Rating Rationale
March 29, 2025 | Mumbai
Allied Digital Services Limited
Long-term rating reaffirmed at 'Crisil BBB+/Stable'; 'Crisil A2' assigned to short-term bank debt; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.90 Crore (Enhanced from Rs.25 Crore)
Long Term RatingCrisil BBB+/Stable (Reaffirmed)
Short Term RatingCrisil A2 (Assigned)
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’ rating on the long term bank facilities of Allied Digital Services Limited (ADSL). and has assigned its ‘Crisil A2’ rating to the short-term bank facilities.

 

The rating reflects the group's long track record of operations in the information technology (IT) service industry supported by well qualified & experienced promoters, geographical & segmental diversification in revenue and healthy financial profile. These strengths are partially offset by its large working capital requirement and exposure to intense competition in the IT sector.

Analytical Approach

For arriving at the ratings, Crisil Ratings has combined the business and financial risk profiles of ADSL along with its subsidiaries and associates owing to significant business and financial synergies. These entities are collectively referred to as the Allied digital group.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Long track record of operations in IT service industry supported by well qualified and experienced promoters: Allied digital group, since its inception in 1984, has distinguished itself as one of the leaders in information technology (IT) consulting and services specializing in digital transformation architecture, global managed IT services, smart city solutions provider and master systems integration. Further, the key promoters have extensive experience of around four decades in the IT sector and thus have helped the group to offer diverse services. As a result, revenues increased to Rs 687 crores in fiscal 2024 from Rs 660 crores last year and is expected to sustain its scale of operations as reflected by revenues of Rs 603 crores during the first nine months of fiscal 2025. Crisil Ratings believe this extensive experience of promoters and established presence of company in industry will continue to support the business profile of Allied group in the medium term.

 

  • Geographical and segmental diversification in revenues: Allied digital group is serving clients across 70+ countries from its 20 strategically located offices. The group leverages its extensive presence to cater to both domestic and overseas clientele. During fiscal 2024, the company generated about 68% of total revenues from overseas clients (mainly based out of USA) while the remaining was contributed by domestic clientele. The company offers a mix of solution-based and service-based offerings which supports the diversified revenue streams. This diversification in geographic reach and service offerings should continue to support the business risk profile.

 

  • Healthy financial risk profile: The group’s capital structure has been at a healthy level due to lower reliance on external funds and healthy networth of Rs 492 crore as on 31st March 2024, yielding gearing of 0.12 and low total outside liabilities to adj tangible networth (TOL/ANW) of 0.32 for year ending on 31st March 2024. With reported networth of Rs 635 crores as on September 30, 2024 – capital structure is expected to remain comfortable. Debt protection measures have also been at a healthy level supported by healthy accruals generated from operations. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 16.2 times and 1.02 times for fiscal 2024. The overall financial risk profile is expected to remain healthy in the medium term too supported by steady accretion to reserves and absence of large debt funded capex. 

 

Weaknesses:

  • Large working capital requirement: Gross current assets (GCA) have been sizeable at 200-290 days for the three fiscals ended March 31, 2024, and is expected to remain in similar range in fiscal 2025. It stood at 226 days as on March 31, 2024, driven by moderately high debtors for around 80 days due to the requirement to extend moderate credit period to its customers and inventory of 71 days as on 31st March 2024 to support the operations. Although the group undertook large debtor write off in fiscal 2023, no further write offs are expected over the medium term given majority of the receivables are expected to be realized. The working capital cycle expected to remain stretched over the medium term driven by moderate debtors and inventory.

 

  • Exposure to intense competition in the IT sector: With rapid evolution of the Indian digital enabled services sector, competition is intensifying as more companies vie for a share of the customer’s wallet. The Allied digital group has to compete with multiple players in most of the verticals within the digital services business. Intense competition in the digital services industry may continue to constrain scalability, pricing power and profitability.

Liquidity: Adequate

Bank limit utilization remains at around 51% for the past 12 months ending January 2025.  Cash accruals are expected to be around Rs 60-65 crore which are sufficient against term debt obligation of Rs 5-7 crore over the medium term. The current ratio is healthy at 3.6 times as on March 31, 2024. Ample cash and bank balance of around Rs. 127 crore as on March 31, 2024 (around Rs 158 crore as on September 30, 2024) provides cushion to liquidity and support working capital requirements. Low gearing and healthy net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

Crisil Ratings believe the group will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating sensitivity factors

Upward factors

  • Significant improvement in the scale of operation and/or operating margins leading to higher-than-expected cash accruals.
  • Improvement in working capital cycle with GCA below 180 days leading to improvement in liquidity profile

 

Downward factors

  • Decline in scale of operations or profitability leading to cash accruals below Rs 35 crores
  • Substantial increase in debt levels weakening the financial risk profile
  • Further stretch in working capital cycle leading to deterioration in liquidity

About the Group

ADSL, was incorporated in February 1995. ADSL, along with its subsidiaries & associates, is one of the leading global information technology (IT) services and solutions provider. Its offerings involve providing infrastructure management services, digital engineering services   software solutions and workplace management services, cloud and cybersecurity related services to its customers. The group caters to domestic as well as overseas clients spanning across sectors like public administration, healthcare, BFSI etc.

 

ADSL is listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Currently, the day-to-day operations are headed by Mr. Nitin Dhanji Shah (Chairman & Managing Director) and Mr. Nehal Shah (Director).

 

Allied digital group is made up of ADSL and its other subsidiaries (shown in List of entities consolidated) operating mainly in overseas geographies like United States of America (USA), Japan, Australia, Brazil etc. and is engaged in similar line of business as ADSL of providing IT solutions.

Key Financial Indicators

As on / for the period ended March 31

 

9M Dec 2024*

2024

2023

Operating income

Rs crore

602.7

687.06

660.07

Reported profit after tax

Rs crore

39.72

46.10

6.92

PAT margins

%

6.59

6.67

1.05

Adjusted Debt/Adjusted Net worth

Times

NM

0.12

0.08

Interest coverage

Times

10

16.11

22.83

*Provisional

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Crore) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 17.50 NA Crisil A2
NA Cash Credit NA NA NA 55.00 NA Crisil BBB+/Stable
NA Proposed Fund-Based Bank Limits NA NA NA 4.54 NA Crisil BBB+/Stable
NA Working Capital Demand Loan NA NA NA 11.58 NA Crisil BBB+/Stable
NA Term Loan NA NA 22-Jun-27 1.38 NA Crisil BBB+/Stable

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Allied Digital Services Limited

Full

Parent company

Allied Digital Services, LLC

Full

Subsidiary

Allied Digital INC

Full

Wholly owned subsidiary

Allied Digital Singapore Pte Limited

Full

Wholly owned subsidiary

Allied Digital Asia Pacific Pty Limited

Full

Wholly owned subsidiary

Allied Digital Services (UK) Limited

Full

Subsidiary

Allied Digital Services (Ireland) Limited

Full

Wholly owned subsidiary

Allied Digital Services Japan G.K.

Full

Wholly owned subsidiary

En Pointe Technologies India Private Limited

Full

Subsidiary

Allied-eCop Surveillance Private Limited

Full

Subsidiary

Allied Digital Services DO Brasil LTDA.

Full

Wholly owned subsidiary

Allied Digital IT Services (Beijing) Co., Limited

Full

Wholly owned subsidiary
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 72.5 Crisil BBB+/Stable 25-03-25 Crisil BBB+/Stable   --   --   -- --
Non-Fund Based Facilities ST 17.5 Crisil A2   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 7.5 Bank of Baroda Crisil A2
Bank Guarantee 10 Indian Bank Crisil A2
Cash Credit 30 Bank of Baroda Crisil BBB+/Stable
Cash Credit 10 IndusInd Bank Limited Crisil BBB+/Stable
Cash Credit 15 Indian Bank Crisil BBB+/Stable
Proposed Fund-Based Bank Limits 4.54 Not Applicable Crisil BBB+/Stable
Term Loan 1.38 Indian Bank Crisil BBB+/Stable
Working Capital Demand Loan 11.58 Indian Bank Crisil BBB+/Stable
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)
Criteria for consolidation

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