Rating Rationale
March 12, 2025 | Mumbai
Pace Digitek Limited
Ratings reaffirmed at 'Crisil BBB+/Stable/Crisil A2'; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.1000 Crore (Enhanced from Rs.200 Crore)
Long Term RatingCrisil BBB+/Stable (Reaffirmed)
Short Term RatingCrisil A2 (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 BBB+/Stable/Crisil A2' ratings on the bank facilities of Pace Digitek Limited (PDL; a part of Pace group).

 

The ratings reflect the group's longstanding presence in the segment along with the highly integrated nature of operations, extensive industry experience of the promoters, and healthy financial risk profile. These strengths are partially offset by susceptibility to tender-based operations, moderate orderbook providing minimal revenue visibility and large working capital requirements.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of PDL, its subsidiaries and step-down subsidiary. This is because all these entities, together referred as the Pace group, operate in the same industry and have operational and financial linkages.

 

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:

  • Long-standing presence in the segment and the highly integrated nature of operations: The business risk profile of Pace group is supported by its long-standing presence of over two decades in the passive telecom infrastructure and optical fibre cable (OFC) industry. Further, the Pace group has the capability to provide end-to-end solutions with highly integrated operations ranging from manufacturing power management systems and installation and erection through engineering, procurement and construction (EPC) or turnkey mode. The group also provides operations and maintenance (O&M) and product life cycle management services for telecom operators. The group is venturing into new products as well as services segments to diversify their offerings, thereby enhancing the business risk profile further. The offtake of the new battery energy storage systems manufacturing segment will remain a key monitorable.

 

  • Healthy scale of operations: Group’s revenue witnessed a significant sharp improvement of 386% in fiscal 2024 to Rs 2513 crore from Rs 517 crore in fiscal 2023. This was largely driven by the execution of Bharath Sanchar Nigam Ltd’s (BSNL’s) 4G saturation project, which was awarded in March 2023. The scope of the order was installation of passive infrastructure equipment and erecting of telecom towers in uncovered villages through 9550 sites spread over 13 states/union territories. The O&M of the sites for the subsequent 6 years also forms a part of the project scope. The project is being executed by BSNL, who is also the service provider while being funded by Universal Service Obligation Fund (USOF). The total value of the order received was Rs 7568 crore including O&M, out of which Rs 4508 crore was yet to be executed as of September 2024. The execution of 4G saturation project will enable the group to continue the growth trajectory in fiscal 2025, with estimated revenue of Rs 2600-2700 crore.

 

  • Healthy financial risk profile: The financial risk profile of Pace group is expected to remain healthy with estimated gearing and total outside liabilities to tangible networth (TOL/TNW) ratios of 0.10-0.20 time and 1.20-1.30 time, respectively, with tangible networth of more than Rs 1100 crore as on March 31, 2025. The financial risk profile is expected to improve in fiscal 2025 due to the equity infusion through five rounds of private placement and repayment of inter-corporate loan of Rs 250 crore in December 2024. Further, PDL is coming out with an Initial Public Offering (IPO) to raise funds, which will further strengthen the group’s financial risk.

 

Weaknesses:

  • Susceptibility to tender-based operations and moderate orderbook providing minimal revenue visibility: Revenue and profitability will depend on the ability to win large tenders amid intense competition, which requires bidding aggressively, thereby restricting operating margin. Hence, securing large orders from strong counterparties on time will remain crucial to maintaining growth rate over the medium term.

 

The group had outstanding orders of Rs 7109 crore as on September 30, 2024. The orderbook is exposed to high concentration risk as 4G saturation project accounts for around 63% of the total orderbook. Also 60% of the total outstanding orders pertain to O&M contracts and orders with longer execution tenure of 10 years and more under the developer model. The group has currently bid for orders of around Rs 8500 crore and hence the buildup will remain a key monitorable over the medium term.

 

  • Large working capital requirements: Operations are working capital intensive as indicated by gross current assets (GCA) of 239 days driven by debtors of 173 days as on March 31, 2024. The debtors are inflated during the fiscal end on account of higher revenue booking happening in March (Rs 826 crore was booked in March 2024 on a standalone basis). Payments from BSNL are received within 60-90 days of billing. Going forward, working capital requirements will be funded through a healthy mix of internal accrual and external debt.

Liquidity: Adequate

Bank limit utilisation is high around 92.79% for the 12 months ended December 2024. Unencumbered fixed deposits and current account balances on average of Rs 110 crore were maintained for the 12 months ended December 2024, providing additional liquidity cushion. Expected annual cash accrual of over Rs 240 crore is sufficient against yearly term debt obligation of Rs 11-13 crore over the medium term.

Outlook: Stable

Crisil Ratings believes the Pace group will continue to benefit from the extensive experience of its promoters, and established relationships with clients.

Rating sensitivity factors

Upward factors

  • Diversification and strengthening of orderbook along with efficient execution of orders resulting in sustenance of healthy performance with cash accruals remaining above Rs 250 Crore. 
  • Timely realisation of receivables and prudent working capital management resulting in a healthy return on capital employed. 
  • Sustenance of healthy capital structure and debt protection metrics

 

Downward factors

  • Decline in profitability resulting in net cash accrual of less than Rs 100 crore and stretch in working capital cycle
  • Weakening of financial risk profile and liquidity

About the Group

PDL (earlier known as Pace Power Systems Private Limited) was incorporated in 2007 and is engaged in providing passive telecom infrastructure and O&M services to telecom operators and developing renewable projects under developer model.

 

Lineage Power Private Limited (LPPL) is a subsidiary of PDL and is engaged in the manufacturing and supply of power management systems and other related products.

 

Pace Renewable Energies Private Limited (PREPL) is a subsidiary of PDL and is engaged in providing solarisation of telecom towers. Currently there are no major operations in this entity.

 

Lineage Power Holding (Singapore) PTE Limited is a wholly owned subsidiary of PDL and was floated as a holding company for Lineage Power Myanmar Limited (LPML).

 

LPML is a step-down subsidiary of PDL and is engaged in the execution of projects in Myanmar and Africa.

 

AP Digitek Infra Private Limited (APDIPL) and Inso Pace Private Limited (IPPL) are subsidiaries of PDL and were floated to execute specific projects. These projects were not awarded and hence the companies do not have any operations currently.

Key Financial Indicators

Consolidated

As on/for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

2,512.51

516.86

Reported profit after tax (PAT)

Rs crore

242.89

14.94

PAT margin

%

9.67

2.89

Adjusted debt/Adjusted networth

Times

0.88

0.72

Interest coverage

Times

3.64

2.79

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 Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 415.25 NA Crisil A2
NA Cash Credit NA NA NA 55.00 NA Crisil BBB+/Stable
NA Letter of Credit NA NA NA 63.00 NA Crisil A2
NA Overdraft Facility NA NA NA 2.00 NA Crisil BBB+/Stable
NA Proposed Working Capital Facility NA NA NA 432.42 NA Crisil BBB+/Stable
NA Rupee Term Loan NA NA 30-Dec-32 27.17 NA Crisil BBB+/Stable
NA Rupee Term Loan NA NA 28-Feb-26 5.16 NA Crisil BBB+/Stable

Annexure – List of entities consolidated

Names of entities consolidated

Extent of consolidation

Rationale for consolidation

Pace Digitek Limited

Full

Parent and flagship of the group

Lineage Power Private Limited

Subsidiary of PDL with significant operational and financial linkages.

Pace Renewable Energies Private Limited

Subsidiary of PDL and have common management

Lineage Power Holding (Singapore) PTE Limited

Subsidiary of PDL and have common management

Lineage Power Myanmar Limited

Step down subsidiary of PDL and have common management

AP Digitek Infra Private Limited

Subsidiary of PDL and have common management

Inso Pace Private Limited

Subsidiary of PDL and have common management
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 521.75 Crisil BBB+/Stable 11-03-25 Crisil BBB+/Stable   --   --   -- Withdrawn (Issuer Not Cooperating)*
      -- 31-01-25 Crisil BBB+/Stable   --   --   -- --
Non-Fund Based Facilities ST 478.25 Crisil A2 11-03-25 Crisil A2   --   --   -- Withdrawn (Issuer Not Cooperating)*
      -- 31-01-25 Crisil A2   --   --   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 415.25 Canara Bank Crisil A2
Cash Credit 55 Canara Bank Crisil BBB+/Stable
Letter of Credit 38 ICICI Bank Limited Crisil A2
Letter of Credit 25 Canara Bank Crisil A2
Overdraft Facility 2 ICICI Bank Limited Crisil BBB+/Stable
Proposed Working Capital Facility 80 Not Applicable Crisil BBB+/Stable
Proposed Working Capital Facility 352.42 Not Applicable Crisil BBB+/Stable
Rupee Term Loan 27.17 Indian Renewable Energy Development Agency Limited Crisil BBB+/Stable
Rupee Term Loan 5.16 Indian Renewable Energy Development Agency Limited Crisil BBB+/Stable
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)
Criteria for consolidation

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