is expected to result in strong debt protection metrics.

Ericsson India was established in 1992 as a joint venture between Ericsson and the Rajasthan-based Jiwarajka group. The Jiwarajka group divested its equity stake in Ericsson India in 1999, since when Ericsson India is a wholly-owned subsidiary of Ericsson.