Oasys Cybernetics Pvt. Ltd.

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 165.00 Crs. of Oasys Cybernetics Pvt. Ltd(‘OCPL’ or ‘the company’)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (19 Oct 2020)	Present
Fund Based	74.00	50.00	Long Term	BWR BBB /Stable Reaffirmation	BWR BBB + /Stable Upgrade
Non Fund Based	91.00	115.00	Short Term	BWR A3+ Reaffirmation	BWR A2 Upgrade
Non Fund Based	(12.50)	(5.00)	Short Term	BWR A3+ Reaffirmation	BWR A2 Upgrade
Grand Total	165.00	165.00	(Rupees One Hundred Sixty Five Crores Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

The rating upgrade for bank facilities of Oasys Cybernetics Pvt. Ltd. (OCPL) is on account of significant reduction of debt leading to improved leverage and gearing ratios, significant reduction of outstanding bank limits, sustenance of its revenue from IT services & e-governance projects despite Covid-19 pandemic, improvement in profitability margins, sustained improvement in TNW, and healthy liquidity profile marked by cash profits. The ratings also factor in the experienced promoters and diversified revenue source with a strong and reputed client base consisting of various Government entities. These rating strengths are partially offset by the company's presence in a highly fragmented and competitive industry and modest but stable scale of operations.

Outlook: Stable

BWR believes that OCPL's business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Experienced Management; Modest Track Record: :

Mr. K.R. Ilanghovan, Chairman and Managing Director of OCPL with an experience of more than three decades as a business and technology leader and also an active member of various Govt and IT professional bodies i.e CII, FICCI, IEEEMA and NASSCOM. Mr. Illanghovan is a first generation promoter who diversified OCPL from an energy management company to a market-leading IT solution provider. He is supported by an experienced and well qualified team, state-of-the-art infrastructure, certified project managers, architects and highly trained field engineers. With an established track record of operation, directors of OCPL have developed strong relationships with suppliers, customers and other stakeholders in the industry.
Strong and reputed client base and healthy order book position :

OCPL is associated with reputed clients in various e-Governance, IT, ITeS, Banking, Education, HealthCare and other business verticals. Over the years the promoters have developed strong business relations with reputed customers and have garnered repeated orders from them. The company has outstanding work orders of more than Rs.1100 crore as on November 30, 2021 of which 30%-35% orders will be executed over FY23 and FY24 and the remaining contracts spread across 4-5 years commencing FY23
Comfortable capital structure and debt coverage indicators :

OCPL’s capital structure improved significantly and remained comfortable owing to minimal reliance on external debt to fund its business operation and the same has significantly improved on a y-o-y basis owing to decrease in debt levels (from Rs.102.56 crore in FY19 to Rs.51.14 crore in FY21) coupled with an increase in the tangible net-worth from Rs. 174.13 crore in FY19 to Rs.204.40 crore in FY21. The reduction in debt was mainly on account of reduction and also lower utilization of fund based limits. Moreover, the debt coverage indicators marked by ISCR & DSCR stood at 3.51x and 3.18x respectively in FY21 (3.41x and 3.45x respectively in FY20).
Moderately comfortable profit margins :

The operating profit margin remained moderate and stood in the range of 23%-30% during FY19-FY21. The PAT margin, though low in absolute terms, has significantly improved to 3.27% in FY21 from 0.05% in FY19 owing to decreased finance cost & depreciation expenses mainly due to significant reduction in overall borrowings and reduction of fixed assets. A sustained and improved performance resulted in OCPL funding all CAPEX incurred since FY19 from internal accruals.

Credit Risks:

Improving albeit modest scale of operations :

Company’s scale of operations continues to remain modest though it has been improving year on year due to increased transaction with the business correspondents and income from e-governance projects. Owing to COVID-19, OCPL’s revenue has largely been stable at Rs.215.61 in FY21 (FY20: Rs. 212.88 crore), although the same has been ably supported by timely execution of turnkey IT projects as well as a rise in demand for public distribution service from various state governments along with increase in software, hardware and manpower deployment for the Tamil Nadu Election Commission owing to 2021 elections. The company has booked revenue of Rs. 129.34 in 8MFY21. The revenue is likely to improve going forward on account of the new orders procured for Supply Chain Management System for Department of Excise, Uttar Pradesh and TASMAC. Since OCPL operates on a build and operate model, post completion of these projects, the company expects a constant rise in revenue until the expiry of the contracts.
Highly Fragmented industry with several organized and unorganized Players :

The IT and software services industry is highly fragmented with several organized and unorganized players in the industry. Thus, OCPL is exposed to significant competition in the domestic market. The company would continue to benefit from its established relationship with key customers, which in turn leads to increase in the revenue. OCPL's ability to sustain strong growth and broaden its client base could help increase its profitability margins.
Elongated working capital cycle :

OCPL’s conversion cycle, though slightly improved, remained stretched at 195 days in FY21 (FY20: 223 days) due to a stretched receivables period of 272 days (FY20:299 days), as the company majorly deals with state government clients. In FY21, the net working capital cycle improved due to improvement in the receivables days and also the receivables in absolute terms improved to Rs. 132.26 crore in FY21 from Rs.189.30 crore FY20. At end-Nov 2021, the receivables position further improved to Rs. 96.37 crore with major funds received from State Governments BWR expects further improvement in the receivable days in the medium term due to diversification in projects.

ANALYTICAL APPROACH - Standalone

BWR has essentially relied upon the standalone audited financials of the company up to FY21 and projections up to FY23, publicly available information and information/clarifications provided by the management.

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive

An improvement in the overall liquidity profile along with sustained and significant growth in operating income and profitability margins

Negative

Any major debt funded capex undertaken by the company or increase in receivables position resulting in deterioration in liquidity profile of the company

LIQUIDITY INDICATORS - Adequate

Company’s liquidity profile remains adequate with nil dependence on external long term debt, high free cash and bank balances of more than 20 crore as on Nov 30, 2021 and undrawn cash credit limited as Rs.13.50 crore as of Oct 31, 2021. The current ratio ratio stood comfortable at 2.66 times in FY21(FY20-1.95 times)

ABOUT THE ENTITY

Established in 2000 as Omne Agate Systems Pvt. Ltd, later on in 2010 it was reconstituted under the name of OASYS Cybernetics Pvt. Ltd (OCPL) by Chennai-based Mr. K.R. Ilanghovan who is presently the Chairman and Managing Director of the Company. The company is in the business of software development, system integration projects, end to end computerization of public distribution systems, E Governance related services and manufacture of digital energy meters to improve the usage of power in various consumer segments. OCPL also provided electoral roll management systems for different state governments and digital signage solutions for banks. It has also entered into contracts for system integrator for supply chain management system of liquor sales for Tamil Nadu and Uttar Pradesh state government entities.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	215.61	212.88
EBITDA	Rs.Crs.	50.29	63.89
PAT	Rs.Crs.	7.05	1.48
Tangible Net Worth	Rs.Crs.	204.40	186.48
Total Debt/Tangible Net Worth	Times	0.25	0.53
Current Ratio	Times	2.66	1.95

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Nil

ANY OTHER INFORMATION

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	50.00	BWR BBB+/Stable (Upgrade)	NA	NA	14Oct2020	BWR BBBStable (Assignment)	NA	NA
		NA	NA	NA	NA	19Oct2020	BWR BBB Stable (Reaffirmation)	NA	NA
Non Fund Based	ST	115.00	BWR A2 (Upgrade)	NA	NA	14Oct2020	BWR A3+ (Assignment)	NA	NA
		NA	NA	NA	NA	19Oct2020	BWR A3+ (Reaffirmation)	NA	NA
NFB SubLimit	ST	(5.00)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
Grand Total		165.00	(Rupees One Hundred Sixty Five Crores Only)

Rating Advisory, as on 25Oct2021
COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Roma Gupta Ratings Analyst roma.g@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Oasys Cybernetics Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Bank of Maharashtra	Cash Credit - Sanctioned	12.00	_	12.00
2	Bank of Maharashtra	Bank Guarantee - Sanctioned	_	10.00	10.00
3	Bank of Maharashtra	Letter of Credit - Sanctioned	_	5.00	5.00
4	IDBI Bank	ILC/FLC/BG - Sanctioned	_	21.01	21.01
5	IDBI Bank	Cash Credit - Sanctioned	23.00	_	23.00
6	State Bank Of India (SBI)	Cash Credit - Sanctioned	15.00	_	15.00
7	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	40.00	40.00
	Sub-Limit (Letter of credit) - Sanctioned		(5.00)
8	State Bank Of India (SBI)	Bank Guarantee - Proposed	_	38.99	38.99
Total			50.00	115.00	165.00
TOTAL (Rupees One Hundred Sixty Five Crores Only)

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