February 15, 2013
Stellar Information Systems Limited
Rating outlook revised to 'Negative'
|Total Bank Loan Facilities Rated||Rs.92.9 Million|
|Long-Term Rating||CRISIL BBB+/Negative (Outlook revised from ‘Stable’ and Rating Reaffirmed)|
(Refer to Annexure 1 for details on facilities)
CRISIL has revised its rating outlook on the long-term bank facilities of Stellar Information Systems Ltd (Stellar) to ‘Negative’ from ‘Stable’, while reaffirming the rating at ‘CRISIL BBB+‘.
The outlook revision reflects Stellar’s increasing risk appetite as demonstrated by its growing exposure towards non-core real estate investments. The company has made investments in non-business related properties which stood at Rs.104 million as of March 31, 2012 and is expected to increase to more than Rs.180 million over the medium term. The exposure is significantly high, in relation to Stellar’s estimated net worth of Rs.335 million as on March 31, 2012. Stellar’s financial risk profile remains strong on the back of the company’s healthy accruals vis-ŕ-vis its moderate debt levels. However, CRISIL believes that the diversion of funds into non-core activities reflects Stellar’s changing business mix, which could negatively impact the business risk of the company over the medium term.
The ratings continue to reflect Stellar’s established position in the data recovery industry, supported by its promoters’ extensive industry experience, and the company’s strong debt protection metrics. These rating strengths are partially offset by Stellar’s vulnerability to intense competition and low entry barriers in the data recovery industry, and high exposure to unrelated real estate investments.
CRISIL believes that Stellar’s business risk profile will deteriorate over the medium term because of the company’s increasing exposure to unrelated real estate investments. CRISIL, however, believes that Stellar will continue to benefit over the medium term from its promoters’ extensive experience and established position in the data recovery industry. The ratings may be downgraded if the company makes larger-than-expected investments in non-business-related properties or if an increase in competition in the data recovery business leads to decline in its revenues and margins. The outlook may be revised to ‘Stable’ if Stellar reduces its exposure to unrelated real estate investments and expands its core business, while it maintains its operating margin and capital structure.
About the Company
Stellar was set up in 1993 by Mr. Sunil Chandna, Mr. Manoj Dhingra, and Mr. Kuljeet Singh. It is in the business of data recovery. The company develops and sells data recovery software and suites and also provide data recovery services through various locations in India as well as through its subsidiary, Stellar Data Recovery BV, in the Netherlands.
For 2011-12 (refers to financial year, April 1 to March 31), Stellar, on a standalone basis, reported a net profit of Rs.102 million on net sales of Rs.332 million, against a net profit of Rs.105 million on net sales of Rs.271 million in 2010-11.
Annexure 1 - Details of various bank facilities
|Current facilities||Previous facilities|
|Cash Credit||12||CRISIL BBB+/Negative||Cash Credit||12||CRISIL BBB+/Stable|
|Foreign Currency Term Loan||69||CRISIL BBB+/Negative||Foreign Currency Term Loan||11.2||CRISIL BBB+/Stable|
|Proposed Long-Term Bank Loan Facility||11.9||CRISIL BBB+/Negative||Proposed Long Term Bank Loan Facility||69||CRISIL BBB+/Stable|
|--||0||--||Term Loan||0.7||CRISIL BBB+/Stable|
|Media Contacts||Analytical Contacts||Customer Service Helpdesk|
Communications and Brand Management
Tel: +91-22- 3342 1818
Communications and Brand Management
Tel: +91-22- 3342 1886
|Subodh K Rai|
Senior Director - CRISIL Ratings
Tel: +91-0124-672 2000
Director - CRISIL Ratings
Tel: +91-0124-672 2000
|Timings: 10.00 am to 7.00 pm|
Toll free number: 1800 267 1301
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Last updated: April 30, 2012
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February 15, 2013