| Collabera Technologies Private Limited | ||||||
| 'CRISIL A/Stable/CRISIL A1' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL A/Stable/CRISIL A1’ ratings to the bank facilities of Collabera Technologies Private Limited (CTPL; a part of the Collabera group).
The ratings reflect Collabera’s strong position in the IT staffing segment and strong financial risk profile. These strengths are partially offset by sectoral concentration in revenue and exposure to intense competition. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of CTPL and its operating subsidiaries, collectively referred to as Collabera, as they have strong business and financial linkages.
Loans from a related party (outstanding at Rs 26 crore as of December 2020) have been treated as debt, as they are interest bearing and Collabera shall make a partial repayment in fiscal 2022.
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:
Collabera is one of the largest players in providing staffing for the IT industry. Apart from IT, it also provides services to BFSI and healthcare industries. It also caters to the banking, financial services and insurance (BFSI) and healthcare sectors. Clientele includes reputed players such as IBM, HCL, WIPRO, and Goldman Sachs, of which few were on-boarded, backed by established relationships of the Collabera group at a global level.
Consolidated revenue stood at Rs 663 crore for the first nine months of fiscal 2021, and may cross Rs 880 crore for the entire fiscal. It is likely to record a compound annual growth rate (CAGR) of around 23% over the three years through March 2018. Increase in number of consultants in India (to over 4,000 as of December 2020, from around 3,000, a couple of years ago) and entry into newer geographies have supported strong revenue growth. It generates less than half of its revenue from India (48%) while remaining is majorly from Philippines (24%), Australia (8%), Singapore and Malaysia (6%), thus ensuring a diversified geographical reach.
Collabera will maintain its strong position over the medium term, driven by well-entrenched relationships with clients, consultant base and expansion to new geographies.
Collabera had nil long term debt as on December 31, 2020. Capital structure was healthy with adjusted gearing expected of below 0.5 times expected over the medium term. Debt protection metrics were comfortable too, with interest coverage and net cash accrual to total debt ratios expected in the range of 11-13 times and over 0.35 times respectively over the medium term. Any increase in debt will remain a key monitorable.
Collabera usually maintains liquidity equivalent to around 1.2 times of its monthly payroll expenses. The parent has extended support via corporate guarantees and unsecured loans of Rs 26 crore (as on December 31, 2020) via fellow subsidiary, Collabera Inc.
Weakness:
With IT companies contributing to around 90% of revenue, Collabera faces significant sectoral concentration risk. In comparison, few peers are well shielded from this risk, as they offer generalised staffing to a diversified end-user base. While a slowdown in the IT industry could negatively impact business, Collabera derives 70-80% of total revenue from repeat customers, thus benefitting from replacement demand.
Intense competition from several domestic and overseas players in the staffing industry exerts pricing pressure and keeps the overall margin low around 5%. However, as Collabera operates in a niche segment, offering specialised staffing for the IT industry, it earns a comparatively higher margin than its peers, which provide generalised staffing. Given the largely service-oriented nature of the IT business, most players face high attrition rates. Issues relating to workforce availability can also adversely impact the group's relationship with clients and therefore, its revenue flow. |
Liquidity: Strong Liquidity is marked by large cash accrual of Rs 35-40 crore expected per fiscal over the medium term, against negligible long-term debt and no capital expenditure plans. Unencumbered cash and equivalents stood at Rs 134 crore as on March 24, 2021. CTPL’s fund-based limit was moderately utilised, by 62% on an average in the six months through December 2020. |
Outlook: Stable CRISIL Ratings believes that Collabera will continue to benefit from its established position in the IT staffing segment. |
Rating Sensitivity factors Upward Factors
Downward Factors
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About the Company Established in 1998 by Mr Hiten Patel as GCI Technologies Asia Private Limited, CTPL offers staffing to IT, BFSI and healthcare industries. It had over 4000 consultants as of December 2020. In fiscal 2014, the company started expanding its geographic reach. It now has subsidiaries and operations in various countries such as Philippines, Singapore, Malaysia, UK, Australia, Ireland, Poland, Romania and New Zealand.
CTPL is 100% held by Collabera Holdings Inc. It also holds the flagship company of the Collabera group, Collabera Inc- USA, which offers IT staffing solutions and other allied services. Collabera Inc, USA was the first company of the Collabera group, founded in 1991, under the name of Global Consultants Inc, and taken over by Mr Hiten Patel in 1997. Collabera Holdings Inc, along with its subsidiaries, are referred to as the Collabera group. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
*Sub-limit of Rs.15 crs for WCDL, Rs.5 crs for Performance BG and Rs.5 crs for financial BG |
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 various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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