software companies credit rating

1. CREDIT PROFILE AND
CREDIT MIGRATION
OF THE SOFTWARE
INDUSTRY IN INDIA
Shreya Mathur
Semester V (2014)
BBA- LLB
National Law University, Jodhpur

3. SOFTWARE COMPANIES IN INDIA

4. SOFTWARE COMPANIES IN INDIA
 Over the past few years, the revenue and earning of the
IT sector firms have been adversely affected through
the global recession and had considerably slowed down
the pace of IT firms in India

5. WHAT IS
CREDIT PROFILE?
A credit profile is used by lenders and landlords to
determine an individual's creditworthiness. Credit profiles
are available for individuals, businesses, conglomerates and
even countries.
An assessment of the credit worthiness of a borrower in
general terms or with respect to a particular debt or
financial obligation. A credit rating can be assigned to any
entity that seeks to borrow money – an individual,
corporation, state or provincial authority, or sovereign
government.

6. CREDIT
RATING
AGENCIES
A credit rating agency (CRA, also called a ratings service) is a
company that assigns credit ratings, which rate a debtor's
ability to pay back debt by making timely interest payments
and the likelihood of default.
It reflects its current opinion on the relative likelihood of
timely payment of interest and principal on the rated
obligation. It is an unbiased, objective, and independent
opinion as to the issuer's capacity to meet its financial
obligations.

7. RATING CRITERIA FOR
THE SOFTWARE
INDUSTRY

8. RATING CRITERIA FOR THE
SOFTWARE INDUSTRY
1. BUSINESS RISK ANALYSIS / MARKET POSITION
 Scale of Operations
The larger the scale, the greater the economy of scale, and the
ability to withstand profitability pressures.
 Business Model
Soundness and efficiency of the model of corporate governance.
 Geographical diversity
Geographical diversity mitigates business risks, however in times
of slowdown, geographical concentration may amount to losing
key markets and difficulty in VISA availability for software
developers.

9. RATING CRITERIA FOR THE
SOFTWARE INDUSTRY
1. BUSINESS RISK ANALYSIS / MARKET POSITION
 Client Profile
All highly rated software companies have well
established client relations leading to repeat business
and stability in earning.
 Mergers and Acquisition
Acquisitions of US based software companies capitalize
existing client relations and acquire domain expertise.

10. RATING CRITERIA FOR THE
SOFTWARE INDUSTRY
2. OPERATIVE EFFICIENCY
 Systems and Processes
The extent to which
processes are documented,
Standardized and
Improved continuously.

11. RATING CRITERIA FOR THE
SOFTWARE INDUSTRY
3. FINANCIAL RISK ANALYSIS
 Revenues & Profitability
 Leverage & Debt Servicing
 Refinancing/ restructuring Risk

12. RATING CRITERIA FOR THE
SOFTWARE INDUSTRY
4. MANAGEMENT RISK ANALYSIS
 Reputation & experience of the key managerial
personnel
 Commitment of the managerial staff

13. CRISIL’s ratings of top IT
Companies in India

14. SUMMARY RATING
RATIONALE

15.  3i INFOTECH
 (Formerly known as ICICI Infotech Ltd.) offers packaged
products for banking and financial services, including
customized software services , offshore support and IT
solutions.
 Strength- Geographical Diversity, product mix
 Weakness- Significant Debt Repayment obligations
 Suggestion- Crisil believes it will maintain its business risk
profile due to its diverse sources of revenue, and there’s an
expected increase in financial risk profile.
The outlook could be revised to “Positive” if it has an increase
in profitability.

16.  HCL TECHNOLOGIES LTD.
 Offers remote infrastructure development, custom
application, research and development, BPO etc.
 Strength- Strong risk profile, positive acquisitions in the
past,
 Weakness- Moderate operating efficiency, volatility in
forex rates
 Suggestion- Through geographical diversification of
revenues and increase in profitability, outlook could
shift from Stable to Positive.

17.  iGATE GLOBAL SOLUTONS LTD.
 Headquartered in Bengaluru (formerly Mascot Systems
Ltd.) it was delisted from the Indian stock exchanges in
2008. Offers services such as data warehousing,
application development and BPO.
 Strength- Adequate liquidity
 Weakness- Below average revenue growth

18.  INFOSYS TECHNOLOGIES LTD.
 Offers softwares for the banking industry, application
and maintenance, consulting etc.
 Strength- strong global competitiveness
 Weakness- weak forex rates
 Suggestion- The outlook can change to Positive if it
retains quality manpower and increases its operative
margins.

19.  KPIT CUMMINS INFOSYSTEMS LTD.
 Incorporated as KPIT in Bengaluru, it merged with
Cummins Ltd in 2004.
 Strength- Stable business risk profile
 Weakness- Geographical concentration in limited area
 Suggestion- With a significant increase in profits and
revenues, and a positive debt repayment profile, KPIT
could easily change into Positive rating.

20.  MASTEK LTD.
 (Formerly Management and and Software Technology
Pvt Ltd.), it offers enterprise management, and has
multiple offshore departments in foreign countries.
 Strength- Healthy Financial Risk Profile
 Weakness- High overheads and low revenues
 Suggestions- To improve from its negative outlook,
downward trend in revenues needs to be revised,
otherwise the rating will be further downgraded.

21.  NIIT TECHNOLOGIES
 It is a wholly owned subsidy of NTL Ltd formed in 2003.
 Strength- Improving risk profile
 Weakness- Small size of operations
 Suggestions- By maintaining its conservative size of
capital and increasing acquisition of new businesses, it
can be raised to a Positive outlook.

22.  PATNI COMPUTER SYSTEMS LTD.
 Patni is a veteran in the field of software infrastructure,
established in 1978 and went public in 2003.
 Strength- Strong market position and maintenance of
high marketable securities.
 Weakness- Fluctuations in forex rates, deteriorating
capital structure.
 Suggestions- The outlook can be shifted to “Positive” if
the business risk profile improves drastically, coupled
with better geographical diversification and client
retention.

23.  SASKEN COMMUNICATION TECHNOLOGIES LIMITED
 The Sasken Group was promoted in 1989 as an Indian
company offering equipment manufacturing, and
communications software services.
 Strength- Market position, financial risk position.
 Weakness- Little diversification.

24. Thank you!