| Goldstone Technologies Limited | ||||
| Rating upgraded to 'CRISIL BB-/Stable' | ||||
| 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 upgraded its rating on the long-term bank facilities of Goldstone Technologies Ltd (GTL; part of the GTL group) to ‘CRISIL BB-/Stable’ from ‘CRISIL B+/Stable’.
The upgrade reflects the improvement in the business risk profile driven by expected increase in operating margin to around 3% in fiscal 2023 from 0.62% in fiscal 2021. The rating action also factors in the improvement in the financial risk profile, with return on capital employed (RoCE) expected at 4.5 times in fiscal 2023 (0.35 time in fiscal 2021). Interest coverage ratio improved to 9.16 times in fiscal 2022 from 1.94 times in fiscal 2021.
The rating reflects the extensive experience of the promoter in the information technology (IT) services industry and the above-average financial risk profile of the group. These strengths are partially offset by modest scale of operations, customer concentration in revenue and exposure to intense competition. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of GTL and its wholly owned subsidiaries, Staytop Systems Inc (SSI) and Staytop Systems and Software Pvt Ltd (SSSPL). This is because all these entities, collectively referred to as the GTL group, are in the same business and have significant operational and financial linkages.
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 promoter: The promoter’s experience of 10 years in the IT services industry and healthy relationships with customers and suppliers will continue to support the business.
Partnerships with other IT services companies: The company has entered into strategic partnerships with software companies such as Fivetran, Snowflake, Simply Learn, Alteryx UK, DVW UK, as well as Tableau to sell its business intelligence products and software services. With these partnerships, revenue is expected to improve from fiscal 2023.
Above-average financial risk profile Limited reliance on debt has kept the financial risk profile moderate. Aided by equity infusion, networth increased to around Rs 57 crore as on March 31, 2022, from Rs 34.6 crore on March 31, 2021. Gearing and total outside liabilities to tangible networth ratios will be comfortable over the medium term. However, the debt protection metrics will be subdued, constrained by modest operating margin.
Weaknesses: Modest scale of operations amid intense competition: Intense competition constrains scalability, as reflected in revenue of Rs 60.98 crore in fiscal 2022. Furthermore, the operating margin was negative (2.10%) in fiscal 2022.
High customer concentration in revenue: Key customers such as Cisco, Dr Reddy’s, Genpact, Eveready and ORACLE accounted for over 40% of the topline in fiscal 2022. Thus, the GTL group remains vulnerable to changes in the business policies of these clients. |
Liquidity: Adequate Bank limit utilisation was moderate at 62% on average for the 13 months through October 2022. Cash accrual, expected at Rs 2-3 crore per annum, will sufficiently cover yearly term debt obligation which is negligble over the medium term, and cushion liquidity.
Current ratio was healthy at 3.84 times as on March 31, 2022, while cash and bank balance was small around Rs 7 lakh as on the same date. Low gearing and moderate networth support financial flexibility, which will cushion adverse conditions or downturns in the business. |
Outlook: Stable CRISIL Ratings believes the GTL group will continue to benefit from the extensive experience of its promoter. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company Incorporated in 1994 in Hyderabad, GTL is promoted by Mr LP Sashikumar. The company provides software development and management services. It is listed on the Bombay Stock Exchange and the National Stock Exchange.
SSI and SSSPL are wholly owned subsidiaries of GTL. SSI provides IT related services, but there are no operations under SSSPL.
As on December 31, 2022, the GTL group reported consolidated revenue and profit after tax (PAT) of Rs 66.57 crore and Rs 1.17 crore, respectively. |
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 | |||||||||
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Criteria Details
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