STB maker My Box’s FY19 net loss zooms while revenue declines
MUMBAI: Set top box (STB) manufacturer My Box Technologies’ FY19 net loss has zoomed almost 11 times while the revenue has declined 76% owing to the company’s focus on debtor collection and development of new products such as Alexa kit, Android and hybrid set-top box (STB).
The net loss stood at 12.1 crore in FY19 as against Rs 1.1 crore in the previous fiscal. EBITDA loss more than doubled to Rs 12.8 crore from Rs 6.1 crore. Revenue declined to Rs 20.6 crore from Rs 85.8 crore.
India Ratings and Research (Ind-Ra) has downgraded My Box Technologies’ Long-Term Issuer Rating to ‘IND BBB-’ from ‘IND BBB+’. The Outlook is Negative.
The ratings continue to factor in the financial flexibility and support available to MBT from its parent, Hero Electronix Pvt Ltd (HEPL), which is an investment vehicle of Hero Group’s ventures in the electronics industry.
The downgrade reflects MBT’s evolving business profile, technology risk and weaker-than-expected operating performance in FY19. The Negative Outlook reflects delays in pickup of revenue from the newly launched products.
The rating agency noted that the My Box offered a credit period of 6-12 months in line with the credit period offered by other players in the cable segment thereby leading to a substantial increase in its receivables.
In order to recover the outstanding receivables, the company restricted sales to existing customers until the receivables were reduced to an acceptable level.
The majority of fresh sales were made through the part advance model, wherein around 30% of the payment was received in advance and the remaining was to be received within six months. As a result, the overall receivables declined to Rs 26.4 crore in FY19 (FY18: Rs 58.9 crore).
The company reported EBITDA losses during FY18-FY19 on account of the low sales volume. During FY18, HEPL acquired the home automation segment for Rs 14 crore, providing the required support for research and development, and interest servicing. The debtor collection of Rs 32.5 crore in FY19 enabled the company to meet its interest obligations.
Ind-Ra further noted that a significant proportion of the revenue in FY18-FY19 was generated from the cable segment, while during FY14-FY17 the company generated the bulk of its revenue from the DTH segment.
To diversify the revenue stream and reduce dependence on the commoditised cable segment, MBT launched a MyBox kit for Alexa, which enables the user to experience Amazon’s Alexa voice services on their existing set-top box. The management believes along with the standalone sales; this kit would augment the sales of new set-top box.
It also stated that the company is in advance stages of discussion with a DTH provider for launching its hybrid set-top box, which provides the dual functionality of a set-top box and android television box. The management believes the new products would result in healthy revenue growth.
“However, any delay in commercialisation of these products could result in slower-than-expected revenue ramp up. Moreover, a higher-than-expected credit period on the new products could result in receivable build up,” it added.
My Box is a 70% holding subsidiary of HEPL. The inherent management support is also demonstrated by the presence of the Munjal family’s members on the boards of HEPL and My Box. HEPL’s management is closely involved in the strategy, planning and operations of the company. It has benefitted from its association with the Hero Group while entering into business relationships with big players such as Google and Amazon.
During FY18, MBT recorded negative CFO of Rs 190 million (FY17: negative Rs 70 million), driven by the decline in sales and the receivable build up. However, Ind-Ra expects the CFO to have turned positive in FY19, following the company’s focus on debtor collection.
However, given the decline in the revenue and the consequent reduction in the drawing power, the company’s fund-based limits were reduced to Rs 15 crore from Rs 40 crore in November 2018. My Box also availed an ad hoc short-term loan facility of Rs 2.25 crore to meet its working capital requirements.
Thus, despite a positive CFO in FY19, the company’s working capital limit remained almost fully utilised during the 12 months ended April 2019, it stated.
My Box does not have any long-term debt obligations. Ind-Ra believes in case of a stretch in liquidity, HEPL is likely to provide the required support through a combination of loans and advances or equity.
Ind-Ra also noted that sales volume volatility remains a key concern for any technological product, as the ecosystem is perpetually evolving. There has been a continuous technological disruption in the cable and satellite TV market because of the impact of 4G on the cable broadband base and technological advancements in content, access and delivery.
Established global players such as Hong Kong Skyworth Digital Holdings Co., Ltd., Huawei Telecommunications (I) Co Pvt Ltd, Coship Electronics Co., Ltd., among others, hold a large share of the Indian market. Imports also provide better financing options in the form of three-year buyer credits to the customers, making it difficult for MBT to compete in the market.
It also stated that lower-than-expected revenue growth, delay in recovery of overdue receivables and/or weakening of linkages with the Hero Group could be negative for the rating.
The revenue growth along with diversification of product profile and improvement in working capital cycle, all on a sustained basis, could lead to Outlook revision to Stable.
Incorporated in 2008, My Box is a government-recognised research and development house that designs and sells digital STBs to several major cable and satellite operators across India. The company collaborates with leading conditional access system companies, chipset manufacturers, and electronics manufacturing services players to deliver set-top boxes to its customers.