| ABM Knowledgeware Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL BBB+/Stable/CRISIL A2+' ratings on the bank facilities of ABM Knowledgeware Limited (ABM, part of ABM Group)
The ratings continue to reflect the group's established track record in the e-governance information technology (IT) services sector and healthy financial risk profile. These strengths are partially offset by moderate scale of operations and large working capital requirement. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the financial and business risk profiles of ABM and its subsidiaries, Instasafe Technologies Pvt Ltd (ITPL) and InstaSafe Inc (ITSI). This is because all these entities, collectively referred to as the ABM group, have common management and strong operational and financial linkages.
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Key Rating Drivers & Detailed Description Strengths:
ABM has been providing IT services to government agencies for over two decades, with special focus on e-governance. The group's established market position has helped it successfully implement its customized in-house software products. The annual maintenance and post-implementation contracts received provide further boost to the operating margin. To de risk the single Geography, Single Vertical business of ABM by investing in Agri Tech start-up in Silicon Valley.
Capital structure was strong, as reflected in networth estimated above Rs 200 crore and total outside liabilities to tangible networth ratio at sub 0.2 times, as on March 31, 2023. Debt protection metrics is expected to be comfortable, as indicated by interest coverage of 57 times, in fiscal 2023. With no major, debt funded capital expenditure (capex), the financial risk profile will remain comfortable over the medium term. Group maintains healthy unencumbered cash and cash equivalents which provides financial flexibility.
Weaknesses:
Operations are working capital intensive, as reflected in gross current assets estimated to be in range of 320-350 days as on March 31, 2023, driven by receivables of around 120-150 days, which includes retention money and inventory (including unbilled revenue) of around 60 days. Working capital requirement may continue to remain large over the medium term as the group deals with state & central government bodies which lead to higher receivable days.
Despite the longstanding presence in the business, ABM's scale is moderate on account of lower tenders floated by urban local bodies, given their focus on Covid-19 pandemic related activities. For 9M FY23, group has booked a revenue of ~Rs. 60 crores. While the revenue is expected to be supported by group’s focus to enter new segments within the IT space, to offset the impact of lower orders from existing clients; the scale of operations is expected to remain moderate over the medium term and will remain key monitorable. |
Liquidity: Strong Liquidity is marked by estimated net cash accruals above Rs 13 crore over the medium term against no repayment obligations. Bank limit utilization is nil for fund-based limit and 72.5% for non-fund-based limit for last 12 months ending March 2023. Company has investments of Rs 82 crore as on September 30,2022. Cash and bank balance (encumbered & Unencumbered) of Rs 19.22 crore as on September 30,2022. No major capex plans over medium term. |
Outlook: Stable CRISIL Ratings believes ABM will continue to benefit from its expertise of the promoter and healthy financial risk profile. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Incorporated in 1993, ABM is listed on the Bombay Stock Exchange. The company provides IT services with focus on e-governance in urban administration, utility, IT-enabled citizen/consumer services, and enterprise resource planning. ABM is promoted by Mr Prakash Rane and his family members.
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Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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This Annexure has been updated on 08-May-23 in line with the lender-wise facility details as on 07-Feb-22 received from the rated entity.
Criteria Details
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