| R Systems International Limited | ||||
| Rating reaffirmed at 'CRISIL A+/Stable' | ||||
| Rating Action | ||||
| ||||
| 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 reaffirmed its ‘CRISIL A+/Stable’ rating on the long-term bank facilities of R Systems International Ltd (R Systems).
The rating continues to reflect the company’s comfortable business risk profile, as reflected in healthy operating performance with higher volume of digital contracts and steady operating margin, and its healthy financial risk profile backed by negligible debt of Rs. 3 crore and cash surplus of around Rs 172 crore as on June 30, 2024. These strengths are partially offset by geographical concentration in revenue.
Revenues in CY24 are expected to growth at a modest rate of 2-4% on the back of a subdued demand for IT services in the key geographies of US and Europe. The growth in the revenue will primarily be driven by revenue from Velotio, an acquisition made by the company in H2 CY23. Velotio recorded a revenue of ~Rs. 127 crore in FY23. These expectations follows a strong growth of 19% CAGR in the past 5 calendar years through 2018. The industry continues to be impacted by macroeconomic pressures in North America and Europe (which contribute around 80% to revenue) as well as the geopolitical uncertainties. However, with macroeconomic headwinds easing, a recovery in demand is expected starting CY25. Operating margin sustained at 13.6% in the first half of 2024 as compared to 13.2% in the corresponding period of the previous year driven by improved utilisation rates and price realisation. Going forward, margins are expected to sustain at 14-15% levels.
Liquidity was strong with liquid surplus of Rs 172 crore and modestly utilised bank lines of Rs 145 crore as of June 2024. Debt was negligible, and cash accrual is expected at Rs 130-200 crore (net of dividend). The ratings reflect the company’s moderate business risk profile supported by the presence in diversified business verticals and healthy financial risk profile. These strengths are partially offset by exposure to geographical concentration risk and modest scale of operations. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of R Systems and its subsidiaries, which are integral to its business and critical to its credit risk profile. For arriving at the adjusted financials, CRISIL Ratings has amortised goodwill created on the acquisition of Innovizant LLC (Rs 10.07 crore) in January 2019 over five years and will amortise the goodwill created on the acquisition of Velotio in June 2023 for a similar tenure.
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:
Weakness:
|
Liquidity: StrongCash surplus was adequate at Rs 172 crore as of June 30, 2024, and is expected to remain healthy barring any cash-funded acquisitions. Fund-based limit of Rs 145 crore was modestly utilised during the six months through June 2024. Expected cash accrual of Rs 130-200 crore should comfortably cover negligible debt obligation in 2024. |
Outlook: Stable R Systems will continue to benefit from its healthy business and financial risk profiles, supported by diversity in clientele and product offerings, healthy cash accrual and modest debt. |
Rating sensitivity factors Upward factors:
Downward factors:
|
About the Company R Systems was incorporated as a private limited company in 1993 by Mr Satinder Singh Rekhi and was reconstituted as a public limited company in April 2000 and came out with its initial public offering in 2006. As on June 30, 2024, Blackstone Capital Partners held 51.93% common equity of the company.
R Systems is a leading provider of technology, artificial intelligence, analytics and knowledge services. It partners with customers to enable or elevate their digital transformation with diversified digital offerings, including product engineering, cloud enablement, quality assurance testing, and digital platforms and solutions.
The company offers services and solutions across telecom, technology, healthcare and life science, finance and insurance, and retail and e-commerce. It has 17 development and service centres to serve customers in North America, Europe and the Far East. Around 80% of revenue comes from North America and Europe. |
Key Financial Indicators
*Basis calendar year |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Interchangeable with letter of credit, export packing credit, pre-shipment credit in foreign currency and pre-shipment credit |
Annexure – List of entities consolidated and the analytical treatment of consolidation
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||
|
Criteria Details
|