| Zen Technologies Limited | ||||||
| Long-term rating upgraded to 'Crisil A/Positive'; Short-term rating reaffirmed | ||||||
| Rating Action | ||||||
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| 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 upgraded its rating on the long-term bank facilities of Zen Technologies Ltd (ZTL; part of the Zen group) to ‘Crisil A/Positive’ from ‘Crisil A-/Stable’. The short-term rating has been reaffirmed at ‘Crisil A1’.
The rating action reflects the expected strong performance of the company in fiscal 2025, with revenue expected to be significantly higher than fiscal 2024 level amid stable operating margin above 35%. Equity infusion of Rs 1,000 crore in the current fiscal has strengthened the financial risk profile and liquidity. The proceeds will likely fund the working capital cycle and inorganic acquisition plans of the management, which should strengthen the market position of the company in the defence segment. It continues to enjoy strong market position in the simulator segment and is among the top players in the country. Favourable government policies and high entry barriers to the segments in which it operates, along with expertise in enhancing and developing new products, will continue to support the business.
The positive outlook factors in the improvement in order book to Rs 1,300-1,400 crore from Rs 956 crore as on September 30, 2024, which is expected to provide medium-term revenue visibility.
The ratings continue to factor in the group’s established market position in design, development and supply of training simulators and strong financial risk profile. These strengths are partially offset by exposure to risks inherent in tender-based business and working capital-intensive operations. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of ZTL, Zen Technologies USA, Zen Medical Technologies Pvt Ltd, AiTuring Technologies Pvt Ltd, Zen Defence Technologies LLC, UAE, and Unistring Tech Solutions Pvt Ltd. This is because all these entities have the same promoters and strong business and financial linkages.
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:
Weaknesses:
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Liquidity: Strong Bank limit utilisation was nil for the 12 months through September 2024. Cash accrual, expected over Rs 230 crore per annum, will sufficiently cover minimal yearly term debt obligation. Current ratio was healthy at 2.3 times as on March 31, 2024. Cash and bank balance was moderate around Rs 1,100 crore as on September 30, 2024. Low gearing and moderate networth support financial flexibility, which will help to withstand adverse conditions or downturns in the business. |
Outlook: Positive The positive outlook reflects the expected improvement in the order book at the group level, which will strengthen business performance. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the group Incorporated in 1993, ZTL develops, designs and supplies computer-based training simulators and anti-drone systems for the Ministry of Defence, police and paramilitary forces, government departments and private players. The company has ISO 9001:2008 (QMS) and ISO 27001:2005 (ISMS) certifications and is a CMMI level 3 company. Its R&D unit is recognised by the Department of Scientific and Industrial Research, Ministry of Science and Technology, government of India.
Unistring Tech Solutions Pvt Ltd is a subsidiary of ZTL, which owns 51% shareholding. The company is engaged in the design and development of products for electronic warfare, communication and RADAR applications.
Zen Medical Technologies Pvt Ltd, a wholly owned subsidiary of ZTL, is primarily engaged in the business of medical and hospital equipment.
AiTuring Technologies Pvt Ltd (ZTL has 51% shareholding) is a pioneer in robotics and integrating sophisticated technologies, and provides cutting edge solutions in remote-controlled weapon stations and optronics.
Zen Technologies USA is a wholly owned subsidiary of ZTL. The company was incorporated on March 9, 2018, and operates in the simulator industry, which complements the parent’s core competencies.
Zen Defence Technologies LLC, UAE, is a wholly owned subsidiary incorporated on November 15, 2022, in the UAE. It undertakes the import and export of training equipment and simulators as well as the trading, development and maintenance of defence and surveillance systems.
ZTL reported total income and profit after tax (PAT) of Rs 507.11 crore and Rs 139.41 crore, respectively, as on September 30, 2024, as against Rs 203.9 crore and Rs 64.47 crore, respectively, a year earlier. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
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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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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