| 3i Infotech Limited | ||||
| Ratings continues on 'Watch Developing' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Rating on the long-term bank facilities of 3i Infotech Ltd (3i Infotech) continues on ‘Rating Watch with Developing Implications'.
Earlier on January 06, 2021, CRISIL Ratings had placed the ratings of 3i Infotech on ‘Rating Watch with Developing Implications.’ following the announcement by 3i Infotech on December 28th, 2020, regarding the agreement to sell its products business to Azentio Software Private Limited, a wholly owned subsidiary of Apax Partners for a consideration of Rs 1000 crore.
On March 31, 2021, company has completed the slump sale of the global software products business (including its worldwide subsidiaries other than the sale of such business of its subsidiaries in Saudi Arabia and Thailand, the completion of which is to occur separately subject to regulatory approvals) on a going concern basis to Azentio Software Private Limited. Proceeds from the sale will be used for repayment of its entire debt, which stood at Rs 820 crore as of December 2020, including preference shares, leaving more than Rs.150 crores to scale up its existing Services business.
The products business accounted for 39% of 3i Infotech’s revenues and about 76% of operating profits in fiscal 2020. Post the conclusion of the deal, while revenues and operating profits will reduce, absence of significant interest obligation will aid net profits. Also, credit profile and liquidity will improve with complete closure of debt and surplus funds.
CRISIL Ratings is in discussion with the company to understand the post-transaction capital structure, growth and profitability aspects of the continuing business, as well as investments required to ramp up the business. The rating watch will be resolved once it has clarity on these aspects.
The rating continues to reflect 3i Infotech’s present diversified revenue profile and healthy demand prospects, and adequate liquidity. These strengths are partially offset by average financial risk profile and modest scale of operation amid intense competition in the IT industry. |
Analytical Approach For arriving at the rating, CRISIL Ratings has combined the business and financial risk profiles of 3i Infotech and all its subsidiaries, held directly or indirectly. This is because all these entities, together referred to as 3i Infotech, share a common management and are in the same business.
Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Weakness:
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Liquidity: Adequate Liquidity remains adequate with cash and equivalents of Rs 115 crore as on September 30, 2020. Healthy cash accruals of 120-130 crore during fiscal 2021 is expected to remain adequate to meet repayment obligations of Rs 101 crore till March 31, 2021. Capex investments are expected to be limited to maintenance capex of about Rs 5-6 crore per annum. The incremental working capital requirement is also expected to be negligible and likely to be managed through internal accrual. Currently, the company has limited access to fund-based working capital limits and is managing its working capital majorly through internal sources |
Rating Sensitivity factors Upwards factors
Downward factors
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About the Company 3i Infotech (formerly, ICICI Infotech Ltd) was set up in 1993 by the erstwhile ICICI Ltd as a back-office processing company. The entity has presence across the globe with offices in South Asia, the Asia-Pacific region, the Middle East, North America, and Western Europe. It offers a range of IT products and services. Its IT product solutions include applications for the banking, financial, and insurance sectors, and an enterprise resource planning suite of applications. The IT services include application development and maintenance, IT consulting, infrastructure management services, business intelligence and enterprise applications, and offshore and onsite support (through its business process outsourcing operations).
For the first six months of fiscal 2021, 3i Infotech reported PAT of Rs 26 crore on operating income of Rs 491 crore compared with PAT of Rs 16 crore on operating income of Rs. 576 Cr during the previous corresponding period. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
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