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-Fitch assigns BBB(ind) to Tera Software.

INTERNET BUSINESS NEWS-(C)1995-2011 M2 COMMUNICATIONS

19 April 2011 - Fitch set today a national long-term rating of BBB(ind) with a "stable" outlook to Indian company Tera Software Ltd (BOM:590020), or Terasoft, engaged in information technology projects for government organisations.

The agency also gave a BBB(ind) rating to the company's INR148.2m (USD3.3m/EUR2.3m) fund-based working capital limit, BBB(ind)/F3(ind) ratings to its INR480m non fund-based working capital limit and a BBB(ind) rating to its outstanding long-term loans of INR8.07m.

The ratings are underpinned by Terasoft's experience of over ten years in executing e-governance projects and the long-term nature of the contracts, which ensures revenue visibility and steady divisional EBIDTA margins of more than 30%, Fitch said.

Although Fitch considers that the company's financial profile is adequate, the ratings are constrained by the sustained drop in the overall EBIDTA margins since fiscal 2007 because of the increasing share of revenues from the low-margin systems integration business, the agency noted.

Another concern is the high working capital intensity in the business, with receivable days being more than 250 days. In addition, the inherent risks related to carrying out large-scale projects while managing working capital would remain a challenge for Terasoft on a mid-term scale, the analysts added.

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Publication:Internet Business News
Date:Apr 19, 2011
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