3i Infotech, the mid-cap IT services firm, which recently raised Rs 317 crore through a qualified institutional placement, may restructure its existing debt of about Rs 1,200 crore.
Analysts said the firm would have to restructure debt to ease its operating cash flows.
“We believe the company would have to refinance some debt obligations as operating cash flows would be inadequate,” Krupal Maniar, Sandeep Shah and Navneet Singh Chahal of ICICI Securities said in a September 23 report to clients.
After the current capital rising 3i Infotech would still have a debt of Rs 1,200 crore in addition to foreign currency convertible bonds (FCCBs) worth Rs 550 crore and preference capital of Rs 100 crore.
Amar Chintopanth, chief financial officer of 3i Infotech, did not confirm any move by the company to restructure debt. He said, “Being a public listed firm we look at our balance-sheet debt management from time to time. I can not comment on the observation of some analysts.”
The company has three broad sources of earning revenue — transaction processing, IT services and products — from which the company earns almost equal percentage of revenue. Though the analysts are upbeat on the firm’s diversified business model they consider 3i Infotech’s margin to drop in the days ahead.
“We believe 3i Infotech’s diversified business model spread across different geographies would ensure organic growth, in line with the industry, once recovery sets in. But we expect margin to dip 60 bps in FY09-11 as business shifts more towards low-margin transaction processing services,” the ICICI Securities analysts wrote.
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