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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 100.00 | - | ACUITE A2 | Upgraded |
| Total Outstanding | 100.00 | - | - |
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Rating Rationale |
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Acuité has upgraded the short-term rating from ‘ACUITE A3+’ (read as ACUITE A three plus) to 'ACUITE A2' (read as ACUITE A two) on the Rs. 100.00 Crore bank facilities of Aon Consulting Private Limited (ACPL).
Rationale for upgrade The rating takes into account the improvement in scale of operations, improving profitability, strong financial risk profile and strong liquidity position. Company has shown improvement in revenues wherein operating income in FY 2023 stood at Rs. 635.60 Cr as against 510.85 Cr in FY 2022. Company has maintained healthy profitability levels and has strong liquidity marked by high net cash accruals and cash surplus in form of unencumbered Mutual fund and Fixed deposit investments. However the rating is underpinned by foreign exchange risk and geographical concentration of revenues. |
| About the Company |
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Incorporated in 2008, ACPL is the Indian arm of the Aon group which is spread across 120 countries in the field of insurance and reinsurance, HR consultancy and others. The company is registered in Delhi and generates its revenues via two lines of business viz. human resources consultancy services in the domestic markets as well as providing technical support to the group companies overseas. ACPL has around 2800 employees and has 4 offices located in Gurgaon, Mumbai Noida and Bangalore. It's Holding company is Aon Mauritius Holdings. It is being managed by Mr. Arun Charles Dias, Mr. Rahul Kedia and Mrs. Vandita Saran.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profiles of AON Consulting Private Limited while factoring in the support from the group entities and their strong brand presence.
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| Key Rating Drivers |
| Strengths |
| Strong brand presence and experienced management
ACPL is a part of Aon group which is one of the biggest players in insurance and HR consulting industry with an expanding reach of branches in 120 countries across the globe as well as over 50,000 employees. The revenues of ACPL are majorly generated by the tech support work undertaken by the entity for its group affiliates thus the company performance is directly proportional to the group entities performances. The Aon group has had a long presence in the industry i.e. nearly of 4 decades catering to clients within numerous domains. The overall consolidated turnover of the group stood at $ 13.37 billion in 2023 as against $12.47 billion in 2022. The long track record of operations and the business diversification of the group geographically as well as in various segments has allowed them to cater to a number of reputed names like Amazon, Walmart, AT & T, Tata Consultancy limited and Infosys to name a few. The group has continuously undertaken mergers and acquisition over the years in order to diversify the business segments as well as expand its reach to new customers and get a larger market share. The brand name of Aon has benefitted their Indian arm ACPL in engaing with many big players in the domestic markets for the Human resources consulting business such as Indian Oil Corporation Limited, Capegemini, HDFC to name a few. Improvement in sales and profitability Company earned revenue of Rs. 635.50 Cr in FY 2023 (Audited) which improved from Rs. 510.85 Cr in FY 2022 on account of better demand for consultancy and Business Process and Technology Outsourcing. Company’s profitability saw improvement in the last three years. EBITDA margin improved from 20.62% in FY 2021 to 21.69% in FY 2022 and stood at 22.74% in FY 2023. Likewise PAT margin improved from 10.97% in FY 2021 to 12.40% in FY2022 and stood at 13.40% in FY 2023. As of December 2023 company has earned revenue of Rs. 563.73 Cr and expects to earn revenue to the tune of Rs. 750 Cr in FY 2024. Strong financial risk profile Company has healthy financial risk profile marked by moderate net worth, healthy debt protection metrics and low gearing. Tangible Networth moderated from Rs. 453.85 Cr in FY 2022 to Rs. 274.86 Cr. in FY 2023 on account of capital reduction as approved by board of directors. The board of directors on January 10, 2022 approved reduction of paid up share capital by 17,94,25,837 fully paid-up equity share of Rs. 10 Each. The same was approved by equity shareholders by special resolution on January 11, 2022 and approved by NCLT on July 5, 2022. Accordingly during the year, the company has given effect to the reduction. The company has no dependence on external debt as Total debt of Rs. 58.66 Cr in FY 2023 consists of lease liability that the company is paying for the offices they are operating in. Consequently, Debt to Equity (Gearing) has remained comfortable at 0.21 times in FY 2023 and 0.14 times in FY 2022. DSCR improved from 18.39 times in FY 2022 to 19.79 times in FY 2023. NCA/TD improved from 1.46 times in FY 2022 to 2.03 times in FY 2023. Interest Coverage Ratio improved and remained strong at 24.82 times in FY 2023 as against 22.43 times in FY 2022. Debt-EBITDA and TOL/TNW even after reduction in capital has remained comfortable and below unity. Since the company does not have any debt funded capex plan and the yearly capex is managed from internal accruals hence the team believes the financial risk profile to remain stable with slight improvement in the near term. |
| Weaknesses |
| Foreign exchange risk and geographical concentration of revenues
The major revenue stream of ACPL emanates from the technical support and Business process outsourcing services provided by the company to its group affiliates overseas which contributed to 70.60 percent of the total revenues of the company in FY 2023 as against 74.22 percent of the total revenues in the previous year therefore the company is exposed to the risk of losses on account of currency fluctuations which can arise from the volatility in the geo-political situations, trade barriers and the advent of global recession led by risk aversions in response to interest hikes by central banks, thus it is imperative that the company uses hedging mechanisms in order to safeguard their earnings in various markets. Acuité also takes note of the fact that out of the total revenues of Rs. 635.60 crores in FY 2023 nearly 47.12 percent was generated by the services provided to USA based group entities similarly in FY 2022 out of the total revenue of Rs. 510.85 crores nearly 50.43 percent therefore there is a high geographical concentration of revenues. This revenue stream can be impacted heavily in case of any major changes in the taxation laws in the USA or any instability in the international relationships. |
| Rating Sensitivities |
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| Liquidity Position |
| Strong |
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Company has strong liquidity marked by strong net cash accruals and unencumbered FD and Mutual fund investments. In FY 2023 company generated net cash accrual of Rs. 118.92 Cr against maturing lease liability payment of Rs. 9.30 Cr. Going forward company is expected to generate NCA in the range of Rs. 130 Cr to Rs. 150 Cr against maturing lease liability of Rs. 11.52 Cr in each respective year. In FY 2023 company has investments of Rs. 137.96 Cr out of which Rs. 92.38 Cr is invested in mutual funds and Rs. 45.58 Cr is in form of Fixed deposits and both the investments are entirely unencumbered. Company had unencumbered cash and bank position of Rs. 15.36 Cr in FY 2023 while current ratio stood at 1.64 times.
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| Outlook : Not Applicable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 635.60 | 510.85 |
| PAT | Rs. Cr. | 85.19 | 63.34 |
| PAT Margin | (%) | 13.40 | 12.40 |
| Total Debt/Tangible Net Worth | Times | 0.21 | 0.14 |
| PBDIT/Interest | Times | 24.82 | 22.43 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||
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