| Coforge DPA Private Limited | ||||
| Rating reaffirmed | ||||
| Rating Action | ||||
| ||||
| 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 AA/Stable' rating on the long-term bank facility of Coforge DPA Pvt Ltd (CDPL; erstwhile, NIIT Incessant Pvt Ltd).
The revenue of CDPL, a wholly owned subsidiary of Coforge Limited (Coforge; ‘CRISIL AA/Stable/CRISIL A1+’), rose 28% in fiscal 2022 with higher order execution and strong demand for digital solutions. Also, despite moderating from 28% in fiscal 2021 due to increased employee costs, operating profitability remained healthy at 23% in fiscal 2022. Margin is expected to stabilise at 20-21% over the medium term as supply-side challenges ease. Operating efficiency will continue to be driven by synergies with Coforge Limited.
The rating reflects the parent stance of extending financial support to CDPL during exigency, healthy business risk profile driven by growing presence in digital services, strong operating profitability, and comfortable financial risk profile. These strengths are partially offset by modest scale of operations and exposure to intense competition in the banking, financial services, and insurance (BFSI) and retail verticals. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of CDPL, and its subsidiaries given their common business and management, and high operational similarities. CRISIL Ratings has applied its parent notch-up framework to factor in the extent of financial and managerial support available from Coforge, given its 100% shareholding and management control in CDPL, and the criticality of the subsidiary to the parent. CDPL will receive distress support from Coforge for timely debt servicing and for any large capital expenditure (capex).
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
Weaknesses
|
Liquidity: Strong Cash and equivalent stood at Rs 73 crore as on March 31, 2022. Overdraft bank limit of Rs 10 crore (which was partially utilised during the 12 months through April 2023) will be adequate to meet working capital requirement. The company is likely to incur capex or acquisitions of Rs 50 crore to upgrade infrastructure and expand delivery locations, which will be expected to be funded through healthy cash generation of about Rs 100 crore per annum over the medium term. |
Outlook Stable Business risk profile will benefit from the integrated operations with Coforge and presence in end-to-end digital service solutions. Financial risk profile will remain healthy over the medium term, driven by steady cash accrual, and moderate capex and working capital requirement. The parent will extend financial aid to meet any large, debt-funded acquisition or exigency. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Company Incorporated in October 2007 as a promoter-driven company, CDPL is a leading vendor of a range of enterprise business process management and customer relationship management services, primarily operating on the Pega and Appian technology platforms. Based in Hyderabad with delivery centres in North America, Australia, Asia Pacific and EMEA (Europe, the Middle East and Africa), the company has about 1,500 employees. It has developed innovative go-to-market solutions by leveraging partnerships with leading platform providers such as Pegasystems, Appian, Outsystems and TRON.
CDPL has experience of over 250 successful customer implementations and a suite of Appian and Pega platforms productivity solutions across different verticals in the BFSI, government, manufacturing, retail, and travel sectors.
During 2015, NIIT Technologies acquired 51% stake and later increased it to 100% over the years. The company was renamed NIIT Incessant Pvt Ltd in 2019 and got its present name in 2021. |
About the parent Coforge is an IT company providing end-to-end software solutions and services. It was formerly known as NIIT Technologies Ltd and was incorporated in April 2003 when NIIT Ltd (NIIT) spun off its software solutions business (excluding knowledge solutions) into a separate legal entity. In May 2019, NIIT and the founder’s family members sold total stake of 30.2% in Coforge to Hulst BV (Hulst; affiliate of Baring Private Equity Asia). In August 2019, Hulst acquired 39.85% stake through an open offer, increasing its total stake in Coforge to 70.05%.
Coforge is a capability maturity model level 5 player in the software services industry. It is among the top 20 Indian software exporters. Prominent global customers include British Airways, the ING group, SEI Investments Company, Sabre Corporation and SITA. Over the years, Coforge has set up subsidiaries in the US, Singapore, Australia, the UK, Germany, and Thailand, mainly to market and mobilise projects for the software division. The company has business partnerships with large IT companies across the world.
On a consolidated basis, net profit was Rs 628 crore in the nine months ended December 31, 2022 (Rs 490 crore in the corresponding period previous fiscal), on revenue of Rs 5,845 crore (Rs 4,689 crore). |
Key Financial Indicators (CRISIL Ratings-adjusted numbers)
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
|
This Annexure has been updated on 02-Jun-23 in line with the lender-wise facility details as on 03-Mar-23 received from the rated entity
Criteria Details
|