Detailed Rationale CRISIL Ratings' rating on the long-term bank facilities of Maveric Systems Limited (Maveric) continues to reflect an established market position in the software services industry, and a moderate financial risk profile. These strengths are partially offset by exposure to risks related to intense competition and changes in government regulations and large working capital requirement.
CRISIL Ratings had earlier upgraded its ratings on the bank loan facilities of Maveric to ‘CRISIL BBB/Stable/CRISIL A3+’ from ‘CRISIL BBB-/Stable/CRISIL A3’, vide rationale dated February 23, 2022.
The upgrade reflects CRISIL Ratings’ belief that the improvement in business and financial risk profile of Maveric will be sustained over the medium term. Revenue grew at a CAGR Of over 20% in past 3 years ended fiscal 2021. Despite COVID-led slowdown in Q1 FY2021, revenue grew to Rs Rs. 381 crores in fiscal 2021 compared to Rs. 339 crores in FY2020. Operating margins also improved from around 13% in FY2020 to over 20% in FY2021. Revenues in FY2022 are expected to be over Rs. 450 crore driven by both new order wins and repeat orders from existing customers. The financial risk profile has improved on account of higher-than-expected cash accruals at over Rs. 65 crores in FY2021 compared to Rs. 37 crore in FY2020. The upgrade also factors in limited reliance on external debt and a healthy financial risk profile. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of Maveric and its wholly owned subsidiaries, Maveric Testing Solutions Ltd (UK), Maveric Testing Solutions Ltd (Mexico), and Maveric NXT Ltd (previously known as Maveric Testing Solutions Ltd) (USA), together referred to as the Maveric 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:
The Maveric group has an established market presence, aided by healthy relationships with reputed companies from the banking, financial services, and insurance (BFSI) domain and other leading technology players. Two decade experience of promoters and the qualified and professional management should help the company acquire new customers and retain its key clients.
The gearing is 0.03 time as on March 31, 2021, and the debt protection metrics were comfortable, with interest coverage ratio at 70 times and net cash accrual to adjusted debt ratio at 13.77 time in fiscal 2021. The operational expenses coverage ratio was moderate at 2 times as on March 31, 2021.
Weaknesses:
Operating performance remains susceptible to cyclicality in the software industry, and any adverse economic conditions or regulatory changes. The performance of software service providers is highly dependent on geo-political, or legislative conditions in countries of the respective customers.
The middle east region accounted for about 40% of total revenue in FY2021, which exposes the group to legislative and geo-political risks, and fluctuations in foreign exchange rates. The group is also vulnerable to economic slowdown in the middle east countries. Decline in scale or profitability over the medium term shall be a key rating monitorable. |
Liquidity: Adequate Bank limit utilisation is low at less than 20 percent for the past 12 months ended December 2021. Cash accruals are expected to be over Rs. 60 crores which are sufficient against negligible term debt obligation of around Rs.0.5 crores over the medium term. In addition, it will be act as cushion to the liquidity of the company. Current ratio are healthy at 4.41 times on March 31, 2021. Moderate cash and bank balance of around Rs.26 crores as on December 31, 2021. |
Outlook: Stable CRISIL Ratings believes the Maveric group will continue to benefit from its established market position in the software testing industry. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
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About the Company Set up in 2000, Maveric provides third-party software-testing services to banks, insurance companies, and other financial service entities, across the world. Its three wholly owned subsidiaries, one each in the UK, Mexico, and the US, operate in the same line of business. |
Key Financial Indicators
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| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
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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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Cash Credit | 6 | State Bank of India | CRISIL BBB/Stable |
| Working Capital Facility | 15 | Citibank N. A. | CRISIL BBB/Stable |
This Annexure has been updated on 19-Aug-22 in line with the lender-wise facility details as on 19-Jul-22 received from the rated entity.
Criteria Details
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