India Ratings & Research (Ind-Ra) has affirmed Infinite Computer Solutions (India) long-term issuer rating at 'AA-'. The outlook is stable.

The affirmation is supported by Infinite's strong credit profile with net leverage below 1x, higher than industry revenue growth rate, a reputed customer portfolio coupled with a long association with these customers  and superior liquidity. While increasing customer concentration (top customer) and fall in margins are concerns, Ind-Ra believes that there is no immediate risk which would necessitate a rating revision since Infinite has been enjoying its association with its top customer for more than 10 years and is one of the few approved vendors providing IT services for this top customer across the globe increasing the customer stickiness.

Infinite's revenue for FY13 grew sharply (+31.7%) and has continued to grow at 29% during 9MFY14, which is well above the average revenue growth rate for the IT services industry. Revenue growth was mainly in the application development and maintenance segment which requires greater onsite effort and translates into higher billing rates. On the flip side, however, growth in this low margin segment partly resulted in Infinite’s overall EBITDA margins (post forex movement) dropping to 10.5% for 9MFY14 (FY13:14.5%; FY12:17.3%). Additionally, downsizing by one of its top customers resulted in idle resources for few months and forex losses on its forward contracts during (FY13: Rs 170 million and 9MFY14: Rs 100 million) while investment on marketing activities led to a fall in EBITDA margins.

Infinite's top customer accounts for nearly 53% of its revenues (3QFY14) compared to 32% in FY12, however Infinite’s nearly 10 year-long association with this customer and it being one of the few approved vendors to provide IT Services for this large customer across the globe partly mitigates the risk. While low margins and increasing customer concentration do indicate heightened business risk from Ind-Ra's previous assessment, they do not have any immediate effect on the credit metrics or on Infinite's ability to repay debt on a timely basis.

Infinite’s liquidity remains strong with cash and cash equivalents of nearly Rs 850 million and, total debt outstanding at end-9MFY14 of Rs 135 million (working capital facilities).

Shares of the company declined Rs 0.8, or 0.59%, to trade at Rs 135.40. The total volume of shares traded was 2,845 at the BSE (12.27 p.m., Thursday).