| Black Box Limited | ||||||
| Rating outlook revised to ‘Positive’; Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 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 revised its outlook on the long-term bank facilities of Black Box Ltd (BBL, erstwhile AGC Networks Ltd) to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘CRISIL BBB’. The short term rating has been reaffirmed at ‘CRISIL A3+’ . The ratings on bank facilities of Rs.36.25 crore has been withdrawn, following a request from the company and on receipt of the withdrawal and revised sanction documents from the lenders. This is in line with the CRISIL Ratings policy on withdrawal of ratings.
The outlook reflects the expectation of improvement in the business and financial risk profiles of BBL, supported by its improved business operations over the years. Revenue is estimated to have grown at a compound annual growth rate (CAGR) of 5-6% over fiscals 2020-2024, post acquisition of Black Box Corporation, USA (BBX) in January 2019. The operating margin was around 7% over the period.
The ratings continue to reflect the established market position of BBL in the IT infrastructure solutions business and its healthy and diversified revenue profile, marked by diverse end-user industries and an established clientele. These strengths are partially offset by high geographical concentration in revenue and exposure to global competition.
Networth was impacted in the past due to losses of BBX carried forward when the business was taken over. The networth is expected to see further improvement from fiscal 2025, thereby improving the capital structure of BBL.
Revenue is estimated at Rs 6,300 crore in fiscal 2024 (Rs 6,286 crore in fiscal 2023). The revenue remained flat as key customers are based in the US (~75% of revenue) and Europe (~10% of revenue) and have deferred capital expenditure (capex) amid macroeconomic headwinds in these regions. In fiscal 2025, as the macroeconomic tensions ease, BBL is likely to record revenue growth of 8-10%, with operating margin improving to 7-8% from ~6.5% in fiscal 2024. |
Analytical Approach
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:
Weaknesses:
Networth was impacted in the past due to carried forward losses of BBX after its acquisition, but will see an improvement from fiscal 2025, thereby improving the capital structure of the company.
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Liquidity: Adequate BBL had cash and equivalents of Rs 200 crore as on September 30, 2023. Utilisation of fund-based limits in India averaged around 40% over the 12 months through February 2024 (95% over the 12 months ended September 30, 2020). Expected healthy annual cash accrual of Rs 234-385 crore between fiscals 2024 to 2026 will support annual debt obligation of Rs 20-22 crore in fiscals 2025 and 2026 and also cover any moderate capex/acquisition plans. |
Outlook: Positive CRISIL Ratings believes the credit risk profile of BBL will continue to benefit from the company’s cost optimisation measures, established market position and improving financial risk profile. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company BBL is a global information and communication (ICT) solutions provider and integrator in business communication systems, applications and services. The company provides a server-based converged networking platform for voice, data and video, including IP telephony, multimedia call center and customer relationship management (CRM) solutions, unified communications, and customer service. To expand its presence globally, the company acquired BBX on January 7, 2019. BBX provides technology solutions by partnering with leading technology vendors and offers need-based value-added services through its key technology alliance partners, aiming to extend end-to-end solutions.
BBL has scaled up revenue to nearly Rs 6,300 crore post-acquisition of BBC and caters to over 8,000 customers in multiple geographies such as the Middle East, Africa, North America, Australia, New Zealand, Singapore, Philippines, and the UK.
BBL was incorporated by Tata Telecom Pvt Ltd in 1986, to manufacture telecommunication equipment, and was acquired by US-based Avaya Inc in 2004. In August 2010, the Essar group took over the company and now holds 71.14% stake in BBL.
For the first nine months of fiscal 2023, BBL reported revenue of Rs 4801 with a profit after tax of 96.77 crore, compared to Rs 4,606 crore and loss after tax of Rs 0.60 crore. |
Key Financial Indicators (CRISIL Ratings-adjusted consolidated financials):
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
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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