CRISIL Revises Nelco's Rating Outlook to Stable, Reaffirms A Rating

CRISIL Ratings has revised its outlook on NELCO 's long-term bank facilities to 'Stable' from 'Positive' while reaffirming the 'CRISIL A' rating. This adjustment comes in response to slower-than-anticipated revenue growth in key segments, including government, maritime, and banking, financial services, and insurance (BFSI).

Revenue Performance

The revision follows a period of range-bound revenue over the last 2-3 fiscal years. NELCO's consolidated operating income saw a decline from Rs 321.00 crore to Rs 306.00 crore, reflecting the challenges faced by the company in its core business areas.

Rating Details

CRISIL's rating action covers Rs 218.30 crore of NELCO's bank facilities. The rating agency has maintained its short-term rating at 'CRISIL A1'. Here's a breakdown of the ratings:

Facility	Rating
Long Term Rating	CRISIL A/Stable (Outlook revised from 'Positive'; Rating Reaffirmed)
Short Term Rating	CRISIL A1 (Reaffirmed)

Factors Influencing the Rating

Despite the outlook revision, CRISIL's reaffirmation of the 'A' rating reflects NELCO's strong market position in the niche very small aperture terminal (VSAT) service industry. The company maintains a healthy revenue visibility over the next few fiscal years and has sustained a robust operational and financial risk profile.

CRISIL also factored in the support NELCO receives from the Tata group, which enhances its financial flexibility. As of September 30, the Tata group, through The Tata Power Company Ltd and its subsidiaries, held a 50.09% equity stake in NELCO.

Business Outlook

Looking ahead, CRISIL expects NELCO's revenue to grow at a healthy rate in the medium term. This growth is anticipated to be driven by:

The recurring nature of its service business
Increasing revenue from the government segment
Expected increase in bandwidth revenue
Growing adoption of VSAT technology

These factors are likely to support NELCO's market position and operating profitability on a sustained basis.

Financial Profile

While NELCO's operating profitability has moderated, its overall financial profile remains healthy. As of March 31, the company reported:

Financial Metric	Value
Total outside liabilities to adjusted networth (TOLANW) ratio	1.08 times
Adjusted gearing	0.42 times

CRISIL expects NELCO to utilize its operating cash accrual towards business requirements, which should support the sustenance of its healthy capital structure.

Challenges and Risks

The rating agency highlighted some challenges faced by NELCO, including:

Working capital-intensive nature of the business
Inherent regulatory and technological risks in the VSAT industry
Competition from terrestrial telecom providers

CRISIL will continue to monitor NELCO's growth in scale of operations and operating profitability as key rating sensitivity factors.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
-0.47%	-0.34%	-0.97%	-7.20%	-3.53%	+358.16%

NELCO , a prominent player in the satellite communications sector, has received a significant regulatory boost. The Department of Telecom (DoT) has issued a Letter of Intent to NELCO, granting approval for the company's GMPCS VNO (Global Mobile Personal Communications by Satellite Virtual Network Operator) license.

Key Highlights

Regulatory Approval: The Department of Telecom has sent a Letter of Intent to NELCO.
License Type: GMPCS VNO (Global Mobile Personal Communications by Satellite Virtual Network Operator) license.
Implications: This approval allows NELCO to operate as a virtual network operator in the satellite communications sector.

Significance of the Approval

This regulatory green light marks a crucial milestone for NELCO, positioning the company to expand its footprint in the satellite communications industry. As a virtual network operator, NELCO will have the opportunity to provide satellite-based communication services without owning the underlying network infrastructure.

The GMPCS VNO license opens up new avenues for NELCO to offer innovative satellite communication solutions. This development could potentially enhance connectivity options, especially in remote or underserved areas where traditional terrestrial networks may be limited or unavailable.

Industry Impact

NELCO's entry into the GMPCS VNO space may contribute to increased competition and innovation in the satellite communications sector. As the demand for global connectivity continues to grow, particularly for applications such as IoT (Internet of Things), maritime communications, and remote area connectivity, NELCO's new license positions the company to address these evolving market needs.

This approval also aligns with the broader trend of expanding satellite communication services, which play a crucial role in bridging the digital divide and enabling connectivity in challenging geographical locations.

As NELCO moves forward with this new license, industry observers will be keen to see how the company leverages this opportunity to introduce new services and potentially reshape the satellite communications landscape in India.