| Coforge DPA Private Limited | ||||
| Rating 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 reaffirmed its 'CRISIL AA/Stable' rating on the long-term bank facility of Coforge DPA Pvt Ltd (CDPL, erstwhile NIIT Incessant Pvt Ltd).
CDPL, a wholly owned subsidiary of Coforge Tech (Coforge; ‘CRISIL AA/Stable/CRISIL A1+’), saw revenue rise 30% in fiscal 2021, driven by higher order execution, and strong demand for digital solutions with stronger synergies with Coforge. Also, operating profitability improved to 28% in fiscal 2021 from 18% in fiscal 2020 due to improved employee utilisation. CDPL’s revenue stood at a healthy 667 crore with operating margin of 24.7% in the first nine months of this fiscal. CRISIL Ratings expects the margin to stabilise at 23-25% over the medium term driven by improved operating efficiency driven by synergies with the parent and better employee utilisation.
The rating factors in Coforge’s stance of financial support to CDPL in exigencies. The rating also reflects the healthy business risk profile of CDPL driven by growing presence in digital services, its strong operating profitability and healthy financial risk profile. These strengths are partially offset by modest scale of operations and high competitive intensity in the banking & financial services and insurance (BFSI) and retail verticals. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of CDPL and its subsidiaries, considering their common business with high operational similarities and common management.
CRISIL Ratings has applied its parent notch-up framework to factor in the extent of financial and managerial support available from Coforge, given its 100% shareholding and management control in CDPL and the criticality of the subsidiary to the parent. CDPL will receive distress support from Coforge for timely debt servicing and for any large capital expenditure (capex).
CRISIL Ratings has amortised goodwill of Rs 50.4 crore on acquisition of Ruletek over a period of five years from fiscal 2018.
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
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Liquidity: Strong CDPL has adequate liquidity supported by cash and equivalent of Rs 52 crore as on December 31, 2021. CDPL has overdraft bank line of Rs 10 crore (which was partially utilised during the 12 months through February 2022), which will be adequate to meet working capital requirement. Capex is expected to remain under Rs 30 crore towards upgrade of infrastructure and expansion of delivery locations. Healthy cash generation of Rs 90-100 crore per annum will be adequate to fund ongoing capex as well as small acquisitions of Rs 30-40 crore over the medium term. |
Outlook Stable The business risk profile of CDPL will benefit from its integrated operations with Coforge and presence in end-to-end digital service solutions. The financial risk profile will remain healthy driven by steady cash accrual, moderate capex and working capital requirement over the medium term, and financial support from Coforge for any large debt-funded acquisition or in exigencies. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company CDPL is a leading vendor of a range of enterprise business process management and customer relationship management services primarily operating on the Pega, and Appian technology platforms. Based in Hyderabad with delivery centres in North America, Australia, Asia Pacific and EMEA, CDPL has about 1500 employees. It has developed innovative go-to-market solutions leveraging partnerships with leading platform providers such as Pegasystems, Appian, Outsystems, and TRON.
CDPL has experience of over 250 successful customer implementations and a suite of Appian, and Pega platforms productivity solutions across different verticals in the BFSI, government, manufacturing, retail and travel sectors.
CDPL was incorporated in October 2007 as a promoter driven company. During 2015, NIIT Technologies acquired majority 51% stake and later increased it to 100% over the years. During fiscal 2019, the company was renamed as NIIT Incessant Pvt Ltd and got its present name in fiscal 2021. |
About the Parent Coforge is an IT company providing end-to-end software solutions and services. It was formerly known as NIIT Technologies Ltd, and was incorporated in April 2003 when NIIT Ltd (NIIT) spun off its software solutions business (excluding knowledge solutions) into a separate legal entity. In May 2019, NIIT and the founder's family members sold total stake of 30.2% in Coforge to Hulst BV (Hulst; affiliate of Baring Private Equity Asia). In August 2019, Hulst acquired 39.85% stake through an open offer, increasing its total stake in Coforge to 70.05%.
Coforge is a capability maturity model level 5 player in the software services industry. It is among the top 20 Indian software exporters. Prominent global customers include British Airways, the ING group, SEI Investments Company, Sabre Corporation and SITA. Over the years, Coforge has set up subsidiaries in the US, Singapore, Australia, the UK, Germany and Thailand, mainly to market and mobilise projects for the software division. The company has business partnerships with large IT companies across the world.
On a consolidated basis, net profit was Rs 490 crore in the nine months ended December 31, 2021 (Rs 329 crore in the corresponding period of the previous fiscal), on revenue of Rs 4,689 crore (Rs 3,401 crore). |
Key Financial Indicators
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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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Working Capital Loan | 10 | ICICI Bank Limited | CRISIL AA/Stable |
This Annexure has been updated on 14-Mar-23 in line with the lender-wise facility details as on 03-Mar-23 received from the rated entity.
Criteria Details
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