WeP Solutions Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 20.83 Crs. of WeP Solutions Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (28 Dec 2020)	Present
Fund Based	24.59	18.33	Long Term	BWR BBB- /Stable Reaffirmation	BWR BBB - /Stable Reaffirmation
	(2.00)	(0.00)
	(4.00)	(4.00)
Non Fund Based	2.50	2.50	Short Term	BWR A3 Reaffirmation	BWR A3 Reaffirmation
	(3.00)	(3.00)
	(3.00)	(0.00)
	(1.00)	(0.00)
	(3.50)	(3.50)
	(2.50)	(2.50)
Grand Total	27.09	20.83	(Rupees Twenty Crores and Eighty Three lakhs 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

BWR has essentially relied upon the audited financials up to FY21, provisional financials of 9MFY22, projected financials up to FY23, publicly available information, and information/clarifications provided by the company's management.

The ratings reaffirm factors of experienced management, adequate financial risk profile, healthy customer relationships, company services, and adequate liquidity position. However, the ratings are constrained by Y-oY declined revenue but an improvement on a provisional basis, a moderate scale of operations and low profitability margins, dependence and inability, concentration risk, and working capital intensive nature of operations. 

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR expects that Wep Solutions Ltd's business risk profile will be maintained over the medium term. The outlook may be revised to Positive in case of better than expected operating income and improvement in financial risk profile debt-protection indicators. The outlook may be revised to Negative if the operating metrics weaken or if larger than anticipated Capex leads to deterioration in credit metrics and liquidity

KEY RATING DRIVERS

Credit Strengths:

• Experienced management :

  The company stands to benefit from experienced and qualified management. It has an established customer base.
   

• The adequate financial risk profile :

  The company has an adequate financial risk profile marked by an adequate capital structure and debt service coverage metrics. The tangible net worth, gearing ratio, interest service coverage ratio, and debt service coverage ratio were around Rs.39.88 Crs, 0.35 times, 7.21 times, and 3.39 times respectively, as on 31st March 2021. 
   

• Healthy customer relationships and company services :

  Direct relationship with major OEM like Ricoh, a global enterprise, that can add to its MPS and digital services and solutions offerings. The company provides comprehensive digital services with a variety of digital solutions like GST services, document management solutions etc. 
   

Credit Risks:

• Y-o-Y declined revenue, remains a moderate scale of operations, low profitability margins, and revenue improvement on a provisional basis :

   The company revenue declined to Rs.64.49 Crs in FY21 from Rs.68.37 Crs in FY20 and Rs.76.70 Crs in FY19. The profitability margins were low marked by a net profit margin negative of 1.73% in FY21 against 3.10% in FY20. But, On a provisional basis, the company revenue has improved substantially and reported a revenue of around Rs.78.75 Crs for 9MFY22 against around Rs.33.00 for 9MFY21.

• Dependence and inability :

  Dependency on products manufactured by other OEM’s for providing solutions in the MPS business. Inability to develop in-house technical expertise quickly to move up the value chain in the MPS business.

• Concentration risk :

  Significant revenues of the company are from the Banking, Financial Service, and Insurance(BFSI) Segments. Any direct or indirect impact on the BFSI industry can impact the revenues of the company.
   

ANALYTICAL APPROACH - Consolidated

BWR has applied its rating methodology as detailed at the end of the document. BWR has adopted a consolidated approach for arriving at its ratings. However, BWR has noted the support to the company from the Wep Group and its promoters.
 

RATING SENSITIVITIES

Upward - Sustained improvement in scale of operations with improved profitability margins and capital structure. Specific credit metrics that could lead to an upgrade of the company's rating include (1) Total Debt/Tangible net worth below 1.00 times on a continuous basis, (2) DSCR and ISCR greater than 3.0 times on a continuous basis. 

Downward - Specific credit metrics that could lead to a downgrade if there is any decline in revenue, debt service coverage metrics and further there is a significant deterioration in the credit profile of the company. 
 

LIQUIDITY INDICATORS - Adequate

The liquidity position of the Company is adequate as its current ratio as on March 31, 2021, is moderate at 1.47 times. The average CC utilization for the last 12 months is 25%. Adequate to meet the net cash accruals of Rs.11.32 Crs and Rs.12.89 Crs against the CPLTD of Rs.2.10 Crs, as on 31 Mar 2022 and Rs. 2.80 Crs, as on 31 Mar 2023, respectively.
 

ABOUT THE ENTITY

Wep Solutions Limited (Wep), promoted by Mr. Ram Narayan Agarwal was incorporated in the year 1995 located in Bangalore and listed in BSE. The company is engaged in Managed Printing Solutions (MPS) and Document Services and Manufacturing and Distribution of Computer peripherals (GST Platform Services, Document Management Solutions, Managed Print Services, and POS Solutions). The Company has a pan India presence having 19 offices and support locations. WSL has manufacturing facilities situated in Mysore(Karnataka) and in Baddi (Himachal Pradesh) both facilities are ISO certified. WeP Solutions Ltd. and Ricoh Asia Pacific entered into a distributor agreement for the Indian Market. Ricoh’s headquarter is located in Tokyo. It is empowering digital workplaces using innovative technologies and services enabling individuals to work smarter. For more than 80 years, Ricoh has been driving innovation and is a leading provider of document management solutions, IT services, commercial and industrial printing, digital cameras, and industrial systems. Under the agreement of WeP Solutions Limited and Ricoh Asia Pacific, WeP has rights to sell and service Ricoh’s product portfolio that addresses the digital printing market in India.

WeP Digital Services Limited is 100% Subsidiary and is managed by its separate Board of Directors. Wep Digital Services Limited commenced its operations in May 2017. WeP Digital services with a Mission ‘WeP Digital’ is to empower the business by providing innovative Digital Services to help the customers to operate on a ‘cashless’ and ‘paperless’ basis. These services are being launched for applications in the areas of GST Tax fling, Document management, and Aadhaar Authentication.

ANY OTHER INFORMATION

The standalone revenue is negligible, hence, BWR has considered the consolidated financials only. 

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	18.33	BWR BBB-/Stable (Reaffirmation)	NA	NA	28Dec2020	BWR BBB- Stable (Reaffirmation)	18May2019	BWR BBB- Stable (Reaffirmation)
FB SubLimit	LT	(4.00)	BWR BBB-/Stable (Reaffirmation)	NA	NA	28Dec2020	BWR BBB- Stable (Reaffirmation)	NA	NA
Non Fund Based	ST	2.50	BWR A3 (Reaffirmation)	NA	NA	28Dec2020	BWR A3 (Reaffirmation)	18May2019	BWR A3 (Reaffirmation)
NFB SubLimit	ST	(3.00)	BWR A3 (Reaffirmation)	NA	NA	28Dec2020	BWR A3 (Reaffirmation)	18May2019	BWR A3 (Reaffirmation)
NFB SubLimit	ST	(3.50)	BWR A3 (Reaffirmation)	NA	NA	NA	NA	NA	NA
NFB SubLimit	ST	(2.50)	BWR A3 (Reaffirmation)	NA	NA	NA	NA	NA	NA
Grand Total		20.83	(Rupees Twenty Crores and Eighty Three lakhs Only)

Rating Advisory, as on 25Jan2022
Press Release, as on 25Jan2022
BWR issued an advisory

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

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

• General Criteria
• Approach to Financial Ratios
• Manufacturing Companies
• Short Term Debt

Analytical Contacts
Prashanth Boorala Ratings Analyst Board : +91 40 2331 0161 / 2331 0071 prashanth.b@brickworkratings.com	Nagaraj K Associate Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Axis Bank Ltd.	Term Loan - Out-standing	3.68	_	3.68
2	Axis Bank Ltd.	Term Loan - Out-standing	1.65	_	1.65
3	Axis Bank Ltd.	Cash Credit - Sanctioned	6.00	_	6.00
	Sub-Limit (Bank Guarantee) - Sanctioned		(2.50)
	Sub-Limit (Letter of Credit) - Sanctioned		(3.50)
	Sub-Limit (Working Capital Demand Loan) - Out-standing	(4.00)
4	Axis Bank Ltd.	Letter of Credit - Sanctioned	_	2.50	2.50
5	HDFC Bank	Cash Credit - Sanctioned	_	_	0.00
	Sub-Limit (Bank Guarantee) - Sanctioned		(0.00)
	Sub-Limit (Letter of Credit) - Sanctioned		(0.00)
	Sub-Limit (Working Capital Demand Loan) - Sanctioned	(0.00)
6	Union Bank of India	Cash Credit - Sanctioned	7.00	_	7.00
	Sub-Limit (Inland Letter of Credit/Inland Bank Guarantee) - Sanctioned		(3.00)
Total			18.33	2.50	20.83
TOTAL (Rupees Twenty Crores and Eighty Three lakhs Only)