3i Infotech Limited
3i Infotech Limited
3i Infotech Limited
3i Infotech Limited
January 07, 2021
Ratings
Amount
Facilities Rating1 Rating Action
(Rs. crore)
CARE BBB -;
254.27 (Triple B Minus;
Placed on credit watch with
Long term Bank Facilities (reduced from 377.80) Credit watch with
developing implications
developing
implications)
254.27
Total Facilities (Rs. Two hundred and fifty four
crore and twenty seven lakhs only)
Details of instruments/facilities in Annexure-1
CARE has placed the rating assigned to the bank facilities of 3i Infotech Limited (3i) under ‘Credit watch with developing
implications’ in view of the announcement regarding the proposed sale of its global software products business on a going concern
basis to Azentio Software Private Limited (Azentio) for a consideration of Rs.1,000 crores, subject to receipt of requisite approvals.
The sale of the business will help 3i Infotech to facilitate repayment of all its existing debt exposure of Rs.820 crores and leave
more than Rs.150 crores to scale up other existing business segments.”
CARE in light of the above events is engaging with 3i’s management to understand the implications on overall financial risk profile
of the company. Going forward it is understood that subsequent to the aforementioned transaction, 3i shall become a debt free
company and retain surplus cash to the tune of Rs. 150 crore. Impact of the transaction on 3i in terms of its prospective financials,
market value, investor value and brand value also remains to be seen since going forward it will be functioning exclusively as an
IT Services company, whereas earlier products division had been a major revenue driver. CARE would take a final action on the
rating watch based on assessment of upcoming developments associated with the aforementioned transaction. CARE may also
undertake a review in the interim if warranted.
1
Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications
closing conditions. Aggregate consideration for the Software Business (in and outside India) and intellectual property of up to Rs.
1000 crore. The buyer is a newly incorporated entity viz. Azentio Software Private Limited along with its parent and fellow
subsidiaries (collectively "Azentio Group") worldwide. Azentio Group is wholly owned by private equity funds advised by Apax
Partners. The newly formed Azentio Software will be supported by Apax Funds, with increased investments in R&D and sales and
marketing. The sale of the business will also help 3i to facilitate repayment of all existing debt exposure of the company, scale up
other existing business segments including providing IT services to customers across sectors and geographies and strengthen its
balance sheet by reducing debt. Following the transaction, 3i will continue to pursue strategic growth initiatives in the IT services
business.
Mid-size scale; industry subject to competition from large players & high attrition among workforce
The industry in which 3i operates is dominated by very large domestic and multinational players, compared to which 3i’s scale of
operations is much smaller as it’s a mid-size player. 3i faces intense competition from these players which constrains its revenue
and profitability. Further the skilled human resources forms an integral part of the organisations such as 3i where attrition has
been considerably high, albeit reduced in the past few years. Ability to retain quality talent remains critical.
Liquidity: Adequate
3i maintained cash balance of Rs. 112.03 crore as on September 30, 2020 and manages its working capital requirement through
internal accruals. Long maturity period of debt under restructuring scheme augurs well for liquidity of the company. The company
has also not opted for the moratorium under RBI’s covid relief package. Further, CARE understands that subsequent to the
repayment of company’s outstanding debt from the aforementioned sale proceeds and transfer of assets, surplus cash to the
extent of ~Rs. 150 crore is likely to be retained within 3i, which is expected to be used towards scaling up of its IT services business.
This is further expected to support the liquidity going forward.
Analytical approach: CARE has taken a consolidated view of 3i Infotech Limited and its subsidiaries as per list enclosed in
Annexure-4
Applicable Criteria
CARE’s Policy on Default Recognition
Rating Methodology: Consolidation and Factoring Linkages in Ratings
Financial ratios – Non-Financial Sector
Liquidity Analysis of Non-Financial Sector Entities
Criteria on assigning ‘outlook’ and ‘credit watch’ to Credit Ratings
Rating Methodology - Service Sector Companies
Name of the Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Type Rating
Instrument/Bank Amount Rating(s) Rating(s) Rating(s) Rating(s)
No. Outstanding assigned assigned assigned assigned
Facilities
(Rs. crore) in 2020- in 2019- in 2018- in 2017-
2021 2020 2019 2018
CARE BBB- 1)CARE
(Under Credit BBB-;
Fund-based - LT- watch with Stable
1. LT 254.27 - - -
Term Loan Developing (28-Jan-
Implications) 20)
Contact us
Media Contact
Mradul Mishra
Contact no. – +91-22-6837 4424
Email ID – mradul.mishra@careratings.com
Analyst Contact
Name – Mr. Arunava Paul
Contact no.- +91-22-6754 3667
Email ID- arunava.paul@careratings.com
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