By Ankur Rustagi

India Ratings and Research (Ind-Ra) has placed NIIT 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/Outlook

Rating Action

Fund-based limits

-

-

-

INR414

IND AA-/RWE/IND A1+/RWE

Placed on RWE

Non-fund-based limits

-

-

-

INR368

IND AA-/RWE/IND A1+/RWE

Placed on RWE

Commercial paper (carved out of fund-based bank lines)

-

-

up to 365 days

INR340

IND A1+/RWE

Placed on RWE

Short-term debt

-

-

-

INR200

IND A1+/RWE

Placed on RWE

Proposed non-fund-based bank limits*

-

-

-

INR700

Provisional IND AA-/RWE/Provisional IND A1+/RWE

Placed on RWE

Proposed long-term debt*

-

-

-

INR400

Provisional IND AA-/RWE

Placed on RWE

*The ratings are provisional and shall be confirmed upon the sanction and execution of the loan documents for the above facilities by NIIT to the satisfaction of Ind-Ra.

Analytical Approach: Ind-Ra continues to take a consolidated view of NIIT and its subsidiaries 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 definitive agreements among NIIT, Baring Private Equity Asia Limited (BPEAL) and other promoters for acquiring 30.2% stake in NIIT Technologies Limited (NIITTECH) for INR26.3 billion (INR1,394/share). In line with the Securities Exchange Board of India’s regulations, BPEAL has made an open offer to acquire up to 26% of share capital of NIITTECH from its minority shareholders at a similar price. Both the transactions are subject to approval from Competition Commission of India and antitrust authorities in the US and Germany. NIIT would receive a consideration of INR20.2 billion for its 23.10% stake in NIITTECH on a fully diluted basis. BPEAL operates as a private equity firm and makes investments into the healthcare, logistics, media, education, financial services, and retail sectors.

The RWE reflects pending clarity on the completion of the proposed transaction and the end use of the consideration proceeds which could be a combination of deleveraging, return to shareholders, investment in future growth, etc. NIIT received an associate income of INR660.9 million in FY18 (FY17: INR590.9 million), which includes dividend income of INR181.2 million (INR 144.9 million).

Ind-Ra will continue to closely monitor the developments and resolve the RWE once it has additional information on the completion of the proposed transaction and the end use of transaction proceeds by evaluating its impact on NIIT’s business and financial profile. The transaction is likely to close by July 2019, subject to regulatory approvals.


RATING SENSITIVITIES

The RWE indicates that the ratings may be upgraded, downgraded or affirmed. Ind-Ra will undertake a detailed annual review and resolve the RWE by end-July 2019.


COMPANY PROFILE

Established in 1981, NIIT, a global leader in skills and talent development, offers multidisciplinary learning management and training delivery solutions to corporations, institutions and individuals in over 40 countries. The company has a multi-product, multi-geography offerings portfolio spread across individuals, corporates, schools and other educational institutions.


FINANCIAL SUMMARY

Particulars

FY18

FY17

Operating revenue (INR million)

8,505

8,452

EBITDA (INR million)

746

674

EBITDA margin (%)

8.8

8.0

Interest coverage (x)

3.85

2.61

Net leverage (x)

1.65

1.82

Source: Ind-Ra, NIIT


RATING HISTORY

Instrument Type

Current Rating/Rating Watch

Historical Rating/Outlook

Rating Type

Rated Limits (million)

Rating/Outlook

29 May 2018

22 March 2017

12 February 2016

Issuer rating

Long-term

-

IND AA-/RWE/IND A1+/RWE

IND AA-/Stable

IND AA-/Stable

IND AA-/Stable

Fund-based limits

Long-term/Short-term

INR414

IND AA-/RWE/IND A1+/RWE

IND AA-/Stable/IND A1+

IND AA-/Stable/IND A1+

IND AA-/Stable/IND A1+

Non-fund-based limits

Long-term/Short-term

INR1,068

IND AA-/RWE/IND A1+/RWE

IND AA-/Stable/IND A1+

IND AA-/Stable/IND A1+

IND AA-/Stable/IND A1+

Commercial paper (carved out of fund-based bank lines)

Short-term

INR340

IND A1+/RWE

IND A1+

IND A1+

IND A1+

Short-term debt

Short-term

INR200

IND A1+/RWE

IND A1+

IND A1+

IND A1+

Proposed long-term debt

Long-term

INR400

Provisional IND AA-/RWE

Provisional IND AA-/Stable

-

-


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. 

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

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Applicable Criteria

Analyst Names

  • Primary Analyst

    Ankur Rustagi

    Analyst
    India Ratings and Research Pvt Ltd DLF Epitome, Level 16, Building No. 5, Tower B DLF Cyber City, Gurugram Haryana - 122002
    0124 6687261

    Media Relation

    Namita Sharma

    Manager – Corporate Communication
    +91 22 40356121