By Gaurav Mathur

India Ratings and Research (Ind-Ra) has placed Mindtree Limited’s Long-Term Issuer Rating of ‘IND AA’ on Rating Watch Evolving (RWE). The Outlook was Stable. The instrument-wise rating actions are as follows:

Instrument Type

Date of Issuance

Coupon Rate (%)

Maturity Date

Size of Issue (million)

Rating/Rating Watch

Rating Action

Fund-based working capital limits

-

-

-

INR7,900

IND A1+/RWE

Placed on RWE

Non-fund-based limits

-

-

-

INR450

IND A1+/RWE

Placed on RWE

Analytical Approach: Ind-Ra continues to take a consolidated view of Mindtree and its 100% subsidiaries Magnet LLC, Bluefin Solutions Limited and Blouvin Limited to arrive at the ratings, due to the operational and strategic linkages among them, driven by similar business lines.

KEY RATING DRIVERS

The RWE follows the signing of a definitive agreement between a shareholder of Mindtree and Larsen & Toubro Limited (L&T) for the sale of a 20.3% stake in Mindtree for INR32.7 billion and L&T’s apparent intent to raise the holding to a majority stake through an open offer. Meanwhile, Mindtree has decided not to go ahead with the earlier contemplated share buyback. 

L&T through its subsidiary, L&T Infotech Limited, is also engaged in the IT business. 

Ind-Ra will continue to closely monitor the developments and resolve the watch on the receipt of adequate clarity on the proposed transaction by evaluating its impact on Mindtree’s business and financial profile.


RATING SENSITIVITIES

Ind-Ra will continue to monitor the developments and await greater clarity to emerge on the acquisition. The RWE indicates that the ratings may be raised, lowered or affirmed.


COMPANY PROFILE

Mindtree was incorporated in August 1999 by a team of information technology professionals and ex-employees of companies such as Wipro Limited, Cambridge Technology Solutions and Lucent Technologies. The company classifies its business into four verticals namely manufacturing & retail, banking finance services & insurance travel and media, others and hi-tech. The company’s service offerings include development, engineering, maintenance, consulting, package implementation, intellectual property, independent testing and infrastructure management and technical support. The company has presence in four geographies, viz. the US, Europe, India and rest of the world. During 9MFY19, the company generated INR51,821 million in revenue with INR7,842 million in EBITDA.  

FINANCIAL SUMMARY (Consolidated)
 

Particulars

FY18

FY17

Revenue (INR million)

54,628

52,364

EBITDA(INR million)

7,405

6,518

Interest expense (INR million)

169

191

Debt (INR million)

3,009

991

Cash & equivalents (INR million)

10,495

8,377

Adjusted leverage (x)

1.2

1.0

Source: Mindtree, Ind-Ra

 

 


RATING HISTORY

Instrument Type

Current Rating/Rating Watch

Historical Rating/Outlook

Rating Type

Rated Limits (million)

Rating

3 January 2019

16 October 2017

1 February 2017

Issuer rating

Long-term

-

IND AA/RWE

IND AA/Stable

IND AA/Stable

IND AA/Stable

Fund-based working capital limits

Short-term

INR7,900

IND A1+/RWE

IND A1+

IND A1+

IND A1+

Non-fund-based limits

Short-term

INR450

IND A1+/RWE

IND A1+

IND A1+

IND A1+


COMPLEXITY LEVEL OF INSTRUMENTS

For details on the complexity level of the instruments, please visit https://www.indiaratings.co.in/complexity-indicators.

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

ABOUT INDIA RATINGS AND RESEARCH

About India Ratings and Research: India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies and project finance companies. 

Headquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank. 

India Ratings is a 100% owned subsidiary of the Fitch Group.

For more information, visit www.indiaratings.co.in.

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Applicable Criteria

Analyst Names

  • Primary Analyst

    Gaurav Mathur

    Senior Analyst
    India Ratings and Research Pvt Ltd Unit 614 - 616, 6th Floor, B Wing Mittal Tower, M G Road Bengaluru - 560 001
    +91 80 46666802

    Media Relation

    Namita Sharma

    Manager – Corporate Communication
    +91 22 40356121