Established Track record of operations
CESL has an established track record of operations data back of almost two decades, along with experienced management. The company is promoted by Mr. Abhinav Singh, Mr. Arunabh Singh, Mr. Pranjal Kumar and Mr. Gaurav Abrol  who are ably supported by the experienced second line of management. The experience of promoters is also reflected in the growing scale of operations, with revenue of the company increasing to Rs. 465.76 Cr. in FY2024 (Prov) as against Rs. 413.93 Cr. in FY2023 and Rs 363.15 Cr. in FY2022. The operating income in FY24 (Prov) also consitute of Rs.3.12 Cr. of other income for the company. Further, the company was able to maintain a stable relationship with reputed clientele in different industries namely NBFCs & Fintech, Banking and Insurance, telecommunication, e-Commerce, and Direct to home television, among others.The clientele of the company includes companies like Bajaj Finance, Axis Bank, Vodafone Idea, Tata play, Tata AIG, Whirlpool, among others. The company in FY24 was successfully awarded a work contract from Central Bank of India for a period of 5 years. The company currently has a total of 68 clients.
Acuite believes that CESL will continue to benefit from its established track record of operations and stable relationships with reputed clients.

Strong financial risk profile
The financial risk profile of the company remained strong marked by a healthy net worth, low gearing, and strong debt protection metrics. The net worth of the company stood healthy at Rs. 170.62 Cr. as on March 31, 2024 (Prov) as against Rs. 136.62 Cr. as on March 31, 2023. The increase in net worth is primarily due to the accretion of profits to the reserves. The company follows a conservative financial risk policy, reflected in its peak gearing (debt/equity) of 0.16 times as on March 31, 2023. The gearing of the company stood at 0.11 times as on March 31, 2024 (Prov) as against 0.16 times as on March 31, 2023 and 0.10 times as on March 31, 2022. The TOL/TNW stood at 0.80 times as on March 31, 2024 (Prov) as against 1.02 times as on March 31, 2023 and 0.89 times as on March 31, 2022. The total outside liabilities are mainly financial lease liabilities of the company. The debt protection metrics stood comfortable with DSCR and Interest coverage ratio standing at 8.12 times and 19.03 times respectively as on FY2024 (Prov) as against 5.11 times and 8.59 times as on FY 2023.
Acuite believes that the financial risk profile of the company may continue to remain healthy with steady cash accruals to fund capex, if any in the near to medium term.

Working capital efficient operations
The working capital operations of the company remained efficient marked by GCA days of 78 days in FY 2024 (Prov) as against 91 days in FY 2023. The GCA days are comprised of debtor and other crurent assets consisting of unbilled revenue. The debtor days stood at 35 days in FY 2024 (Prov) as against 54 days in FY 2023. The company has agreement of providing invoice to customers within 30 days of end of service month and then within 30 to 45 days, the company receives the payment from client. The unbilled revenue of the company stood at Rs 37.62 Cr. in FY 2024 (Prov) and Rs 37.52 Cr. in FY 2023. The company has average dependence on short term bank finance with an average utilization of 38% for last 7 months ended April 2024.
Acuite believes that working capital operations of the company may continue to remain efficient considering the efficient receivable mechanism.

Customer Concentration risk along with contract renewal risk
The CEPL faces a customer concentration risk with its top four customers contributing nearly 60% of its total revenue. Further, the contracts for the services with its customers are for three years and future revenue for the company is highly dependent on renewal of these contracts. However, to mitigate this risk to some extent renewal clauses are mentioned in contract at the discretion of both parties.
Acuite believes that the recurring renewal of these contracts is a key rating sensitivity.

Competitive Industry with high manpower attrition­.
The global IT services industry is dominated by several large players and small niche technology players. The industry is highly technology-oriented which keeps changing from time to time. Thus, the company has to keep upgrading the services it offers according to the needs of its clients and changes in the industry. However, the established relationship with clients and vendors, diversified geographical presence and experienced management mitigate the risk to some extent. Further, the ability of the company to manage industry specific risks such as wage inflation and employee attrition levels determines the company's ability to sustain its business risk profile and will remain a key rating sensitivity.