| Softline Services India Private Limited | ||||||
| 'CRISIL BBB / Stable / CRISIL A3+ ' assigned to Bank Debt | ||||||
| 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 BBB/Stable/CRISIL A3+’ ratings to the bank facilities of Softline Services India Private Limited (SSIPL; part of Softline India group).
The ratings reflects established market position in software distribution business, extensive experience of promoters, moderate working capital requirements and adequate debt protection metrics:. These strengths are partially offset by its exposure to intensely competitive software trading industry, vendor concentration risks and its aggressive capital structure. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has consolidated the business and financial risk profiles of SSIPL and its subsidiary Embee Software Private Limited (ESPL), which is strategically important to, and have a significant degree of operational integration with SSIPL. CRISIL Ratings considers these entities, together referred to as the Softline India group, have a common management, and significant business and operational 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: Established market position in the software distribution business aided by extensive experience of promoters: The promoters have been in the software business for over more than a decade which has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers. The group is a prominent software vendor in India, and has strong associations with major software producers such as Microsoft, Ingram, Redington, Adobe and McAfee and also has strong relationships with its customers, leading to repeat business. This has led to steady increase in revenue from Rs 400 crore in fiscal 2018 to Rs 2503 crore in fiscal 2021.
Moderate working capital requirements: Its moderate working capital management is reflected in its gross current assets (GCA) 70-100 days over the three fiscals ended March 31, 2021. It extends credit of around 2-3 months to its customers while the inventory is low due to the nature of its business. Additionally, its ability to stretch its creditors to around 2-3 months leads to moderate working capital requirements.
Adequate debt protection metrics: The group’s adequate debt protection metrics are marked by comfortable interest coverage and net cash accrual to adjusted debt ratios of 3.92 times and 0.37 times, respectively, for fiscal 2021. The metrics are expected to remain at similar times over the medium term owing to controlled reliance on external debt.
Weaknesses: Exposure to intensely competitive software distribution industry: The group operates in an intensely competitive industry as the software distribution business is fragmented. This leads to stiff pricing competition in order to garner higher volumes. Furthermore, agreements with software vendors are non-exclusive, which leads to higher competition. Moreover, the operating margin has been in the range 0.9-1.6% over the three fiscals through 2021 because of limited value addition.
Exposure to vendor concentration risks: The group has significant vendor concentration risk as Microsoft accounts for more than 85% of sales. Hence any changes in policy of Microsoft, with respect to credit period, margin and sales policy may significantly impact the group’s business.
Aggressive capital structure: Group has an aggressive capital structure marked by total outside liabilities to adjusted networth of 4.05 times as on March 31, 2021. The capital structure is expected to improve with steady accretion to reserves. |
Liquidity: Adequate Liquidity remains adequate, marked by healthy cash generation and moderate bank limit utilization. Cash accrual of more than Rs 25 crore per fiscal in fiscals 2022 and 2023 are expected against repayment obligations of Rs 1.7 crore and Rs 1.6 crore, respectively. SSIPL’s fund-based bank limit of Rs 34.8 crore remained unutilized during the past 12 months through April 2021. It had cash and cash equivalents, outstanding at Rs 138 crore, of which more than Rs 100 crore was unencumbered, as on March 31, 2021. CRISIL Ratings expects internal accruals, cash and cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations and incremental working capital requirements. |
Outlook: Stable CRISIL Ratings believes the group will continue to benefit over the medium term from its longstanding relationships with principals and customers. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 2014, SSIPL is a Mumbai-based company engaged in the business of trading of software license. It is a software distributer for companies such as Microsoft, Ingram, Redington and McAfee. It is a wholly own subsidiary of Softline Overseas Corp. (part of Russia based Softline International group) and day-to-day operations are managed by Mr. Vinod Nair (Managing Director).
ESPL, incorporated in 1988, is a Kolkata-based company engaged in software licensing for companies such as Microsoft, IBM, HP and Oracle and also provides related services such as ERP/SAP implementation. SSIPL acquired 94.7% stake in ESPL in fiscal 2021. |
Key Financial Indicators - Consolidated
*Provisional consolidated numbers |
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 30-Sep-2021 in line with the lender-wise facility details as on 30-Sep-2021 received from the rated entity
Criteria Details
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