CRISIL assigned a CRISIL IPO Grade 1/5 to the proposed IPO of Radiant Info Systems Ltd (Radiant). This grade indicates that the fundamentals of the IPO are poor relative to the other listed equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy/sell or hold the graded instrument, or a comment on the graded instrument’s future market price or its suitability for a particular investor.

The assigned grading reflects Radiant’s relatively smaller scale of operations in the IT services industry, which, in turn, presents a highly competitive business environment. The grading also factors in the company’s topline performance, which compares unfavourably with the industry’s growth rate over the last 12 years, since its inception in 1997. Despite a wide client base and presence across several segments, Radiant’s dependence on a few clients in select verticals for a significant portion of its revenues is high.

A large share of the company’s revenues comes from the telecom sector (accounting for 30% of consolidated revenues in FY09), followed by the pharmaceuticals and healthcare, manufacturing and IT sectors. Further, almost 96% of the company’s revenue (geography-wise, on a consolidated basis) is derived from the United States. Despite increased repeat business from some key clients, the company’s overall repeat business has declined in recent times. The grading also reflects high debtors, declining employee strength and potential foreign exchange risk exposure, since the company does not follow a formal practice of hedging.

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