Rating Rationale
December 12, 2023 | Mumbai
Ksolves India Limited
'CRISIL BBB/Stable' assigned to Corporate Credit Rating
 
Rating Action
Corporate Credit RatingCRISIL BBB/Stable (Assigned)
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1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has assigned its ‘CRISIL BBB/Stable’ corporate credit rating to Ksolves India Limited (KIL).

 

The rating reflects stable business and financial risk profiles of the company with continued growth of more than 60% in last two fiscals ending FY23 driven by continuous focus on invocation and new technologies which helps them to provide new solution to their clients and sustain the revenue growth. The company has established presence across various geographies with around 70% revenue coming from USA market with services provided to various industries like including IT companies, BFSI sector, telecom sector, edutech sector etc.

 

The rating reflects the KIL along with its subsidiaries’ extensive industry experience of the promoters and management team, and healthy capital structure. These strengths are partially offset by its high fixed cost base & susceptibility to employee attrition and vulnerability of operating margin to fluctuations in forex rates.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of KIL along with its wholly owned subsidiaries, i.e., Kartik Solutions Private Limited (KSPL) and Ksolves LLC(KL).

 

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:

  • Extensive industry experience of the promoters and management team: The key promoter cum Managing Director, Mr. Ratan Kumar Srivastava has an experience of around two decades in internet software & services industry. He is supported by well-qualified and experience management team. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers. The healthy relationship with customers is reflected in repeat orders from clients in the US and European markets.

 

Company has been able to grow constantly at a CAGR of more than 60% for the last 2 periods ended March 31, 2023 backed by company’s strong clientele with repeat orders from existing customers and healthy order book visibility over the medium term. The company is focusing in emerging technologies like Artificial intelligence and machine learning which are higher ticket size and better margin products.  Till H1FY24 company has achieved revenue of Rs. 49.7 cr. and with healthy visibility and business in hand the revenue is expected to be grow at a consistent pace for full year FY24.

 

  • Diversified revenue and customer profile: The company has presence in various sectors such as technology, media and entertainment, telecommunications, banking, financial services and insurance (BFSI), e-commerce and healthcare. The top 10 customers accounted for ~50% of the revenue in fiscal 2023. Revenue profile is diversified, with the company booking revenue through licensing of software, annual maintenance fee and support services.

 

  • Healthy operating efficiencies: Company has been generating very healthy and stable operating margins since last 3 fiscals within the range of 42-43%% in last 3 fiscals ending FY23. Major expense of the company is employee cost which the company is able to maintain and also focus of company on emerging technologies like Artificial intelligence and machine learning which are higher ticket size and better margin products which is expected to support the margins over the medium term.

 

Weakness:

  • Modest scale of operations:  Intense competition constrains scalability, as reflected in revenue of Rs.78.3 crore in fiscal 2023. Till H1FY24 company has achieved revenue of Rs. 49.7 cr. and with healthy visibility and business in hand the revenue is expected to remain stable for the full year FY24. Presence in a niche segment will continue to support revenue growth over the medium term, which will remain a key monitorable.

 

  • Vulnerability to fluctuations in forex rates: Since majority of the revenue comes from the international market, any sharp fluctuation in forex rates affects realisations and accrual. This exposes the operating margin to fluctuations in forex rates.

Liquidity: Adequate

Cash accruals are expected to be over Rs.8-14 crore which are sufficient against term Nil Debt obligations over the medium term. In addition, it will be act as cushion to the liquidity of the company.

 

Current ratio is healthy at 9.07 times on March 31, 2023.High or moderate cash and bank balance  of around Rs.8-10crore as on March 31, 2023. Low gearing and moderate net worth support it’s financial flexibility, and provides  the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

CRISIL Ratings believes KIL along with its subsidiaries will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating Sensitivity Factors

Upward factor

  • Sustained improvement in scale of operation and sustenance of operating margin, leading to higher cash accruals of more than Rs. 20 crores.
  • Continued improvement in financial risk profile, supported by better than anticipated cash generation, and improved working capital management.

 

Downward factor

  • Decline in revenue by 20% and operating margin impacting the overall cash accruals of the company.
  • Any large debt-funded capital expenditure or sizeable dividend payment weakening the financial risk profile.

About the Company

KIL was incorporated in July 2014. It is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). KIL is engaged in developing software & application and providing IT related solutions such as big data services, salesforce services, artificial intelligence, machine learning, iOS application development, android application development, node.js development, reactjs development, salesforce development, serverless architecture, ruby on rails development, cyber security, DevOps, SecOps, backup, and disaster recovery, cross-platform, SaaS application, and API integration to its clients.

 

About the subsidiaries

KSPL was incorporated in 2012 and was acquired by KIL in 2019. It is a wholly owned subsidiary of KIL. It’s engaged in providing IT and IT-enabled services including web, mobile, cloud, and e-commerce solutions.

 

KL was acquired in June 2021. It is a wholly-owned subsidiary of KIL. It’s engaged in providing IT solutions with KIL.

 

The group is headed by Mr. Ratan Kumar Srivastava (Founder and Managing Director) along with other directors.

Key Financial Indicators (Consolidated)

As on/for the period ended March 31

Unit 

2023

2022

Operating income

Rs.Crore

78.32

47.11

Reported profit after tax

Rs.Crore

24.57

15.61

PAT margins

%

31.56

33.39

Adjusted Debt/Adjusted Networth

Times

0.00

0.00

Interest coverage

Times

763.49

512.73

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

level

Rating assigned
with outlook

NA

NA

NA

NA

NA

NA

NA

NA

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Kartik Solutions Private Limited

Full consolidation

Wholly owned subsidiary of KIL

Ksolves LLC

Full consolidation

Wholly owned subsidiary of KIL
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
Corporate Credit Rating LT 0.0 CRISIL BBB/Stable   --   --   --   -- --
All amounts are in Rs.Cr.

          

Criteria Details
Links to related criteria
The Rating Process
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
Understanding CRISILs Ratings and Rating Scales
CRISILs Criteria for Consolidation

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