| Yash Technologies Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1' | ||||||
| Rating Action | ||||||
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| 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 A/Stable/CRISIL A1’ ratings on the bank facilities of Yash Technologies Private Limited (YTPL).
The business risk profile will continue to benefit from the healthy pipeline of deals from the parent, Yash Technologies Inc., USA (YTI) and increase in customer base. Revenue has grown by 25% in fiscal 2022, driven by strong performance of subsidiaries with increase in the share of wallet of the existing customers as well as addition of new customers. Operating margin, however, moderated by 300 basis points to 12.2%, due to rise in cost of employees and subcontracting and higher overheads with the new facility at Indore nearing completion.
Revenue is likely to grow by 12-15% over the near to medium term, buoyed by increasing demand for digitisation across industries and initiatives taken to garner new clients. Operating margin may remain range bound at 11-12%. Employee expenses are expected to increase in line with business volume but will be nearly offset by certain cost-saving measures and continued rise in employee utilisation as well as billing rates.
The ratings continue to reflect the healthy business and financial risk profiles of YTPL, supported by its long track record of operations both in India and the overseas market. Financial risk profile is backed by a comfortable capital structure and healthy debt protection metrics. Liquidity is marked by a healthy cash surplus of Rs. 160 crore as on March 31, 2022 and should remain adequate in the absence of any capital expenditure (capex) plans and repatriation of funds to the parent. These strengths are partially offset by geographic concentration in revenue. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of YTPL and its subsidiaries and joint ventures. This is because the entities, collectively referred to as the YTPL group, have significant 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: Presence in multiple verticals and healthy clientele, supported by an experienced management: YTPL provides application development, maintenance, testing and digital services. Over the past five years, the company has forayed into several service segments, including life sciences, chemicals, food processing, oil and gas, healthcare, banking and insurance, and logistics and transport, through acquisitions. Along with the parent, YTI, YTPL caters to the information technology (IT) requirements of over 350 large and mid-sized companies across six continents. Some of these clients feature in the Fortune 500 list of companies globally.
Adequate financial risk profile: Capital structure should remain healthy, with gearing moderating to 0.1 time over the medium term, from the peak of 0.2 time as on March 31, 2022 as capex undertaken at the Indore facility has been completed in the fiscal 2023. Improving cash accrual and moderate debt should keep debt protection metrics adequate over the medium term. Interest coverage and net cash accrual to total debt ratios are estimated at 34.2 times and 3.0 times, respectively, in fiscal 2023, as against 29.6 times and 1.6 times, respectively, in fiscal 2022.
Weaknesses: Susceptibility to geographic and customer concentration risk: For the first nine months of fiscal 2023, bulk of revenue was derived from the US (71%) and India (18%). Contribution from these countries has remained high over the last three fiscals. Also, nearly 60% of sales are to the parent, which outsources contracts to YTPL. However, the company is actively adding clients in different geographies to reduce revenue concentration risk.
Exposure to volatility in forex rates: Bulk of the revenue is earned in foreign currency which exposes the company to any sharp fluctuation in forex rates, especially in the absence of a formal hedging policy.
Liquidity: Adequate YTPL is likely to generate cash accrual of over Rs 150 crore per fiscal over the next three years. The company had cash and marketable securities worth Rs 161 crore as on March 31, 2022. Hence, it has adequate liquidity to service its term debt of Rs 23 crore in fiscals 2024 and 2025, and cover the incremental working capital expense. |
Outlook: Stable CRISIL Ratings believes YTPL will maintain its business and financial risk profiles over the medium term, supported by steady growth in revenue, healthy networth and moderate debt. |
Rating Sensitivity factors Upward scenario * Sustained revenue growth of over 12% along with healthy operating margin of 14-16%, resulting in higher-than-expected cash generation * Sustenance of healthy credit metrics
Downward scenario * Significant decline in revenue by over 10% and in operating margin to around 7%, affecting cash flow * Large, debt-funded capex or acquisition, or stretch in working capital cycle, weakening the key credit metrics with gearing rising above 0.50 time * Significant cost and time overruns in completion of the ongoing Indore complex * The rating will remain sensitive to any change in credit profile of the parent Yash Technologies Inc. |
About the Company YTPL was incorporated in Indore in December 2002, by the promoters, Mr Manoj Kumar Baheti and Mr Kirti Kumar Baheti. The company is a wholly owned subsidiary of YTI and provides software development services and IT-enabled services. It also trades in software. Its registered office is in Indore, but the global headquarters are in East Moline, Illinois (the US). The company has over 30 campuses across India, Malaysia, Singapore, Dubai, Brazil, Europe, and the US. It has over 8,500 global employees and was recently awarded the SEI-CMMI, Level 5 certification.
About the parent YTI, which holds the entire stake in YTPL, was incorporated in 1996 in USA by Mr Manoj Kumar Baheti. It offers strategic consulting services related to business process modernisation, change management, and application management. YTI is headquartered in East Moline, too, and has offices across Asia, North America, South America, Australia, and Europe. Revenue for CY2021 was USD 1,26.6 million while profit was USD 3.0 million. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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-May-2023 in line with the lender-wise facility details as on 13-Dec-2021 received from the rated entity.
Criteria Details
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