| Cadsys (India) 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 rating outlook on the long-term bank facilities of Cadsys (India) Limited (CIL) to ‘Positive’ from ‘Stable’ while reaffirming the rating at 'CRISIL BB+'. The short term rating has been reaffirmed at 'CRISIL A4+'
The revision in outlook reflects better-than-expected business performance as indicated by healthy revenue growth and comfortable operating margin resulting in substantial increase in net cash accruals. Operating Income grew around 165% in fiscal 2023 supported by huge demand from fiber line and wireless communication industry in US Market. Operating performance is expected to remain healthy going forward with CIL now started with construction work of the telecom towers in addition to its existing operations in offering Engineering design, CAD services, GIS and Project management support in the field of Telecom, Gas, Electric segment. The operating margins are also expected to remain at the comfortable level at 10-12% in medium term.
The ratings also reflect the extensive experience of the promoters in the information technology-enabled services (ITES) industry and above-average financial risk profile. These strengths are partially offset by the modest scale of operations & exposure to intense competition and large working capital requirements . |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of CIL and its subsidiaries AAT, Apex Engineers India Pvt Ltd (AEIPL), and Cadsys Technologies LLC, USA (CTLLC) as all the entities are in similar businesses.
Unsecured loans of Rs 21 crs extended by the promoters and related parties in fiscal 2023, have been treated as No Debt No Equity (NDNE) as these are be retained in the business over the medium term.
CIL have issued 25 lakhs compulsory convertible preference shares with face value of Rs 10 in fiscal 2023. The preference shared will be converted into equity within 12-18 months with a premium of Rs 40 per share. Thus it has been treated the same as equity.
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: Extensive experience of the promoters Founder director Mr. Rangacharya is a post-graduate from the Indian Institute of Technology, Chennai, and has extensive experience in software development, computer-aided design (CAD), and marketing. Mrs Nallani Padmaja, the executive director and co-founder, handles the administrative and financial affairs. Promoters expertise in workflow design and process re-engineering, an essential requirement for the ITES industry with a proven track record of around 20 years has given them an understanding of the dynamics of the market and enabled them to establish relationships with customers.
Comfortable Financial risk profile The financial risk profile is characterized by moderate capital structure and robust debt protection metrics. Networth remains strong around Rs 36 crore as on March 31, 2023. Due to healthy networth and capital infusion in the form of unsecured loans and issuance of compulsory convertible preference shared, the capital structure remains healthy with gearing and total outside liabilities to tangible networth ratio of below 1.70 times as on March 31, 2023. The debt protection metrics remain robust, with interest coverage ratio of more than 5 times.
Weaknesses: Modest scale of operations and exposure to intense competition Scale of operations has remained small with revenue of about Rs 70 crore in fiscal 2022. The scale of operations are expected to remain healthy going forward with the group now started with construction work of the telecom towers in addition to its existing operations in offering Engineering design, CAD services, GIS and Project management support in the field of Telecom, Gas, Electric segment. However, Intense competition will continue to constrain revenue growth and pricing flexibility to an extent over the medium term.
Large working capital requirements: Operations are working capital intensive as reflected in the high gross current assets of 226 days as of March 31, 2023 driven mainly by receivables of 127 days as on March 31, 2023. Operations may continue to remain working capital intensive going forward as well because of high receivable |
Liquidity: Adequate Liquidity profile is supported by moderate bank limit utilization at around 27% for the past twelve months ended March. 2023. Also, the company has sufficient cash accruals against repayment obligations and fund support from promoters. Unsecured loans from promoter is treated as debt. |
Outlook: Positive CRISIL Ratings believes CIL's business risk profile will improve tremendously in medium term because of higher work order. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 1989, Hyderabad-based CIL provides engineering design, CAD services, geographic information system, and project management support in the fields of telecommunications, gas, and electric and software development. |
Key Financial Indicators
*CRISIL Ratings Adjusted Numbers |
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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This Annexure has been updated on 23-May-23 in line with the lender-wise facility details as on 31-Jan-23 received from the rated entity.
Criteria Details
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