Rating Rationale
July 25, 2024 | Mumbai
ABM Knowledgeware Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.38.1 Crore
Long Term RatingCRISIL BBB+/Stable (Reaffirmed)
Short Term RatingCRISIL A2+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL BBB+/Stable/CRISIL A2+' ratings on the bank facilities of ABM Knowledgeware Limited (ABM, part of ABM Group)

 

The ratings continue to reflect the group's established track record in the e-governance information technology (IT) services sector and healthy financial risk profile. These strengths are partially offset by moderate scale of operations and large working capital requirement.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has combined the financial and business risk profiles of ABM and its subsidiaries, Instasafe Technologies Pvt Ltd (ITPL) and InstaSafe Inc (ITSI). This is because all these entities, collectively referred to as the ABM group, have common management and strong operational and financial linkages.


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:

Established track record in the e-governance IT services market: ABM has been providing IT services to government agencies for over two decades, with special focus on e-governance. The group's established market position in Maharashtra has helped it successfully implement its customized in-house software products. The annual maintenance and post-implementation contracts received provide further boost to the operating margin. Furthermore, the company has now also entered in the Manpower augmentation segment and started receiving orders for the same. An established presence in the market and diversifying revenue streams should aid the business risk profile of the company over the medium term.

 

Healthy financial risk profile: The financial risk profile remains healthy driven by comfortable capital structure with the net worth of ~Rs 216 crores as on March 31, 2024 with NIL debt and total outside liabilities to adjusted net worth of 0.15 times as on March 31, 2024 respectively. In absence of any debt funded capex and healthy accretion to reserves, overall financial profile is expected to remain strong over medium term.

 

Weaknesses:

Working capital intensive operations:

Operations are working capital intensive, as reflected in gross current assets (excluding cash) of ~ 350 days as on March 31, 2024, driven by receivables of around 195 days, which includes retention money and inventory (including unbilled revenue) of 60 days. Working capital requirement may continue to remain large over the medium term as the group deals with state & central government bodies which typically has elongated debtor cycle.

 

Moderate scale of operations: Despite the longstanding presence in the business, ABM's scale is moderate, with revenue at around Rs 91 crore in fiscal 2024. Significant increase in the scale of operations by timely execution of the work in hand and receipt of new orders will remain a key monitorable.

Liquidity: Adequate

Liquidity is adequate marked by estimated net cash accruals of more than Rs 15 crore for fiscal 2025 and Fiscal 2026 against no repayment obligations. Bank limit utilization is nil for fund-based limit and 72.5% for non-fund-based limit for last 12 months ending March 2024. Company has investments of Rs 82 crore as on March 31,2024. Cash and bank balance of Rs 20+ crore as on March 31, 2024 out of which Rs 7.5 crore is unencumbered.

Outlook: Stable

CRISIL Ratings believes ABM will continue to benefit from its expertise of the promoter and healthy financial risk profile.

Rating Sensitivity factors

Upward factors:

  • Significant improvement in the scale of operations by 30% and sustenance of operating margins leading to improvement in the Net cash accruals.
  • Improvement in working capital cycle, with receivables days reducing to less than 150 days.
  • Sustained healthy financial & strong liquidity risk profile.

 

Downward factors:

  • Significant reduction in revenue or sharp drop in operating margin, leading to much lower cash accruals.
  • Stretch in working capital cycle with significant elongation in debtors or debt-funded capital expenditure (capex) or acquisition, or high dividend pay-out impacting the financial risk profile or liquidity
  • Reduction in unencumbered liquid investments to below Rs 50 crores.

About the Group

Incorporated in 1993, ABM is listed on the Bombay Stock Exchange. The company provides IT services with focus on e-governance in urban administration, utility, IT-enabled citizen/consumer services, and enterprise resource planning. ABM is promoted by Mr Prakash Rane and his family members.


ITPL provides cloud-based security-as-a-service solutions, which obviate the need for significant investments in hardware and make security imperatives simpler for customers.
 
ITPL has a 100% subsidiary, ITSI, in Delaware, USA, especially for executing orders in the country

Key Financial Indicators

As on/for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

91.1

79.76

Reported profit after tax

Rs crore

15.32

14.55

PAT margins

%

16.8

18.2

Adjusted Debt/Adjusted Networth

Times

0.00

0.00

Interest coverage

Times

50.66

54.72

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue Size (Rs.Cr)

Complexity

Levels

Rating assigned with outlook

NA

Bank Guarantee

NA

NA

NA

32.64

NA

CRISIL A2+

NA

Cash Credit

NA

NA

NA

0.2

NA

CRISIL BBB+/Stable

NA

Proposed Working Capital Facility

NA

NA

NA

5.26

NA

CRISIL A2+

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

ABM Knowledgeware Limited

Full

Parent

Instasafe Technologies Private Limited

Full

Common management and strong operational and financial links with the parent

InstaSafe Inc

Full

Common management and strong operational and financial links with the parent
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 5.46 CRISIL BBB+/Stable / CRISIL A2+   -- 09-05-23 CRISIL BBB+/Stable / CRISIL A2+ 07-02-22 CRISIL BBB+/Stable / CRISIL A2+   -- CRISIL BBB+/Stable
      --   -- 08-05-23 CRISIL BBB+/Stable / CRISIL A2+   --   -- --
Non-Fund Based Facilities ST 32.64 CRISIL A2+   -- 09-05-23 CRISIL A2+ 07-02-22 CRISIL A2+   -- CRISIL A2+
      --   -- 08-05-23 CRISIL A2+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 32.64 Canara Bank CRISIL A2+
Cash Credit 0.2 Canara Bank CRISIL BBB+/Stable
Proposed Working Capital Facility 5.26 Not Applicable CRISIL A2+
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for Consolidation

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