Brickwork Ratings reaffirms the short term ratings for the Bank Loan Facilities of Rs. 25.00 Crs. of Sysnet Global Technologies Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (27 Jul 2020) |
Present | ||
| Fund Based | 25.00 | 25.00 | Short Term |
BWR A3
Upgrade |
BWR A3
Reaffirmation |
| Grand Total | 25.00 | 25.00 | (Rupees Twenty Five Crores Only) | ||
BWR has reaffirmed the rating of Sysnet Global Technologies Private Limited at BWR A3. The reaffirmation of rating reflects the stability in the company’s operating income (OI) at around Rs.150 Crores for the past three years. Net profit margins have been improving year on year. The current ratio have been constant at 1.05 times in FY20 and FY19. The debt protection metrics are moderate in FY20. Overall, the credit risk profile of the company seems moderately low. The rating has also factored the extensive experience of the promoters in the ITES industry, long track record of the company and the client’s established relationship with reputed clients over the past many years. The rating is however constrained by the stagnant revenue levels in the past couple of years, thin profitability margins and possible affect on the business due to the Covid-19 pandemic.
KEY RATING DRIVERSCredit Strengths:
The company has been operating since 1999 hence has an established presence in the market. The company has maintained long term relationships with highly reputed clients such as Hewlett Packard India Pvt. Ltd., Tata Consultancy Services, IBM India Pvt. Ltd. etc.
The Tangible Net worth of the company has been consistently increasing y-o-y and stood at Rs. 24 Crs for FY21 (Provisional) and the gearing of the company was 0.67 times as on 31 March 2021. The ISCR and DSCR of SGTPL was at 1.47 times and 1.10 times in FY20 which are moderate. Both the ratios are estimated to improve to 1.72 times and 1.36 times in FY21(Prov.).
The Indian IT industry is expected to stage a ‘strong recovery’ in 2021-22 with a revenue growth of up to 11%. The recovery will be led by increasing outsourcing and accelerating digital transformation services mainly in sectors such as banking, financial services and insurance (BFSI), healthcare, retail and manufacturing.
The company’s operating income has remained somewhat stagnant in the last three years i.e. since FY18. The operating income in FY21(Prov.) saw a slight decline to Rs. 145.10 Cr. as compared to Rs. 150.55 Cr. in FY20 due to the Covid-19 lockdown. However, the operating income of the company is further improving to Rs. 173.81 Cr. in FY22(Proj.).
Operating profit margins of the company has fallen from 3.88% in FY19 to 3.84% in FY20, which is further falling to 3.40% in FY21(Prov.). The company is projecting an improvement in operating margins in FY22(Proj.) to 4.37%. Net profit margins on the other hand are gradually improving year on year from .90% in FY19 to 1.06% in FY20 which is further improving to 1.15% and 2.01% in FY21(Prov.) and FY22(Proj.) respectively.
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
Going forward, the ability of the company to improve its capital structure & profitability and manage liquidity would be key rating sensitivities.
Upward: The outlook may be revised upward if the company is able to achieve the projected revenues, profitability & capital structure and improve its profitability margins & debt protection metrics.
Downward: The outlook may be revised downwards if the company fails to achieve projected revenues & profits and there are delays in servicing the debt obligations.
LIQUIDITY INDICATORS - Adequate
The company has generated net cash accruals of Rs.2.54 Crores in FY20 as compared to Rs.2.22 Crore in FY19. Cash accruals in FY21(Prov.) Rs. 2.49 Cr. which is further rising to Rs. 4.33 Cr. in FY22(Proj.). Other liquidity indicators are marked adequate on account of bank balance of Rs. 9.29 Cr. in FY20 which is further rising to Rs. 9.59 Cr. and Rs. 10.55 Cr. in FY21(Prov.) and FY22(Proj,) respectively. In absence of any major debt repayments in the near term, the company seems to have adequate levels of liquidity to meet its working capital needs. The factoring facility utilization level was between 60-65% in the last 1 year. The current ratio of the company is at 1.05 times which is further improving to 1.26 times and 1.32 times in FY21(Prov.) and FY22(Proj.) respectively. BWR believes that the company’s liquidity profile will remain adequate in the short to medium term.
ABOUT THE ENTITYSysnet Global Technologies Pvt Ltd (SGTPL) was established in 1999 by a group of qualified & experienced professionals, to provide IT hardware solutions to companies in India. Mr. Sunil Gautam is the major shareholder of the company and is the key promoter. He is supported by other director Mr. Arush Sogani. SGTPL provides system integration and service products like warranty support, AMC, facility management services, up gradation for HP (HP and Compaq), IBM, Acer, Cisco, Epson, 3Com, D-link, Intel, Canon, Samsung, etc. directly or through their strategic partners.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 150.55 | 150.38 |
| EBITDA | Rs.Crs. | 5.78 | 5.84 |
| PAT | Rs.Crs. | 1.60 | 1.35 |
| Tangible Net Worth | Rs.Crs. | 22.29 | 20.81 |
| Total Debt/Tangible Net Worth | Times | 0.95 | 1.04 |
| Current Ratio | Times | 1.05 | 1.05 |
Nil
Nil
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | ST | 25.00 |
BWR A3
(Reaffirmation) |
27Jul2020 |
BWR A3
(Upgrade) |
28Apr2019 |
BWR A3
(Reaffirmation) |
NA |
NA
|
| NA |
NA
|
NA |
NA
|
24Dec2019 |
BWR A4+
(Downgrade) |
NA |
NA
|
||
| Grand Total | 25.00 | (Rupees Twenty Five Crores Only) | |||||||
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 | |
|---|---|
|
Arjun Gupta Ratings Analyst arjun.g@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@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 | IFCI Limited | Domestic Factoring | _ | 10.00 | 10.00 | |
| 2 | SBI Global Factors Limited | Domestic Factoring | _ | 15.00 | 15.00 | |
| Total | 0.00 | 25.00 | 25.00 | |||
| TOTAL (Rupees Twenty Five Crores Only) | ||||||
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