| Netcore Cloud Private Limited | ||||
| 'CRISIL A / Stable' assigned to Bank Debt; 'CCR A / Stable' assigned to Corporate Credit Rating | ||||
| Rating Action | ||||
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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 A/Stable’ rating to the bank facilities of Netcore Cloud Private Limited (NCPL) and 'CCR A/Stable' corporate credit rating to NCPL.
The rating reflects NCPL's strong market position in marketing technology business, marked by extensive industry experience of the promoters, established customers relationship, along with improving operating margins and strong financial risk profile. These strengths are partially offset by intense competition, susceptibility to changes in marketing spend by clients as well as evolving technology and consumer behavior and potential integration risks with upcoming acquisitions while working capital intensive operations requirements remain moderate. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has fully consolidated the business and financial risk profiles of all NCPL and all its subsidiaries. This is because all these entities, collectively referred to as the NCPL group, have common promoters, are in the same business and have significant operational, managerial and financial linkages. |
Key Rating Drivers & Detailed Description Strengths: Strong market position backed by established customer base NCPL benefits from a strong market position in the marketing technology industry, with a large market share in India as well as other Asian markets. It caters to a large customer base of more than 5000 brands across segments like banking, e-commerce, restaurants, OTT platforms, tourism and travel and other B2C brands.
NCPL will continue to benefit from strong relationship with existing customers as well as its potential new customer wins while expanding its presence in US and Europe through acquisitions. NCPL is present across different platforms such as SMS, email and web based applications. This has helped cater to large set of customers and increase revenues to Rs 523 crores in fiscal 2021 from Rs 474 crores in fiscal 2019.
Promoter’s extensive industry experience NCPL has a strong management team with the promoters' experience of over 3 decades and other top management personnel who have 20+ years of experience in the industry. NCPL benefits from their strong understanding of market dynamics, as well as in depth domain knowledge of developing software and related solutions, which will continue to support the business. The management has hence been able to advance its technical capabilities through acquisitions in the artificial intelligence, which helps provide comprehensive consumer insights to the customers.
Improving profitability through increased focus on platform business NCPL’s operating margin has increased to 17.5% in fiscal 2021 from 13.4% in fiscal 2019 due to increasing revenues from the higher margin email/platform segment; the gross margins in platform business is90% while its about 25% in the mobility segment. Continued focus on further increasing the share of business from platform segment should enable NCPL to maintain strong operating margins of about 18%.
Strong financial risk profile NCPL has historically maintained a conservative capital structure as acquisitions have been funded through equity. The capital structure has been healthy due to low reliance on external funds resulting in total outside liabilities to adjusted networth ratios of 0.22 times as on March 31, 2021, with networth of Rs. 565 crores. Debt protection metrics were strong in fiscal 2021, in absence of any debt, and is expected to remain string despite increase in debt. Financial risk profile is expected to remain strong over the medium term despite expected increase in debt to fund future working capital requirements, given healthy accruals.
Weakness: Operations susceptible to marketing spend of customers and technological changes NCPL’s revenues are tied to the marketing spend of its clients, and it can be unfavorably impacted during an economic downturn resulting in marketing budget cuts by customers. In addition, the company needs to consistently evolve its services with overall industry dynamics and technology advancements to stay relevant for the customers, which leads to high costs to be incurred for acquisition of technology. Furthermore, the industry is fragmented in nature with various regional and national players, especially in the mobility business resulting in intense competition.
Risks associated with the ongoing acquisition NCPL is planned to complete a large acquisition to enter the US market, which will expand their existing product capabilities as well as add incremental customer base. However, the integration risk and associated returns related to the acquisition remains a key monitorable. Competitive pressure from existing players in the established markets of US and Europe, may constrain profitability, and impact overall credit profile. |
Liquidity: Strong Liquidity is strong due to healthy cash accruals, moderate limit utilization expected on proposed working capital facility and absence of term debt obligation. Cash accrual is expected to remain healthy at Rs. 70 to 80 crores over the medium term and in absence of term debt obligations, will be utilised to meet incremental working capital requirement. Cash and cash equivalents stood at Rs 69.5 crore as on March 31, 2021. In addition, the group has Rs 120 crores in fixed deposits and has about Rs 250 crores in mutual fund investments as of fiscal 2021. The company intends to fund its upcoming acquisition with cash and bank balance and internal cash accruals and has applied for Rs 200 crore of bank lines which is estimated to be used moderately. With gearing expected to remain low driven by conservative capital structure, the group has sufficient headroom, to raise additional debt to meet its capex requirement and working capital requirements. |
Outlook Stable CRISIL Ratings believe NCPL will continue to benefit from its strong market position, healthy profitability and strong financial risk profile. |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company NCPL, incorporated in 1992, by Mr. Rajesh Jain, is a SaaS company offering marketing technology (MarTech) product and solutions to B2C brands through digital marketing services like SMS, email, push notifications, etc. It has head office located in Mumbai and provides services across 18 countries through various subsidiaries. |
Key Financial Indicators
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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. 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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 10-Mar-2022 in line with the lender-wise facility details as on 10-Mar-2022 received from the rated entity.
Criteria Details
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