| 3i Infotech Limited | ||||
| Rating removed from 'Watch Developing'; Rating reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has removed its ratings on the bank facilities of 3i Infotech Limited (3i Infotech) from 'Rating Watch with Developing Implications' and has reaffirmed the rating at 'CRISIL BBB-‘ while assigning a 'Stable' outlook.
CRISIL Ratings had placed the rating on “watch with developing implications” on January 06, 2021 following the announcement by 3i Infotech on December 28th, 2020, regarding the agreement to sell its software products business to Azentio Software Private Limited (Azentio), a wholly owned subsidiary of Apax Partners for a consideration of Rs 1000 crore.
On March 31, 2021, company 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.
Proceeds from the sale was used for repayment of company’s entire debt, which stood at Rs 772 crore as on March 31, 2021, including preference shares, leaving free cash surplus of more than Rs.100 crores. These funds are proposed too be used to scale up its existing services business.(Of the above repayments, FCCBs worth Rs.93.32 crore are yet to repaid and awaiting regulatory clearance, funds for the same have already been deposited in the nominated escrow account)
The software products business accounted for 39% of 3i Infotech’s revenues and about ~70% of its operating profits in fiscal 2020. Post the sale, while revenues and operating profits have significantly reduced, absence of high interest obligation is expected to aid net profits. Further, credit profile and liquidity have improved significantly with complete closure of debt and surplus funds.
While company is expected to pursue strategic growth initiatives in the services business, no major investment is expected in the next 2-3 years. Additionally, for organic growth the surplus cash of Rs. 100 crore should be sufficient and hence company is expected to remain debt free over the medium term. That said, higher than expected debt-funded capex or inorganic expansion will remain key monitorable.
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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 100 crore as on date. Cash accruals over the medium term is expected to remain in the range of Rs. 40-45 crore which should be adequate to fund operations in the absence of any repayment obligations. 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. While company is expected to pursue strategic growth initiatives in the services business, no major investment is expected in the next 2-3 years. Additionally, for organic growth the surplus cash of Rs. 100 crore should be sufficient and hence company is expected to remain debt free over the medium term. That said, any major inorganic expansion and funding for the same will remain key monitorable. |
Outlook Stable CRISIL Ratings believes the while the sale of the software product business has impacted business risk profile of the company, repayment of entire debt using the proceeds from the sale of the software business has significantly benefitted financial risk profile. |
Rating Sensitivity factors Upward 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 services including 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).
On March 31, 2021, company sold its 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 (Azentio), a wholly owned subsidiary of Apax Partners for a consideration of Rs 1000 crore |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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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Criteria Details
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