Fitch Ratings has downgraded Megasoft Ltd’s long term rating one notch. “The outlook is negative,” the rating agency has said. However, Megasoft has disagreed, pointing to the recent order winnings because of which the company is confident of being able to meet its repayment obligations.

Fitch’s downgrade of the Rs 150-crore Hyderabad-based IT company “reflects the steep deterioration in Megasoft’s credit metrics consequent to the loss of a key customer in 2011,” the rating agency said.

Incorporated in 1999, Megasoft is engaged in the sale of licenses for products related to pre-paid billing, mobile commerce, roaming and mobile advertising to telecom operators. These products are also hosted on Megasoft's servers for which it receives a monthly payment on a per subscriber basis (annuity revenue).

Fitch is concerned about the fact that Megasoft’s subsidiary, XIUS Holding, needs to pay back a $ 7 million loan in 2012. Megasoft has guaranteed the loan. Fitch notes that Megasoft expects to be able to pay up the loan out of internal accruals and advance payments from customers. “In case of delays in such inflows, the company would have to raise debt from other sources to service its obligations,” Fitch says.

Megasoft response

Reacting to Fitch’s position, Mr G V Kumar, Managing Director and CEO, Megasoft, told Business Line today that the company received two fresh orders, worth Rs 35 crore and Rs 15 crore, this month. The orders would be executed in the third and fourth quarters of 2012. (Megasoft’s financial year is the same as the calendar year.) “We are confident of securing revenues and repaying our liabilities,” Mr Kumar said.

mramesh@thehindu.co.in

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