ICRA Reaffirms Ratings for C-Edge Technologies Limited

C-Edge Technologies Limited (CTL) has benefitted from its joint venture with Tata Consultancy Services (TCS) and State Bank of India (SBI), leading to a strong financial profile and robust capital structure. Although the company faces challenges in retaining talent and managing receivable days, its dominance in the Application Service Provider (ASP) business for Core Banking Solutions (CBS) remains a significant revenue contributor.

Key Takeaways:

• ICRA has reaffirmed CTL's long-term rating of [ICRA]AA- (stable) and short-term rating of [ICRA]A1+.
• The ratings reflect CTL's strong parentage, technological and business support from TCS and SBI, as well as its financial flexibility and comfortable liquidity position.
• CTL's ASP based CBS business is its largest revenue contributor, with high switching costs for clients and value-added service offerings ensuring customer lock-in.
• The ratings are constrained by the limited market size for the ASP business, increasing competitive pressures, and high receivable days.
• Retention and development of talent in the India IT sector remains a challenge for CTL.
• Going forward, ASP based business is expected to remain dominant, but scale-up of other financial solutions provided by CTL will be a key rating sensitivity.

Statistics:

• CTL reported a profit after tax (PAT) of Rs. 28.56 crore on an operating income (OI) of Rs. 219.22 crore for the twelve months ended March 31, 2015.
• CTL's PAT increased by 74% compared to the previous year, while OI grew by 18.1%.
• CTL's capital structure is robust, with a debt-to-equity ratio of 0.25 as of March 31, 2015.
• CTL has a comfortable liquidity position, with current assets of Rs. 891.48 crore and current liabilities of Rs. 356.14 crore as of March 31, 2015.

Sources:

• ICRA, [ICRA]AA- (stable) rating reaffirmed for C-Edge Technologies Limited's long-term and short-term non-fund based facilities.
• Press release by ICRA, dated July 2015.