| Cyient Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ on the bank facilities of Cyient Limited (Cyient).
During fiscal 2021, revenues declined by 6.8% compared to the previous year due to subdued discretionary spending by clients and deferment of large orders in key sectors mainly Aerospace & Defence and Transportation segments. The de-growth was however partially offset by strong ramp up in DLM segment which grew by ~34% Y-o-Y along with healthy growth in communications segment ~7%. Further, despite decline in revenue, the company has been able to improve its operating margins by 250bps to historical high of 15.7% during the fiscal. This has been achieved by cost optimization programs undertaken by the company, favourable product mix and improvement in margins of DLM segment.
For fiscal 2022, gradual recovery in product development spending by clients across sectors post the COVID pandemic, stronger deal wins following revival of end market demand globally and healthy customer additions are expected to drive growth. Although Aerospace continues to remain muted due to challenges in commercial space, the same is expected to recover from H2FY22 onwards. Further, a large part of the cost benefits achieved in fiscal 2021 is expected to sustain in the near term, which coupled with volume benefits will enable company to maintain margins at 14-15% in fiscal 2022.
The rating continues to reflect Cyient’s healthy business risk profile, driven by niche engineering services, strong client relationships and timely acquisitions to support its product solutions profile. The rating also factors in strong financial risk profile, with minimal debt, and healthy debt protection metrics and liquidity. These rating strengths are partially offset by customer and segment concentration risks, and modest scale of operations. |
Analytical Approach For arriving at the rating, CRISIL Ratings has combined the business and financial risk profiles of Cyient and all its subsidiaries. This is because the entities are under a common management and in related businesses.
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 Liquidity remains strong driven by cash and cash equivalents of Rs 1526 crore as of June 30, 2021, and healthy cash accruals over the medium term. Repayment obligations remains low at about Rs 42 crore in fiscal 2022. Capex requirements are also expected to remain moderate at about Rs 200-220 crore per annum to fund the internal product development marketing and client acquisition costs. During Q1 fiscal 2021, Cyient operationalized its manufacturing facility expansion project (total project cost of about Rs 110 crore) for Cyient DLM in Hyderabad. Accruals are expected to remain healthy at Rs 450-600 crore per annum will remain adequate to meet incremental working capital and capex requirements over the medium term. Cyient is also scouting for strategic acquisitions to grow its business and employ its surplus liquidity efficiently. |
Outlook: Stable CRISIL Ratings believes Cyient will maintain a healthy financial risk profile over the medium term, supported by moderate debt, high liquid surplus, and conservative financial policies despite some headwinds in key sectors, including due to Covid-19. Business risk profile will continue to be supported by long-term relationships with clients and demand for niche engineering services in diverse verticals. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Cyient (formerly known as Infotech Enterprises Ltd) was originally founded as a private limited company in 1991 by Mr. B V R Mohan Reddy, its executive chairman. The company commenced operations in September 1992. Cyient was reconstituted as a public limited company in April 1995, and made its initial public offering in March 1997.
Cyient started operations by providing geographic information systems (GIS) services. In May 2000, the company diversified into engineering services. It currently operates through eight strategic business units: Aerospace & Defence; Transportation; Industrial, energy and natural resources; Semiconductor, Internet of things and Analytics; Medical and Healthcare; Utilities & Geospatial; Communications and Design led manufacturing (Cyient DLM). Cyient DLM’s (earlier Rangsons) business provides design integration and production facilities to the designs created in Engineering, thus enabling Cyient to provide design-to-production solutions to its clients.
Cyient has operations across the globe. During fiscal 2021, it derived around 50% of its revenue from the Americas, 25% from Europe, the Middle East and Africa, and around 25% from Asia Pacific (including India).
During the first three months of fiscal 2022, Cyient reported a profit after tax (PAT) of Rs 115 crore (as against profit of Rs 81 crore during the corresponding period of fiscal 2021) on an operating income of Rs 1058 crore (against Rs 992 crore during fiscal 2021). |
Key Financial Indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 30 crore with CC limits |
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) | Rating |
| Bank Guarantee | 15 | CRISIL A1+ |
| Letter of Credit | 5 | CRISIL A1+ |
| Loan Equivalent Risk Limits | 10 | CRISIL A1+ |
| Packing Credit* | 30 | CRISIL AA/Stable |
| Packing Credit in Foreign Currency | 30 | CRISIL A1+ |
Criteria Details
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