| 3i Infotech Limited | ||||
| Rating downgraded to 'CRISIL BB+/Stable'; Rating Withdrawn | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has downgraded its rating on the long-term bank facilities of 3i Infotech Limited (3i Infotech) to ‘CRISIL BB+/Stable’ from ‘CRISIL BBB-/Stable’; the rating has been withdrawn on receipt of request and requisite documentation (No Due Certificates) from the company. This is in line with CRISIL Ratings’ withdrawal policy..
The rating action reflects the continued subdued operating performance after sale of the software products business. The company continued to incur operating losses of Rs 23 crore in fiscal 2022 and Rs 24 crore in fiscal 2021, despite healthy revenue growth. While pursuing strategic growth initiatives in the services business, operating performance is expected to remain under pressure this fiscal and turnaround in the next fiscal.
On March 31, 2021, the company completed the slump sale of 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 Pvt Ltd (Azentio). The proceeds from the sale were used to repay the entire debt of 3i Infotech, resulting in net surplus cash of Rs 136 crore as on March 31, 2022. These funds will be used to scale up its existing services business. That said, higher-than-expected debt-funded capital expenditure or inorganic expansion will remain key monitorable.
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Analytical Approach 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 – List of Entities Consolidated, 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 Cash and equivalents were Rs 136 crore as on March 31, 2022. Annual cash accrual of Rs 10-30 crore should be adequate to fund operations in the absence of any debt obligation, over the medium term. The incremental working capital requirement is expected to be funded mostly through internal accrual and partly through working capital borrowing. While the company is expected to pursue strategic growth initiatives in the services business, no major investment is expected in the next 2-3 fiscals. Surplus cash of Rs 136 crore should be sufficient to fund organic growth, leading to a likely debt-free status over the medium term. That said, any major inorganic expansion and funding for the same will remain key monitorables. |
Outlook: Stable While the sale of the software product business has impacted business risk profile, repayment of the entire debt 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 BPO operations).
On March 31, 2021, 3i Infotech sold its global software products business on a going concern basis to Azentio, a wholly owned subsidiary of Apax Partners, for a consideration of Rs 1,000 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 Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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