By Mitali Dalvi

India Ratings and Research (Ind-Ra) has assigned Zebion Infotech Private Limited (ZIPL) a Long-Term Issuer Rating of ‘IND BB-’. The Outlook is Stable. The instrument-wise rating actions are given below:

Instrument Type

Date of Issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating/Outlook

Rating Action

Fund-based working capital limits

-

-

-

INR201

IND BB-/Stable/IND A4+

Assigned

Non-fund-based working capital limits

-

-

-

INR10

IND A4+

Assigned

Term loan

-

-

February 2026

INR18.6

IND BB-/Stable

Assigned

KEY RATING DRIVERS

The ratings reflect ZIPL’s small scale of operations, as indicated by revenue of INR805.8 million in FY21 (FY20: INR612.7 million). The significant increase in revenue in FY21 was due to an increase in demand of information technology and electronic products. In 1HFY22, ZIPL achieved revenue of around INR491.65 million. Ind-Ra expects the revenue to be marginally higher in FY22 than FY21, owing to the high demand for electronic products. FY21 financials are provisional.

The ratings also factor in ZIPL’s average EBITDA margin of 5.48% in FY21 (FY20: 6.3%) with a return on capital employed of 14% (14%). The decline in margin was on account of increase in operating expenses. During 1HFY22, ZIPL achieved EBITDA margin of 4.96%. Ind-Ra expects the margin to marginally improve in FY22 due to normalisation of business operations.

The ratings are also constrained by ZIPL's weak credit metrics with the gross interest coverage (operating EBITDA/gross interest expense) of 1.34x in FY21 (FY20: 1.25x) and the net leverage (adjusted net debt/operating EBITDAR) of 6.4x (6.13x). The interest coverage improved marginally in FY21 due to an increase in absolute EBITDA, while the net leverage marginally deteriorated on account of an increase in total debt due to higher utilisation of the fund-based limits. In 1HFY22, the gross interest coverage was 1.26x. Ind-Ra expects the credit metrics to marginally improve in FY22 on account of a likely increase in absolute EBITDA and scheduled loan repayments. 

Liquidity Indicator - Stretched:
 The company’s average maximum utilisation of the fund-based facilities was around 87.69% over the 12 months ended October 2021, while the non-fund-based limits were fully utilised. The cash flow from operations turned negative to INR45.86 million in FY21 (FY20: INR16.5 million) due to unfavourable changes in working capital. ZIPL borrows funds from the promoters’ families and friends to meet its growing working capital demand to sustain the growth in operations. ZIPL has a low cash and cash equivalents of INR1.66 million at FYE21 (FYE20: INR0.2 million). The working capital cycle is elongated; it improved to 162 days in FY21 (FY20: 180 days) due to a decline in the inventory holding period to 92 days (109 days).

However, the ratings are supported by ZIPL’s promoters’ over a decade of experience in the computer peripherals and accessories industry, leading to established relationships with customers and suppliers.


RATING SENSITIVITIES

Positive: An improvement in the scale of operations, leading to an improvement in the credit metrics with the gross interest coverage increasing above 1.8x and an improvement in the liquidity position, all on a sustained basis, will be positive for the ratings.

Negative:
 Any decline in the scale of operations, leading to deterioration in the credit metrics or the liquidity position, will be negative for the ratings.


COMPANY PROFILE

Established in 2010, Pune-headquartered ZIPL is engaged in the trading of information technology products, including closed circuit television, computer peripherals and accessories. The company imports products mainly from China and Taiwan on contract manufacturing basis and sells it under the Zebion brand. Abhishek Lodha, Abhinandan Dagale and Yogesh Dagale are the promoters.

FINANCIAL SUMMARY

Particulars

FY21 (Provisional)

FY20

Revenue (INR million)

805.82

612.70

EBITDA (INR million)

44.14

38.60

EBITDA margin (%)

5.48

6.30

Gross interest coverage (x)

1.34

1.25

Net leverage (x)

6.40

6.13

Source: ZIPL, Ind-Ra



COMPLEXITY LEVEL OF INSTRUMENTS

Instrument Type

Complexity Indicator

Fund-based working capital limits

Low

Non-fund-based working capital limits

Low

Term loan

Low

 

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

    Mitali Dalvi

    Analyst
    India Ratings and Research Pvt Ltd Wockhardt Towers, 4th Floor, West Wing, Bandra Kurla Complex, Bandra East,Mumbai - 400051

    Media Relation

    Ankur Dahiya

    Manager – Corporate Communication
    +91 22 40356121