Salora International: Indian Equities

Salora International: Indian Equities
Salora International is engaged in the distribution, supply, and after-sales service of consumer electronics, IT, Telecom, televisions, and other products.
It supplies products for brands such as Acer, Motorola, MTS, Sharp, etc. along with some Chinese manufacturers.  It also supplies televisions under its own brand name ‘Salora’.
The company reported declining operating profits (now losses) on declining revenues over the last five years.  It reported net losses of 8cr on a revenue base of just over 400cr in the year ended 31stMarch, 2012.  Despite the losses, the debt load appeared moderate in relation to its current assets – assuming that its receivables and inventories were valued conservatively.
The business is exposed to the interest rate cycle – with high rates adversely impacting both the servicing costs of the company’s debts and consumer demand i.e. those who finance purchases with loans.
The business is also exposed to the considerable risk of technological obsolescence where products can be rapidly rendered out-of-date as a result of aggressive competitor innovations.
The high level of competition in electronics retailing results in pressure on selling prices.  The cost structure is adversely impacted by inflation, government taxes, customer defaults (>50% of debtors exceed six months), and foreign exchange movements among other factors.
By: AI