|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 21.00 | ACUITE BBB- | Stable | Reaffirmed | Negative to Stable | - |
| Bank Loan Ratings | 8.00 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 29.00 | - | - |
| Rating Rationale |
|
Acuité has reaffirmed the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B Minus) and short-term rating of ‘ACUITE A3’ (read as ACUITE A three) on the Rs.29.00 Cr bank facilities of Precision Infomatic (Madras) Private Limited (Precision). The outlook has been revised from 'Negative' to 'Stable'.
Rationale for Rating The revision in outlook is on account of the improvement in operating performance of the company marked by improving profitability, diversification of customer profile and reduced working capital cycle. The operating margins of the company stood at 3.52% in FY2023 (Prov) as against 3.17% in FY2022. Furthermore, the company has currently diversified its customer profile by focusing more on Infrastructure services, Biometric and IoT business segments. The same is also expected to reduce the customer concentration risk going forward. Also, the quoted segments generate higher margins and are thus expected to further improve the company’s profitability over the medium term despite an anticipated drop in revenues of the company during this year. The revision in outlook also considers improvement in company’s working capital cycle reflected by improvement in GCA days to 185 days for FY2023 (Prov) as against 306 days in FY2022. The rating continues to factor in the extensive experience of management above 2 decades in the service Industry, established track record of operations with long standing relationship with reputed clientele such as Vodafone Idea, H.P. Enterprise Pvt Ltd, Hyundai Autoever India Pvt Ltd, and among others. |
| About the Company |
|
Precision Infomatic (Madras) Private Limited (Precision) is a Chennai (Tamil Nadu) based company incorporated in June 1996. Precision is promoted by Mr. Mathew Chacko, Mr. Viswanathan Murali and Mr. Thanjavur Govindarajan Ramesh. The company's revenue profile is diversified into Infrastructure Management, System Integration and Biometrics & Internet of things (IoT) services. It has a Pan India presence with 10 branches. Precision has a welldiversified client base comprising of IT companies, Banks, Telecom companies, public sector units, among others.
|
| Standalone (Unsupported) Rating |
| None |
| Analytical Approach |
|
For arriving at the ratings, Acuité has considered the standalone business and financial risk profile of Precision Infomatic (Madras) Private Limited.
|
Key Rating Drivers
| Strengths |
| Experience of promoters and established track record of operations:
Incorporated in 1996, Precision's promoters Mr. Mathew Chacko, Mr. Viswanathan Murali and Mr. T G Ramesh are technocrats and having more than two decades of experience in the IT/ITES industry. Over the years the company has developed well-diversified client base comprising of Automobile companies, FMCG companies and Telecom companies. Its major clientele includes Hyundai Autoever India Private Limited, ITC Limited, Vodafone-Idea Ltd, Hewlett Packard Enterprise (India) Private Limited and Samsung India Electronics Private Limited. Further, the revenues are diversified into: system integration (~ 62%), infrastructure services (~29%), and biometric solutions (~9%). The company as of October 2023 has an outstanding order book of Rs.93.54 Cr. The order book here consists of 40-45% from System Integration, 30-35% from Infrastructure Services, and the remaining 20-30% from Biometrics and IoT. Acuité believes that promoters' entrepreneurial experience, healthy relations with its clientele is expected to aid in improving its business risk profile over the medium term. Moderate financial risk profile: The financial risk profile of the company stood moderate marked by moderate net worth, gearing and debt protection metrics. The tangible net worth stood at Rs.41.73 crore as on 31 March, 2023 (Prov) as against Rs.38.62 crore as on 31 March, 2022. The total debt of the company stood at Rs.4.72 crore includes Rs.0.66 crore of long-term debt, Rs.3.80 crore of short-term debt, and Rs.0.26 crore of CPLTD as on 31 March 2023. The gearing (debt-equity) stood at 0.11 times as on 31 March, 2023 (Prov) as compared to 0.49 times as on 31 March, 2022. Interest Coverage Ratio stood at 2.31 times for FY2023 (Prov) as against 5.28 times for FY2022. Debt Service Coverage Ratio (DSCR) stood at 1.76 times in FY2023 (Prov) as against 3.57 times in FY2022. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 2.60 times as on 31 March, 2023 (Prov) as against 5.18 times as on 31 March, 2022. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.83 times for FY2023 (Prov) as against 0.29 times for FY2022. Acuite believes the financial risk profile of the company will continue to remain moderate on account of its moderate revenue growth. |
| Weaknesses |
| Intensive Working capital management
The working capital management of the company is intensive, however there has been improvement in the GCA days of 185 days in FY2023 (Prov) as against 306 days in FY2022. The debtor days stood at 150 days in FY2023 as against 277 days in FY2022. However, the average credit period allowed to customers for System Integration (SI) is 120-180 days, for Infrastructure Services (IS) and cloud services (CS) is 30-45 days. The creditor days stood at 162 days in FY2023 (Prov) as against 295 days in FY2022. However, the credit period for SI is 120-180 days, for IS and CS is 30-45 days. The inventory days stood at 26 days in FY2023 (Prov) as against 18 days in FY2022. Further, the average working capital utilization for fund-based limits stood at ~80 percent and for non-fund-based limits stood at ~75-80 percent for the last 07 months ending July 2023. Vulnerability of profitability to competitive pressures and technological changes The IT industry is susceptible to risks related to technological changes, competition from substitutes and shifts in customer’s preferences. Further, due to the agency-like nature of business of Precision, the margins are thin. The operating margins of the company ranged between 3.17-4.56 percent in the last three years ended FY2023 (Prov.). |
| Rating Sensitivities |
|
| All Covenants |
| Not Available |
| Liquidity Position |
| Adequate |
|
The company’s liquidity position is adequate marked by sufficient net cash accruals against its maturing debt obligations. The company has net cash accruals in the range of Rs.3.91-Rs.5.38 Crore from FY 2021- 2023 (Prov) against its maturing debt obligations in the range of Rs.0.26-Rs.0.33 crore in the same tenure. In addition, it is expected to generate a sufficient cash accrual in the range of Rs.4.61-Rs.5.07 crore against the maturing repayment obligations of around Rs.0.20-Rs.1.20 crore over the medium term. The working capital management of the company is intensive marked by GCA days of 185 days in FY2023 (Prov) as against 306 days in FY2022. The company maintains unencumbered cash and bank balances of Rs.0.10 crore as on March 31, 2023 (Prov). The current ratio stands at 1.30 times as on March 31, 2023 (Prov) as against 1.14 times as on March 31, 2022. The average working capital utilization for fund-based limits stood at ~80 percent and for non-fund-based limits stood at ~75-80 percent for the last 07 months ending July 2023.
Acuité believes that the liquidity of PIPL is likely to remain adequate over the medium term on account of sufficient net cash accruals against its maturing debt obligations. |
| Outlook: Stable |
|
Acuité believes that Precision will maintain a 'Stable' outlook over the medium term on account of the improvement in operating margins, experienced management and reputed clientele. Further, it also considers improvement in company’s working capital cycle. Further, the outlook may be revised to 'Positive' if the company is able to improve its scale of operations while maintaining is profitability margins and and working capital cycle. Conversely, the outlook may be revised to 'Negative' in case of increased customer concentration or registers lower-than-expected revenues and profitability.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 276.76 | 271.88 |
| PAT | Rs. Cr. | 3.08 | 4.67 |
| PAT Margin | (%) | 1.11 | 1.72 |
| Total Debt/Tangible Net Worth | Times | 0.11 | 0.49 |
| PBDIT/Interest | Times | 2.31 | 5.28 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Available |
| Any other information |
| None |
| Applicable Criteria |
|
• 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 |
| Note on complexity levels of the rated instrument |
| 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. |
|
| |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Contacts |
|
|
|
About Acuité Ratings & Research |
