Rating Rationale
December 31, 2021 | Mumbai
Infinx Services Private Limited
Ratings upgraded to 'CRISIL BBB / Stable / CRISIL A3+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.46.47 Crore
Long Term RatingCRISIL BBB/Stable (Upgraded from 'CRISIL BBB- / Stable')
Short Term RatingCRISIL A3+ (Upgraded from 'CRISIL A3 ')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed rationale

CRISIL Rating has upgraded its rating on the bank loan facilities of Infinx Services Pvt Ltd (ISPL) to ‘CRISIL BBB/Stable/CRISIL A3+’ from ‘CRISIL BBB-/Stable/CRISIL A3’.

 

The rating upgrade reflects improved financial risk profile on the back of equity infusion which has augmented the company’s networth and enhanced the financial flexibility. ISPL raised Rs 333 crore of capital in the current quarter through private equity placement. As understood, these funds would be utilised primarily to finance inorganic growth via acquisition over the medium term apart from general corporate use. CRISIL Rating believes the business risk profile of the company should also accordingly improve over the medium term, supported by the additional technological capabilities and client base through the acquisitions which are currently under consideration.

 

While, the aforesaid acquisitions are expected to be moderate in terms of investment value; any large leveraged acquisition would be a rating monitorable.

 

The ratings continue to reflect the promoter's extensive experience and the company’s established position in the business process outsourcing (BPO) industry, specialised in to Revenue Cycle Management (RCM) for healthcare industry. The rating also factors in healthy financial risk profile. These strengths are partially offset by geographical concentration in revenue and elevated working capital requirement

Key Rating Drivers & Detailed Description

Strengths:

  • Promoters' extensive experience: Owing to the four-decade-long experience of the promoters in the information technology and BPO industry, the company has established its position in the market. It has a large clientele, comprising over 150 customers across the US. The top customers include companies such as Radnet, Simon med, Pharmarcia, CHI Baylor and Trident USA Health. ISPL has built strong relationships with its clients, enabling continuous flow of orders and long-term contracts and steady increase in revenue over the last four fiscals. The company is in the process of acquiring companies with technologies which can be integrated with current offering and brings synergy to the business. Inorganic growth is expected to drive business for the company over the medium term; however impact on the standalone business profile of ISPL is a key monitorable.

 

  • Healthy financial risk profile: Financial risk profile improved materially in current fiscal on the back of equity infusion. Company has raised equity of Rs 333 crore in current fiscal, adjusted networth is expected to improve to around Rs 435-400 crore in fiscal 2022 from Rs 86.2 crore as on 31st March 2021. Capital structure has strengthened with total outside liabilities to adjusted networth expected at around 0.3 times at the end of current fiscal, improved from 0.9 times as on March 31st 2021. Despite the debt component expected in the inorganic growth plans over the medium term, capital structure is expected to remain strong. Debt protection metrics continues to be comfortable with interest coverage and net cash accrual to adjusted debt of 14.5 and 0.5 times respectively and likely to remain comfortable over the medium term

 

Weaknesses:

  • Elevated working capital requirements: Operations are working capital-intensive as indicated by gross current assets of 146 days as on March 31, 2021, driven by receivables of 106 days. Moreover, company’s revenues have also been increasing year-on-year (from Rs 104 Crore in fiscal 2017 to Rs 180 Crore in fiscal 2021) leading to increased working capital requirements. The working capital requirements should continue to remain high on the back of expected improvement in revenues over the medium term.
  • Geographic and customer concentration in revenue: ISPL derives 100% of its revenue from customers based in the USA, which makes its revenue growth dependent on outsourcing policies of the country. Moreover, approximately 30% of the revenue is generated from two customers, leading to customer concentration.

Liquidity: Adequate

Adequate liquidity characterized by sufficient cushion between net cash accruals and repayment obligation. The company is expected to make cash accruals in the range of Rs 22-30 crore per fiscal over the medium term, against repayment obligation of approximately Rs. 7.4 crore in fiscal 2022 and Rs 17.6 crore in fiscal 2022. The company has inorganic growth plans over the medium term, should be adequately funded by equity raised and a debt component. Company has access to fund based bank limits of Rs. 20 crore which remain utilized at an average of 89.7% for 12 months ending November 2021. Backed by the recent capital infusion, company currently has liquid assets over Rs 300 crore, supporting liquidity profile.

Outlook: Stable

CRISIL Ratings believes ISPL will continue to benefit from the promoters’ extensive experience and long standing relationship with the customers

Rating sensitivity factors

Upward factors:

  • Sustained material growth in revenue with improved operating margins, enhances the net cash accruals to sustain above Rs 30 crore, over the medium term.
  • Sustained financial risk profile with strong liquidity and improved working capital cycle

Downward factors:

  • Subdued revenue growth and operating margins sustain below 10% weakens net cash accruals and business risk profile
  • Large debt funded capex/acquisitions or stretch in working capital cycle weakens the financial risk profile along with strain on liquidity

About the company

Incorporated in 1996, ISPL operates a BPO unit and provides various services, including insurance verification, medical coding, medical billing, patient pay solutions, and pre-authorisation, to players in the healthcare industry in USA. Mr Sandeep Tandon, Mr Jaideep Tandon, and Mr Sudeep Tandon are the promoters. It has 100% holding in Enhanced Revenue Solutions, Inc. and TIS International, Inc. Both the subsidiaries are based in USA and TIS International is a marketing and sourcing arm to ISPL. The company also has a step down subsidiary, Infinx Pharmacy LLC. (100% holding by TIS International, Inc.).

Key Financial Indicators

Particulars

Unit

2021*

2020

Revenue

Rs Crore

179.9

177.2

Profit After Tax

Rs Crore

15.8

21.1

PAT Margin

%

8.8

11.9

Adjusted Debt/Adjusted Networth

Times

0.5

0.7

Interest coverage

Times

14.5

10.7

Status of non cooperation with previous CRA:

ISPL has not cooperated with Brickwork Ratings India Private Limited which has classified it as issuer not cooperative vide release dated May 21, 2020. The reason provided by Brickwork Ratings India Private Limited is non-furnishing of information for monitoring of ratings.

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)

ISIN

Name of Instrument

Date of Allotment

Coupon

Rate (%)

Maturity Date

Issue Size

(Rs Crore)

Complexity Levels

Rating Assigned  with Outlook

NA

Pre-Shipment Credit in Forex

NA

NA

NA

20.00

NA

CRISIL A3+

NA

Term Loan

NA

NA

March 2024

26.47

NA

CRISIL BBB/Stable
Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST/LT 46.47 CRISIL A3+ / CRISIL BBB/Stable   -- 21-09-20 CRISIL BBB-/Stable / CRISIL A3 27-09-19 CRISIL BBB-/Stable / CRISIL A3 19-06-18 CRISIL BBB-/Stable / CRISIL A3 --
      --   -- 04-03-20 CRISIL BBB-/Stable / CRISIL A3   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Pre-Shipment Credit in Forex 10 CRISIL A3+
Pre-Shipment Credit in Forex 10 CRISIL A3+
Term Loan 2.21 CRISIL BBB/Stable
Term Loan 24.26 CRISIL BBB/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition

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