| SIS Cash Services Private Limited | ||||||
| Rated amount enhanced | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A/Stable/CRISIL A1’ ratings on the bank facilities of SIS Cash Services Private Limited (SISCL).
CRISIL Ratings had on June 29, 2022, upgraded its ratings on bank facilities of SISCL to ‘CRISIL A/Stable/CRISIL A1’ from ‘CRISIL A-/Positive/CRISIL A2+’.
The ratings reflect the expected increase in scale of the company alongwith expected improvement in the business and financial risk profiles of the SIS Cash Services group. While operating margins have improved to around 13.5% in fiscal 2022 from around 6.9% is fiscal 2020, with inflationary pressures on the economy alongwith increase in commodity and fuel prices, margins may moderate slightly going forward. While company has been able to negotiate partial tariff hikes from clients in fiscal 2022 as well as in fiscal 2021, further tariff hikes to offset the increase in fuel and commodity prices will be a key monitorable.
Operating income rose by around 19% in fiscal 2022 as compared to fiscal 2021. Operating margins rose to 13.5% in fiscal 2022 from 8.6% in fiscal 2021 due to reduction of the company’s exposure towards non-profitable automated teller machine (ATM) business (transporting cash vans to ATMs and replacing the cash) along with tariff hikes from the customers. Incremental working capital requirement is met through cash accrual, reducing dependence on debt. Debt protection metrics have also improved, reflected in interest coverage ratio of around 2.8 times in fiscal 2022, compared to around 1.8 times in fiscal 2021. With improvement in profitability, the debt protection metrics will continue to strengthen over the medium term.
The ratings continue to reflect strong infrastructural, operational and financial support from Security and Intelligence Services (India) Ltd (SIS India); established position in cash management services as the second-largest player, leveraging the SIS Prosegur and SISCO brands; and technical support from Prosegur cia de seguridad (Prosegur; 49% stake held by Singpai Pte Ltd [Singpai]). These strengths are partially offset by modest debt protection metrics and large working capital requirement. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in the extent of support available from the parent, SIS Limited.
CRISIL Ratings has combined the business and financial risk profiles of SISCL and its wholly owned subsidiary, SIS Prosegur Holdings Pvt Ltd (SISPHL), together referred to as the SIS Cash Services group. The companies have strong business synergies, with focus on cash management services under the brands, SIS Prosegur and SISCO in SISCL and SISPHL, respectively, and financial fungibility.
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: Strong infrastructural, operational and financial support from the parent: Cash management services were initially offered by a division of SIS Limited; the business was hived off as a joint venture (JV) between Singpai (subsidiary of Prosegur) and SIS India. The group leverages the established brand of SIS India, a market leader in manned guarding services; and the Prosegur brand, a leading cash management services provider in Spain and other countries.
Established position in cash management: The SIS Cash Services group is the second-largest player in the cash services segment. Cash services segment consists of three major sub-segments – ATM, Cash in Transit (CIT) and Door Step Banking (DSB). Around 85-90% of SISCL’s revenues are contributed by these segments. SISCL expects the revenue mix to remain similar with growth expected from ATM, CIT and DSB sub-segments. However, unlike previous years, SISCL will focus on ATM routes which are profitable.
Weakness: Modest debt protection metrics: Operating margin in the cash logistics business had remained subdued till fiscal 2019. Operating margins improved to around 13.5% in fiscal 2022 compared to around 8.6% in fiscal 2021 and around 6.9% in fiscal 2020 on account of price negotiations in the non-ATM business and reduction in contribution from the non-profitable ATM business to overall sales which company had exited.
The group’s reliance on debt has reduced over the past two fiscals, reflected in interest coverage ratio of around 2.8 times in fiscal 2022, respectively (compared with around 1.3 times in fiscal 2020), and net cash accrual to adjusted debt ratio of around 0.18 times for fiscal 2022 compared with around 0.03 time for fiscal 2020).
Client Concentration: Top four clients of the SISCL contributed to around 69% of overall revenues for fiscal 2022 compared to around 58% in fiscal 2021. SISCL was previously focusing on private banks and organizations, which had contributed to increase in revenue concentration.
However, company has now started bidding for more PSU contracts as well which is expected to lower the client concentration going forward. |
Liquidity: Strong Bank limit utilisation was NIL for the 12 months through April 2022. Cash and equivalents were around Rs 105 crore as on March 31, 2022 (increased from Rs 45.6 crore as on March 31, 2021). Net cash accrual is around Rs 32 crore in fiscal 2022 as compared around Rs 14.9 crore in fiscal 2021 against term debt obligation of around Rs 14 crore. Expected cash accrual of over Rs 40 crore per fiscal will sufficiently cover yearly term debt obligation of around Rs 20 crore over the medium term.
Group’s liquidity profile is further supported by a strong parentage from SIS Limited and Prosegur. Unsecured loan from the parent stood at Rs 74.4 crore as on March 31, 2022. |
Outlook: Stable CRISIL Ratings believes the SIS Cash Services group will continue to benefit from its established position in the cash management services business, backed by operational, financial and infrastructural support from SIS Limited; and technical support from Prosegur. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group Incorporated in 2012, SISCL provides cash-in-transit, ATM management, cash replenishment, cash processing and other cash-related services to banks. The company is a JV between the SIS group and Prosegur and operates under the SIS Prosegur brand. In fiscal 2015, SISCL acquired the cash management services of ISS SDB in India and operates the business under a wholly owned subsidiary, SISPHL.
SIS India was established in 1974 by Mr Ravindra Kishore Sinha as a proprietorship concern; it was reconstituted as a private limited company in 1985 and as a public limited company in 1993. The company has been providing security services since inception, mainly manned guarding. It is the second-largest player in the segment in India, after G4S Security Services India Pvt Ltd. The company also has presence in Australia (through SIS MSS Security Holdings Pty Ltd after acquisition of Chubbs Security in July 2008). |
Key Financial Indicators (Consolidated)
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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 - List of Entities Consolidated
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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 07-Jul-2022 in line with the lender-wise facility details as on 07-Jul-2022 received from the rated entity.
Criteria Details
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