3I Infotech Debt dropped on 70.4% and Net Debt / EBITDA dropped on 7.9x from 14.7x to 6.8x

11-08-2016 • About 3I Infotech ($3IINFOTECH) • By InTwits

3I Infotech reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

3I Infotech is a company in decline: FY2016 revenue growth was -16.3%, 5 years revenue CAGR was -15.2%
3I Infotech has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.7%. At the same time it's a lot of higher than industry average of 10.0%.
CAPEX is quite volatile: ₹0m in FY2016, ₹0m in FY2015, ₹229m in FY2014, ₹426m in FY2013, ₹617m in FY2012
The company has unprofitable business model: ROIC is -18.5%
It operates with high leverage: Net Debt/EBITDA is 6.8x while industry average is 0.7x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue dropped on 16.3%. During the last 5 years Revenue growth topped in FY2015 at 2.8%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 3.4 pp from 12.3% to 8.9% in FY2016.

Net Income margin dropped on 21.2 pp from -72.6% to -93.9% in FY2016. Net Income margin followed a declining trend at -17.9 pp per annum in the last 5 years.

Leverage (Debt)

Company's Net Debt / EBITDA is 6.8x and Debt / EBITDA is 7.2x. Net Debt / EBITDA dropped on 7.9x from 14.7x to 6.8x in FY2016. Debt dropped on 70.4% while cash surged on 286%. During the last 5 years Net Debt/EBITDA topped in FY2014 at 27.7x and was declining since that time.

3I Infotech has short term refinancing risk: cash is only 86.3% of short term debt.

Financial and operational results

3I Infotech ($3IINFOTECH) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	16,810	13,114	13,079	13,440	11,256	-16.3%
EBITDA	2,234	1,036	939	1,655	1,002	-39.5%
Net Income	-3,600	-5,050	-3,576	-9,763	-10,564
Balance Sheet
Cash	883	377	511	115	443	286.1%
Short Term Debt	2,870	1,733	5,882	5,827	513	-91.2%
Long Term Debt	17,016	19,706	20,585	18,603	6,707	-63.9%
Cash flow
Capex	617	426	229	0	0
Ratios
Revenue growth	-34.6%	-22.0%	-0.3%	2.8%	-16.3%
EBITDA growth	-57.5%	-53.6%	-9.4%	76.3%	-39.5%

EBITDA Margin	13.3%	7.9%	7.2%	12.3%	8.9%	-3.4%
Net Income Margin	-21.4%	-38.5%	-27.3%	-72.6%	-93.9%	-21.2%
CAPEX, % of revenue	3.7%	3.2%	1.8%	0.0%	0.0%

ROIC	3.7%	-4.2%	-5.3%	-2.5%	-18.5%	-16.0%
ROE	-32.0%	-52.8%	-52.5%
Net Debt/EBITDA	8.5x	20.3x	27.7x	14.7x	6.8x	-7.9x

Peers in IT Consulting & Software

Below you can find 3I Infotech benchmarking vs. other companies in IT Consulting & Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Mindtree ($MINDTREE)	-	23.2%	28.8%	17.0%	31.8%
Ramco Systems ($RAMCOSYS)	-	7.3%	9.9%	37.0%	24.2%
Sqs India Bfsi ($SQSBFSI)	-	32.9%	20.4%	10.1%	23.4%
Infinite Computer Solutions (India) ($INFINITE)	-	31.7%	24.6%	0.3%	21.3%
Tech Mahindra ($TECHM)	-	25.2%	174.0%	20.1%	17.1%
Median (22 companies)	34.3%	20.5%	14.0%	10.1%	11.6%
3I Infotech ($3IINFOTECH)	-	-22.0%	-0.3%	2.8%	-16.3%

Top companies by Gross margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Tata Consultancy Services ($TCS)	-	-	47.4%	42.4%	43.9%
Infosys ($INFY)	41.3%	98.1%	35.9%	38.3%	37.4%
Mindtree ($MINDTREE)	31.5%	36.2%	-	34.8%	32.4%
Wipro ($WIPRO)	29.2%	30.4%	32.0%	31.6%	30.4%
Median (4 companies)	32.7%	36.2%	35.9%	36.6%	34.9%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Oracle Financial Services Software ($OFSS)	35.3%	35.2%	37.4%	39.7%	41.1%
Tata Consultancy Services ($TCS)	29.5%	28.6%	30.7%	26.1%	28.2%
Infosys ($INFY)	31.6%	27.9%	26.3%	27.1%	27.1%
Wipro ($WIPRO)	19.1%	20.9%	22.4%	22.3%	21.1%
Ramco Systems ($RAMCOSYS)	9.6%	-2.8%	4.9%	18.8%	20.3%
Median (21 companies)	15.1%	17.2%	18.5%	13.2%	14.3%
3I Infotech ($3IINFOTECH)	13.3%	7.9%	7.2%	12.3%	8.9%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Ramco Systems ($RAMCOSYS)	-	22.1%	15.3%	12.4%	10.3%
Niit Technologies ($NIITTECH)	5.9%	4.6%	6.1%	7.9%	6.0%
Financial Technologies (India) ($FINANTECH)	8.9%	11.4%	-	6.5%	5.4%
Infosys ($INFY)	4.9%	5.2%	5.5%	4.2%	4.4%
Cyient ($CYIENT)	5.2%	3.9%	3.5%	3.0%	4.2%
Median (18 companies)	3.8%	3.1%	3.2%	3.1%	2.9%
3I Infotech ($3IINFOTECH)	3.7%	3.2%	1.8%	0.0%	0.0%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Oracle Financial Services Software ($OFSS)	18.0%	16.8%	16.3%	24.2%	45.7%
Tata Consultancy Services ($TCS)	48.6%	48.4%	50.2%	40.5%	44.4%
Sqs India Bfsi ($SQSBFSI)	12.1%	27.0%	29.4%	30.6%	39.9%
Mindtree ($MINDTREE)	24.9%	34.6%	36.2%	32.0%	28.9%
Infosys ($INFY)	32.4%	28.3%	27.2%	25.1%	25.3%
Median (29 companies)	19.6%	20.7%	23.1%	20.7%	18.9%
3I Infotech ($3IINFOTECH)	3.7%	-4.2%	-5.3%	-2.5%	-18.5%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Agc Networks ($AGCNET)	0.9x	10.1x	-	4.6x	22.8x
Onward Technologies ($ONWARDTEC)	2.4x	2.2x	4.1x	1.9x	1.2x
Wipro ($WIPRO)	-0.3x	-0.3x	-0.6x	-0.8x	0.2x
Asm Technologies ($ASMTEC)	1.7x	2.1x	-	0.0x	0.0x
Empower India ($EMPOWER)	0.0x	-	-	0.0x	0.0x
Median (23 companies)	-0.0x	-0.2x	-0.3x	-0.3x	-0.2x
3I Infotech ($3IINFOTECH)	8.5x	20.3x	27.7x	14.7x	6.8x

3I Infotech stock price chart

3I Infotech financials

mln.	FY2010	FY2011	FY2012

Revenue	15,799	25,697	16,810
EBITDA	5,041	5,255	2,234
Net income	334.6	2,525	-3,600.300
CAPEX	1,698	638.0	616.9
Debt	21,856	19,993	19,886
Cash	1,292	1,579	882.9

About 3I Infotech

3i Infotech Limited provides IP based software solutions and information technology (IT) services in India and internationally. Its products include asset and wealth management solution accelerators and software products, which enable management of various asset classes across the investment lifecycle; and KASTLE corporate and retail banking software and solutions that enable banks to manage their retail operations, including Internet and core banking, fraud detection, universal lending, and risk management, as well as specialized corporate banking products to manage risk, asset liability, payments, and treasury. It also provides brokerage specialized products for stock broking and clearing management, workflow, back-office management, and online trading and accounting, as well as warning, risk, and surveillance system for regulators and exchanges; and document management software and solutions for enterprise-wide document management and archival, and workflow management. In addition, the company offers enterprise resource planning software and solutions to manage enterprise-wide systems, teams, and data; insurance management solution accelerators and software that enable management of insurance business processes; IT infrastructure management software; and Framework, a private equity software solution. Further, its services comprise application development and maintenance, business intelligence and enterprise applications, business process outsourcing, consulting, testing and compliance, and infrastructure management services. The company serves banking, insurance, capital market, and asset and wealth management industries, as well as government, manufacturing, retail, distribution, telecom, and healthcare industries. It has strategic partnerships with Microsoft, Oracle, HP, IBM, Cisco, Symantec, Image Right, Intersystems, redhat, Mentisoftware, Dell, and Hitachi Data Systems. The company was incorporated in 1993 and is based in Navi Mumbai, India.