| Subex Limited | ||
| 'CCR A-/Stable’ rating assigned | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CCR A-/Stable’ corporate credit rating to Subex Limited (SL; part of the Subex Group) |
Analytical Approach: For arriving at the ratings CRISIL Ratings has consolidated the business and financial risk profiles of SL and its subsidiaries Subex Assurance LLP; Subex Technologies Limited, Subex Digital LLP, Subex Americas INC, Subex UK Limited, Subex Middle East Limited, Subex Bangladesh Private Limited, Subex Asia Pacific Pte Limited and Subex Inc, collectively referred to as the Subex group
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:
The Subex group provides revenue assurance and fraud management software solutions to its customers amongst other products; which are of critical importance to the customers in the telecom segment. With its ability to meet changing requirement of customers and provide robust support services, the group has been able to secure repeat contracts from its key customers like British Telecom Limted, Telstra International Limited, Optus Systems Private limited etc. CRISIL Ratings believes the group shall benefit from its strong client relationship in the telecom segment over the medium term.
The group is managed by Mr. Vinod Kumar who have an experience of more than 4 decades giving strategic direction and turning around entities. Additionally, Mr Vinod Kumar along with his core management teams, have a strong domain knowledge and understanding of software requirements for various end-users, which benefits the group.
The financial risk profile is strong marked by a comfortable capital structure and robust debt protection metrics. Due to absence of external debt, the capital structure remains strong and is expected to remain so over the medium term. The group is likely to fund its incremental working capital requirements and capital investments through its internal accruals and cash balances Further debt protection metrics are strong marked by an interest coverage of around 29 times for fiscal 2021; the interest component primarily being finance lease charges. Supported by absence of debt funded acquisitions and capital expenditure, the financial risk profile is expected to remain strong over the medium term.
Weaknesses:
The scale of operations is moderate as reflected in revenues of around Rs.340-370 crore over the last 5 fiscals ended March 2021. Further there are players who are building core competencies around several products/services which overlap with that of this group’s offerings, thereby, exposing Subex group to competition. The moderate scale of operations shall continue to constrain the business risk profile over the medium term.
Revenues of the group from top 10 customers increased to 42 percent in 2021 as against 30 percent in fiscal 2020. Further the group derives almost its entire revenues from the telecom segment. Any slowdown in the telecom segment could adversely impact the group’s ability to add new customers and add new projects from existing customers. This is partially mitigated by launch of new products to other end-user segments like banking and financial institutions. However revenue contribution from these products are currently low at around 5% of the overall revenues. Diversification in end user industry and customer profile resulting in an improvement in revenues shall remain a key monitorable. |
Liquidity: Strong Liquidity remains strong supported by large cash and equivalents and absence of debt. The group is expected to generate cash accrual of around Rs.45-55 crore annually against no major repayment obligations. Liquidity is further supported by unencumbered cash and bank balances of around Rs.140-150 crore to be maintained at any point in time. This is likely to support the group’s incremental working capital requirements. The group does not have any debt funded capital expenditure/acquisition plans over the medium term supporting the liquidity. Contingent liabilities comprising of income tax and service tax disputes were at around Rs.100 crore as on March 31, 2021. Crystallization of these liabilities and its impact on the liquidity shall remain a key monitorable. The group does not have any fund based working capital limits. |
Outlook: Stable CRISIL Ratings believes SL shall benefit from its established market position over the medium term. |
Rating Sensitivity factors Upward Factors
Downward Factors
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About the Company SL is a technology company listed on the National Stock Exchange and BSE Ltd. Subex Assurance LLP is a wholly owned subsidiary of Subex Limited. The group provides business support systems to telecommunication companies, which improves their revenue and profits through the identification and elimination of leakages in their revenue chain and includes fraud, revenue assurance, analytics, partner management, cost management and credit risk management. |
Key Financial Indicators
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| 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 – 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. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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