SLK SOFTWARE SERVICES PRIVATE LIMITED

Rating The rating of SLK Software Services Private Limited (SLKSPL) derives strength from the experience of the promoters and the management in the IT industry, modest order book, comfortable capital structure, satisfactory debt coverage indicators, and established business relations with the key customers. The rating is however constrained by modest scale of operations of SLKSPL coupled with customer concentration risk, segment and geographical concentration risk with majority of sales to the US where there is a growing protectionist trend against outsourcing, exposure to foreign exchange fluctuations due to export nature of business and its presence in the highly fragmented IT industry with stiff competition from the domestic and international players. Background SLK Software Services Private Limited (SLKSPL), incorporated in the year 2000 and promoted by Mr Parth Amin, is in the business of software and IT services. Mr Parth Amin is the Chairman and CEO who looks after the overall management of the company. The revenue primarily comes from offshore contracts, covering the geography of USA. SKLSPL provides software related services in the segments such as manufacturing, banking and finance, logistics, media and entertainment. SLKSPL is a primary IT partner for some mid-tier banks based in USA. It provides solutions with respect to transaction processing services, internet banking solutions, mobile banking solutions, payables and receivables processing support, bankcard transactions, automated processes and paperless office solutions (database management solutions) to these clients. SLKSPL generates revenues from five major business domains in software services value chain namely Enterprise Resource Planning (ERP) (24% of total turnover in FY12 (refers to the period April 1 to March 31), Custom Development and Maintenance (17%), End to End solutions (25%), Independent testing (25%), Technology Infrastructure Management (8%), and System Integration (5%). The technology platforms used for above services include Microsoft technologies, Sun Technologies, Oracle, Filenet, SAP and TIBCO for system integration. Credit Risk Assessment Experienced promoter and management Mr Parth Amin, the initial promoter of SLKSPL, is a technocrat and career entrepreneur having nearly two decades of business experience in the information technology industry. The long association of Mr Parth Amin with the IT industry has been instrumental in developing long term relationships with its clientele in both domestic and international markets. Mr Parth Amin, Mr Daniel J White, Mr Gopal Amin, Mr K Jaishankar, Mr Shishir Shirgaokar and Mr. Keith David Hafner are the directors of SLKSPL with an average experience of 20 years in the similar line of business. The directors are associated with the firm for a period of 11 years. Mr Parth Amin is the CEO and looks after the general management of the company and under his leadership,

there are key executives who look after the various functions in the organisation. Mr Girish Kumar is the COO with an experience of 25 years and an association of 11 years with the firm. Mr Indushekar is a CA by profession with an experience of 25 years and works as the CFO for SLKSPL. Mr B R Jayakumar is designated as Chief Legal Officer and Ms Manu Srinivasan as Vice President- HR. Established business relations with key customers SLKSPL has a list of dedicated customers who have remained with SLKSPL in spite of acute competition in the international market. The key clients of the company include two major banks in the USA and a major manufacturing company based out of USA, which have been associated with the company for more than seven years. The company enjoys repeated contracts from these clients year on year. SLKSPL has grown from a team size of 100 people and one major customer in the year 2000 to a team of 1800 people with several reputed clients in 2012. The company has added one more reputed bank and a financial services company, both in the geography of USA, to its client list in the year 2012. The company is planning to expand its geographical presence in Europe and Africa in FY12-13. Favourable financial risk profile The total operating income increased significantly with a CAGR of 35%, due to increase in number of products and services offered and an increase in new and recurring contracts from existing as well as new clients. . Modest scale of operations of SLKSPL coupled with customer concentration risk, segment and geographical concentration risk The ratings take into account SLKSPLs modest scale of operations in the intensively competitive IT Industry. The small size poses challenges in terms of ability to bag large- sized contracts, which generally have better realization and lower execution costs, though the company has been successful in getting a few big contracts in the past one year. The small scale of operation restricts geographic diversification, making it susceptible to economic slowdown in the customer geographies. SLKSPL gets 70% of its revenues from banking and financial services sector and 20% from manufacturing sector while 10% comes from others, in the geography of USA, which leads to segment and geographical concentration risk for the company. Furthermore, nearly 70% of the revenue is concentrated with three customers. Foreign exchange risk: Due to the export nature of business, the company is inherently exposed to foreign exchange risk. To mitigate the risk, the firm takes forward cover in foreign exchange to avoid forex losses on account of fluctuations in the exchange rate.

Competition from the domestic players and international market The IT and software services industry is highly fragmented with the presence of several organized and unorganized players. Thus SLKSPL is exposed to significant competition in the domestic market. The industry also faces competition from other developing countries such as Brazil, China and Indonesia.