| Nelito Systems Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL A-/Stable/CRISIL A2+' | ||||||
| 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 A-/Stable/CRISIL A2+’ ratings on the bank facilities of Nelito Systems Private Limited (Nelito).
In fiscal 2022, revenue remained flat at Rs 94 crore, as order fulfilment was impacted due to high employee attrition rate of more than 70%. While revenue from the services business has been steady, the ongoing revamp of some of its major products led to lower sales from the products business, which typically accounts for about 40% of overall revenue.
Consequently, Nelito’s high employee costs and product development costs, coupled with a refund for an unfulfilled order led to earnings before interest, tax, depreciation and amortization (Ebitda) losses of about Rs 4.5 crore in fiscal 2022. Nelito’s operating performance is expected to remain moderate this fiscal and improve over the medium term, once the product revamp is complete.
The company, however, maintains a healthy capital structure with low dependence on debt, which, along with a moderate networth of Rs 33 crore led to a comfortable gearing of 0.07 time. Further, liquid surplus was above-average at Rs 9 crore as on March 31, 2022.
The ratings continue to reflect strong support from DTS Corporation, Japan (DTS) and the company’s adequate financial risk profile. These strengths are partially offset by the small scale of operation, and significant dependence on the highly competitive banking sector. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in the financial and managerial support available from the majority shareholder, DTS. CRISIL Ratings believes Nelito will, in case of exigencies, receive distress support from DTS for timely repayment of debt obligations, driven by the strategic importance of Nelito to DTS and its 98.81% shareholding in the company. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
While the revenue from the services business has been steady, the ongoing revamp of some of its major products led to lower sales from the products business, which typically accounts for about 40% of the overall revenues. Nelito’s high employee costs and product development costs, coupled with refund for an unfulfilled order led to EBITDA losses of Rs 4.5 crores in fiscal 2022. Nelito’s operating performance is expected to remain moderate this fiscal and improve over the medium term, once the product revamping is complete. Improvement in the business risk profile, driven by diversification in revenue with support from DTS and scaling up of product business will remain rating monitorable.
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Liquidity: Adequate Liquidity is expected to remain adequate, supported by cash balances of Rs 9 crore as on March 31, 2022 and bank limits of Rs 12 crore, which were utilized 55%, on average, over the 12 months through August 2022. While term debt repayment remains low, capex requirements shall be comfortably funded through the company’s liquid surplus and internal accruals. Financial support from DTS in case of exigencies provides additional support. |
Outlook: Stable CRISIL Ratings believes Nelito will continue to benefit from the strong operational and financial support from DTS. While near term pressures persist due to ongoing revamping of product portfolio, an improvement in operating performance and cash accrual thereafter should help improve the financial risk profile over the medium term. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Nelito, set up in 1995, provides IT solutions for the banking and financial services industry. The company offers a range of solutions such as software development and implementation, and professional consultancy. Presently, it is owned by DTS Corporation (98.81%). |
About the Group DTS, formed in 1972, is an IT solutions and services company, headquartered in Japan. It is listed on the Tokyo Stock Exchange and comprises of 13 group companies operating in the US, China, Vietnam, and Thailand, besides Japan. |
Key Financial Indicators^
^Crisil Adjusted Numbers |
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)
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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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This Annexure has been updated on 29-Sep-2022 in line with the lender-wise facility details as on 02-Aug-2021 received from the rated entity.
Criteria Details
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