Rationale

 The assigned ratings factor in Paradigm IT Technology Services Private Ltd.’s (Paradigm) long track record in staffing solutions and IT services segments and significant experience of the promoters in the industry. The company has a diversified revenue profile, with corporate staffing accounting for ~70-72% of its revenues, followed by IT services constituting ~13-15% of its revenues. The company’s established customer base in the corporate staffing division, which includes Avenue Supermarts Ltd., Vodafone Idea Ltd., Magicbricks Realty Services Ltd. and Ola Electric Mobility Pvt Ltd., has supported a healthy growth in revenues over the past five years. In the IT services segment, the company has an established relationship of around two decades with its only client, Medidata Solutions Inc, leading to steady revenues. The company is also involved in executing cyber security projects and has recently secured a project from the Maharashtra Government worth Rs. 179.9 crore, which is expected to span over FY2025 – FY2030, accounting for a material share of revenues in the near term. Besides, the company also executes skill development and E-governance projects. The company’s revenue grew at a healthy CAGR of ~35% during FY2021 – FY2024 on the back of robust order inflow across the segments. It is expected to record healthy revenue growth in the term, supported by revenues from the Maharashtra cyber security project, while maintaining operating margins of 9-11%. The ratings also factor in Paradigm’s healthy financial profile characterised by comfortable debt metrics with total debt / OPBITDA of 1.2 times and DSCR of 3.4 times in FY2024. Nevertheless, its debt metrics are expected to moderate in the near term owing to debt availed to fund the working capital requirements for the Maharashtra project. The ratings are constrained by the company’s moderate scale of operations in the highly competitive staffing solutions and IT services segments, impacting its pricing flexibility. Moreover, both industries are characterised by high employee attrition rates. The company faces high customer concentration risk as entire revenues from the IT services vertical are derived from a single client. In staffing solutions, the top five clients accounted for 37% of the segment’s revenues in FY2024, indicating moderate concentration. However, ICRA notes that the company has been adding new customers regularly in the staffing solutions space. The company’s revenues remain susceptible to demand cycles of end-use industries and the performance of its customers, given the high concentration. The ratings are also constrained by working capital-intensive operations and the expected elongation of its working capital cycle, going forward, given the longer receivables cycle of the cyber security project. The Stable outlook reflects ICRA’s view that Paradigm will continue recording healthy growth in revenues and earnings, backed by consistent order inflow from its established customer base, supporting its financial profile.