Luminous - Lack of management bandwidth leading to lower margin - A real risk

The revision in outlook underlines the Luminous group's lower-than-expected profitability estimated in 2011-12 (refers to financial year, April 1 to March 31) because of writing of an extraordinary expense of Rs.650 million as a one-time adjustment done in the books of account. In 2011-12, the group has incurred an estimated net loss of around Rs.283 million as against CRISIL's expectation of a healthy profitability. The Luminous group's operating margin in 2011-12 is also estimated at weaker-than-expected levels; the group's operating profitability is estimated at around 5.8 per cent in 2011-12, lower than the operating margin of around 9.4 per cent in 2010-11. This is because of the decline in the Luminous group's market share in the first half of 2011-12 because of limited management bandwidth available in the first quarter of 2011-12 as the acquisition by Schneider Electric South East Asia (HQ) Pte Ltd (Schneider) was underway, and also because of the relatively cooler summer season leading to a fall in the overall demand.