Rating Rationale
October 31, 2023 | Mumbai
Global Payments Asia-Pacific India Private Limited
Rating reaffirmed at 'CRISIL A/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.100 Crore
Long Term RatingCRISIL A/Stable (Reaffirmed)
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 A/Stable’ rating on the bank loan facility of Global Payments Asia-Pacific India Pvt Ltd (GPAP India).

 

The rating continues to benefit from the strong operational, managerial, and financial support of the parent, Global Payments Inc (GPI; rated ‘BBB-/Stable’ by S&P Global Ratings). In fiscals 2022 and 2023, the parent infused equity of Rs 25 crore and Rs 8 crore, respectively, to fund losses and support the networth of GPAP India. CRISIL Ratings believes the company will, in case of exigencies, receive support from GPI for timely servicing of debt obligation.

 

Operating performance revived in fiscal 2023 after the Covid-induced slump in the travel and entertainment industries, with revenue of Rs 86 crore against Rs 42 crore in fiscal 2022. This was led by better absorption of fixed costs, resulting in an operating profit of Rs 6 crore at a 6.8% margin against operating loss of Rs 3 crore (8% margin). Growth in fiscal 2023 was also driven by increased transactions in the travel and entertainment sector, which accounted for over half of the company’s revenue. With the second half of fiscal 2023 being a festive season, the company is expected to grow at a steady pace of 8-10%. Operating profitability is also expected to improve to 8-9% over the medium term.

 

Despite losses in fiscals 2021 and 2022, financial risk profile remained modest supported by net worth of Rs 41 crores as of March 31, 2023, as compared to Rs 29 crores a year earlier. The net worth is further strengthened by equity infusions by parent GPI. Total debt stood at Rs. 29 crores as of March 31, 2023, in the form of working capital debt with modest debt protection metrics as reflected in interest coverage of 1.8 times and gearing of 0.7 times as of March 31, 2023.

 

The rating continues to reflect the established market position of GPAP India in the payment and settlement industry and longstanding association with key clients. These strengths are partially offset by exposure to regulatory changes, intense competition in the transaction processing services industry, and a modest financial risk profile.

Analytical Approach

The rating factors in the operational, technical, and financial support GPAP India is expected to receive from its ultimate parent, GPI.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong operational, financial, and managerial support from GPI: GPAP India is a stepdown subsidiary of GPI, which holds 100% stake through the Luxembourg-based entity, Global Payments International Holding Co. Since fiscal 2021, the parent has infused a total of ~Rs 34 crore in GPAP India to absorb losses and support operational requirements. Furthermore, GPI has extended corporate guarantee for the fund-based limit of GPAP India and will continue to offer timely assistance. The company also has access to a proprietary product portfolio, as well as technological and operational support from its parent. GPI, which has operational presence in over 100 countries, is the third-largest US non-bank merchant acquirer and has processed around 11 billion transactions across 2.5 million customer locations. GPAP India has leveraged on its parent’s reputation and established its position in the country as a non-bank acquirer with around 1 million merchant locations.

 

  • Established market position and longstanding association with merchants: GPAP India has been catering to marquee clients in various segments such as hospitality, entertainment, luxury retail, oil and gas, and airlines for over seven years. However, over 50% of the total revenue comes from the hospitality segment. The company has been actively trying to diversify its list of customers. Its established list of clients and longstanding channel partners partially mitigate the slowdown in end sectors, as witnessed in fiscals 2021 and 2022.  The diversity in revenue stream also helps offset client concentration, including stable income from point of sale (POS) transaction processing. The company has also applied for the payment aggregator/payment gateway licence, which will further unlock a new stream of revenue through which the company will be able to target new clients with higher transaction volumes, such as government taxes. Its top 10 clients accounted for 52% of the total revenue in fiscal 2023.

 

Weaknesses:

  • Exposure to intense competition and regulatory changes in the industry: In India, the payment and settlement industry is regulated by the Reserve Bank of India. The regulator prescribes the guidelines for the settlement process and the framework for merchant discount rate (MDR). Any change in the process or the MDR framework could impact GPAP India’s operating performance. The company also faces intense competition from fintech players as well as banks and other financial institutions in the transaction processing services, which limits pricing power.

 

  • Modest financial risk profile: The financial risk profile is expected to remain modest over the medium term but should improve gradually as business volumes and profitability pick up. Net worth remains modest at Rs 41 crore as of March 2023. Debt availed from overdraft facility stood at Rs. 29 crores as on March 31, 2023. Gearing was 0.7 times and is expected to improve to less than 0.5 time over the medium term. The interest coverage and net cash accrual to total debt ratios were 1.8 time and 0.1 time, respectively, in fiscal 2023.

Liquidity: Strong

Liquidity is supported by annual accrual of Rs 5-8 crore over the medium term, nil term debt obligation and moderate bank limit utilisation (24% on average for the 12 months through August 2023). Unencumbered cash and equivalent stood at Rs 2 crore as of March 2023. Funding support from the parent has always been forthcoming: it infused Rs 34 crore in the past two fiscals to fund losses during the Covid slump and maintain modest networth. GPAP India remains highly critical for the parent and hence, support will be forthcoming in case of exigencies.

Outlook: Stable

CRISIL Ratings believes that the business risk profile will continue to benefit from diversified revenue profile and clientele, while financial risk profile will improve gradually over the medium term with steady improvement in accrual. The rating will also remain sensitive to any change in GPI’s credit risk profile.

Rating Sensitivity factors

Upward factors::

  • Upward movement in the rating of the parent
  • Sustained revenue growth and improvement in operating profitability above 15%

 

Downward factors:

  • Downward movement in the parent rating or change in stance of support
  • Sustained decline in revenue leading to steady operating losses
  • Any sizeable, debt-funded capital expenditure or working capital requirement weakening gearing above 2.0 times

About the Company

Incorporated on March 29, 2006, GPAP India is a stepdown subsidiary of GPI. The company provides high-volume processing of electronic transactions comprising data and fund transfer between merchants, financial institutions, debit network and card associations. GPAP India provides a series of services, including authorisation, electronic capture and file transfers to facilitate fund settlement. The company caters to the travel and entertainment, luxury retailing and fuel segments.

About GPI

GPI was founded in 1967 and is headquartered in Atlanta, Georgia. It provides payment solutions for credit cards, debit cards, electronic payments and cheque-related services. It operates in three segments: North America, Europe and Asia-Pacific. The company offers authorisation, settlement and funding services, customer support and help-desk functions, chargeback resolution, terminal rental, sales and deployment, payment security services, consolidated billing and statements, on-line reporting, industry compliance and payment card industry security services.

Key Financial Indicators

As on/for the period ended March 31

 

2023

2022

Revenue

Rs crore

86

42

Profit after tax (PAT)

Rs crore

0.1

-10

PAT margin

%

0.1

-23.1

Adjusted debt/adjusted networth

Times

0.70

1.16

Interest coverage

Times

1.81

-1.11

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 the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Overdraft facility NA NA NA 100 NA CRISIL A/Stable
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 100.0 CRISIL A/Stable   -- 30-08-22 CRISIL A/Stable 01-07-21 CRISIL A/Stable 05-08-20 CRISIL A/Stable CRISIL A/Stable
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Overdraft Facility 100 IndusInd Bank Limited CRISIL A/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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