| R Systems International Limited | ||||||
| Long-term rating upgraded to 'CRISIL A+/Stable'; Rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 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 facility of R Systems International Limited (R Systems) to ‘CRISIL A+/Stable’ from 'CRISIL A/Positive'. Also, CRISIL Ratings has also reaffirmed its ‘CRISIL A1’ rating on the short-term bank facility.
The upgrade reflects strong revenue growth and sustained healthy operating profitability, supported by increase in volumes of digital contracts, better pricing in majority contracts on lines of employee cost increase and rupee depreciation. The financial risk profile was healthy, supported by negligible debt and healthy cash surplus of ~Rs 277 crore as on December 31, 2021.
In 2021, revenue grew by 31% because of shift towards digital contracts and rupee depreciation. Consequently, the operating margin increased to 14.8% in 2021 from 13.7% in 2020. Revenue growth sustained at 38% in the first half of 2022, backed by healthy volume growth, customer additions and rupee appreciation. Operating margin stood at 12.6% in the first half of 2022 on account of higher employee cost and lower utilisation amid attrition.
In 2022, the company is likely to sustain revenue growth and maintain operating margin at 13-14% as the end users in key verticals such as telecom and banking, financial services and insurance (BFSI) accelerated their digital transformation initiatives.
Liquidity was strong with liquid surplus of Rs 277 crore and unutilised bank lines of Rs 20 crore as of June 2022. Debt was negligible, and cash accrual is expected at Rs 120-150 crore (net of dividend). The ratings reflect the company’s moderate business risk profile supported by 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 an integral part of the company’s business and are, therefore, critical to its credit risk profile. For arriving at the adjusted financials, CRISIL Ratings has amortised goodwill created upon the acquisition of Innovizant LLC (Rs 10.07 crore) in January 2019 over a period of five years.
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:
In 2021, revenue grew by 31% driven by increased shift towards digital contracts and rupee depreciation. Consequently, the operating margin improved to 14.8% in 2021 from 13.7% in 2020. In 2022, the company is likely to sustain revenue growth while maintaining operating margin at 13-14% as the end users in key verticals such as telecom and BFSI will be accelerating their digital transformation and share of digital. Diversified industry and customer portfolios should support steady business growth over the medium term.
Weakness:
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Liquidity: StrongCash surplus was adequate at Rs 277 crore as on December 31, 2021. Fund-based limit of Rs 20 crore remained unutilised. Cash accrual, expected at around Rs 120 crore in 2022 (Net of dividend) and over Rs 130 crore per annum over the medium term, will comfortably cover negligible estimated debt obligation of Rs 1.2 crore in 2022. Liquidity is sufficient to cover working capital requirement, debt obligation and modest capex requirement. |
Outlook: StableCRISIL Ratings believes R Systems will maintain healthy financial risk profile over the medium term, supported by negligible debt, large liquid surplus and conservative financial policies. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company R Systems was set up in 1993 by Mr Satinder Singh Rekhi as a private limited company. It was reconstituted as a public limited company in April 2000 and came out with its initial public offering in 2006. As on March 31, 2022, the promoter and promoter-group companies held 51.67% of the company’s equity.
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 18 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.
For the three months through June 2022, R Systems reported net profit of Rs 31.8 crore on net sales of Rs 374.9 crore, as against Rs 46.1 crore and Rs 273.6 crore, respectively, for the corresponding period of the previous year. |
Key Financial Indicators
*Company follows calendar year |
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)
*Interchangeable with Letter of Credit, Export Packing Credit (EPC), Pre-Shipment credit in Foreign currency (PCFC) and Pre shipment credit (PSC) |
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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