Detailed Rationale

Crisil Ratings has assigned its ‘Crisil A-/Positive’ rating on the long term bank facilities of Innovatiview India Limited (IIL; part of Innovatiview Group).

 

Group’s revenue has been growing at a healthy CAGR of over 58% in the three fiscals ending March 2025. In fiscal 2024, the group achieved revenue of Rs. 639 crores which has improved from Rs. 381 crores in fiscal 2023. During the current fiscal, the group has achieved revenue of around Rs. 513 crores during H1-FY25 and is expected to clock revenue of around Rs. 900-1000 crores for full fiscal 2025. The growth in revenue is majorly driven by the increasing share of business with existing clients as well as addition of clients. The group has also started providing security and surveillance services for events and elections. The group has a dealer network of more than 4700 which provides equipments such as CCTV and other equipments which are required at the site at different locations; this enables the group to control the operations at competitive rates. The group’s operating margin has remained healthy in the range of 48-50% over the two fiscals ended March 2024. This is on account of the in-house R&D which helps the group to develop its own security software. The major cost for the group is administration cost; the group operates under the asset light model which helps it control the fixed overheads required to maintain the same. Operating margin is expected to be around 45% in fiscal 2025 and Return on Capital Employed (RoCE) is expected to be around 50-60% going forward, due to the asset light model.

 

The positive outlook reflects Crisil Ratings’ expectation of sustained growth of 15-20% in revenue going ahead, backed by increasing share of business with existing clients and addition of new business. Heathy growth in scale of operations along with sustenance of operating margin at around 45% will remain key rating sensitivities.

 

The rating reflects the group’s established market position supported by geographically diversified vendor network and asset light model and a strong financial risk profile. These strengths are partially offset by high fixed costs and susceptibility to employee attrition and working capital intensive operations.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of IIL and its wholly owned subsidiaries Innovatiview Rental Solutions Private Limited, AVA Global Technology Private Limited and Innovatiview Foundation.

 

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:

• Established market position supported by geographically diversified vendor network and asset light model: The group has an established market position in exam security solution and infrastructure segment. Company has a strong brand recall in solution space within government and private test conducting agencies. The group has a network of 4700 vendors across 28 states and 8 Union territories for exam surveillance on Pan India basis. Further, it also benefits from the promoters' experience of over a decade, their strong understanding of market dynamics, and healthy relations with customers and suppliers and the same will continue to support the business risk profile. The group has an asset light model i.e. minimal inventory of surveillance systems along with low investments in the infrastructure; this enables the group to mitigate obsolescence risk. Scale of operations is expected to grow at a healthy pace with the growth in the number of students appearing for exams along with addition of new geographies. The group is also focusing on expanding its center-based examinations test (CBT) infrastructure which will help the company to generate a recurring income with healthy operating margin, which will further boost the group’s market position. Currently the group has one fully equipped CBT center in Noida with capacity of 4500 seats and is planning to expand the facilities across other locations as well.

 

• Strong financial risk profile: The group has a strong financial risk profile backed by a strong net worth expected to around Rs 670 crore for the year ending March 31, 2025, supported by healthy accretion to reserves. Capital structure has been at a healthy level due to lower reliance on external funds yielding estimated gearing below 0.20 time and low total outside liabilities to tangible networth (TOL/TNW) of around 0.30 times for year ending on 31st March 2025. The group’s debt protection measures have also been at a healthy level due to low leverage and healthy profitability. The estimated interest coverage and net cash accrual to total debt (NCATD) ratio are expected to be around 48 times and around 4 times for fiscal 2025. The group is expected to incur capex of around Rs. 80-100 crores annually which is expected to be funded through internal accruals and liquid funds of over Rs. 160 crores as on December 2024.

 

Weaknesses:

• Large working capital requirements: Operations are working capital intensive marked gross current assets (GCAs) of 235 days as on March 31, 2024. This is mainly due to high receivables of 131 days and high cash and bank balance. GCAs net of cash and bank balance is around 143 days. As the majority of the business is derived though the government entities therefore the payment realization time around 4-5 months. Going forward the GCAs (net of cash) are expected to remain in the similar range of 135-150 days. Inventory, which remains in the range of 5-7 days, includes the consumables which are used in the normal routine. The group provides the 50% advance to suppliers at the time of allocating the order and balance is paid within 5-7 days after the service. Due to the nature of business and most of the revenue coming from the government entities, the working capital cycle is expected to remain in the similar range.

 

• High fixed costs and susceptibility to employee attrition: The group has a high proportion of fixed overheads (employee cost, rentals and job work expenses paid to the vendors), making it susceptible to the quantum of work received, and subsequently, the level of billing. Variation in operating margin depends on the duration, ticket size and nature of contracts awarded. Operations are also susceptible to employee attrition, although the group has maintained a low attrition rate over the past few years by way of yearly increments and performance incentives. However, with increasing revenue, the absorption of employee costs has improved, leading to operating margin ranging around 48-50% over the two fiscals ended March 2024.

Liquidity: Strong

Bank limit utilisation is sparingly utilized, averaging at 45 percent for the past twelve months ended Dec 2024. Net cash accruals are expected to be Rs 330-470 crore annually which will adequately cover yearly debt repayment obligations of Rs. 6-18 crores over the medium term. In addition, it will act as cushion to the liquidity. Current ratio was healthy at 2.36 times on March 31, 2024. Cash and bank balance of around Rs.167 crore as on Dec 31, 2024. Low gearing and strong net worth support its financial flexibility, and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Positive

Crisil Ratings believes IIL will continue to benefit from the extensive experience of its promoter, and established relationships with clients

Rating sensitivity factors

Upward factors:

• Sustained growth in revenue to over Rs. 1000 crores and sustenance of operating margin over 40%.
• Sustenance of financial risk profile and liquidity.
   

Downward factors:

• Decline in operating margin below 30%
• Large, debt-funded capex or stretched working capital cycle weakening the financial risk profile and liquidity

About the Company

IIL, formerly known as Innovatiview India Private Limited, was incorporated in 2017. Subsequently, the company was converted from private limited company to public limited company in 2024. It is based in Noida, Uttar Pradesh. It is engaged in providing diversified IT services focusing security solutions for exams, elections and events. It is also engaged in providing IT equipment rental services. IIL is promoted by Mr. Ankit Agarwal, Mr. Ashish Mittal, Mr. Vishal Mittal and Mr. Abhishek Agarwal.

Any other information: Not Applicable