Facilities/Instruments Amount Rating Rating Action (Rs. Crore)

Press ReleaseXpanxion International Private LimitedApril 5, 2021RatingsFacilities/InstrumentsShort Term Bank FacilitiesTotal Bank FacilitiesAmount(Rs. crore)Rating1Rating Action12CARE A2(A Two)Assigned12(Rs. Twelve crore only)Details of facilities in Annexure-1Detailed Rationale & Key Rating DriversThe rating assigned to the bank facilities of Xpanxion International Private Limited (XIPL) derives strengthfrom the global presence of the parent UST Global, its established relationship with reputed clients,consistent growth in the scale of operations of the Indian entities, comfortable profit margins, capitalstructure and debt protection metrics. The rating is, however, constrained by client concentration risk,elongated working capital cycle with high receivables position. The rating is also constrained by the group’sbusiness prospects being closely linked to global economic scenario and the highly fragmented &competitive nature of the global IT industry.Rating SensitivitiesPositive factors Improvement in collection of receivables at the Indian operations level to less than 90 days on aconsistent basis Ability to integrate the newer acquisitions with the existing businesses and consistently grow its scaleof operations Ability to lower client concentrationNegative Factors Any further large debt-funded capital expenditure leading to moderation of the capital structure Drop in PBILDT margins below 15%Detailed description of the key rating driversKey Rating StrengthsGlobal presence of the parent and professionally managed group: UST Global’s operations are spreadacross four continents with 23,000 associates globally. In terms of employee head count, USA has around4,000 employees, UK has around 500 employees, Singapore has around 300 employees, and UST Group(India) has more than 28,500 employees. UST Global was established in 1999. It is a part of the Comcraftgroup, a USD 7 Billion conglomerate consisting of over 200 companies with operations in more than 45countries.UST group companies are managed by experienced professionals with long experience in the IT industry.Being the largest employer in the IT sector in the state of Kerala, UST group also works closely with theGovernment of Kerala in its various initiatives.Growing scale of operations offering multiple IT services: Growing scale of operations offering multipleIT services: UST has a diversified presence across various execution platforms and industry verticals. Interms of services offered by UST Group, during the CY20, income from technology services (applicationdevelopment) contributed about 30% of its total income, followed by Engineering at 11% and businessservices (application managed services) at 12%. The total income of UST at Global level improved fromUSD 1081 million during CY19 to USD 1156 million during CY20. On a combined basis at Indian level, thetotal income increased by 8.5% year on year from Rs.2064 crore in FY19 to Rs.2241 crore in FY20.1Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications.1CARE Ratings Limited

Press ReleaseComfortable financial risk profile: The profitability levels of the combined Indian entities continue toremain healthy with PBILDT margin of 25.14% during FY20 as compared with 23.22% during FY19. Theoverall gearing remained comfortable at 0.67x as on March 31, 2020 albeit moderated from 0.32x as onMarch 31, 2019 on account of lease liabilities due to adoption of Ind AS 116. The coverage indicators forthe group are also comfortable with interest coverage of 5.16 times in FY20 and Total Debt / GCA of 2.91times as on March 31, 2020.Reputed clientele albeit with moderate client concentration: Clients of UST Global are spread acrosshealthcare, retail, banking and financial services (BFSI), technology, manufacturing, insurance, etc. Duringthe calendar year 2020 (CY20), Healthcare sector contributed 28.70% of the total revenues of the USTGroup, while Retail and BFSI contributed 16.20% and 23.60% of the total revenues, respectively. The USTGlobal group has a moderate client concentration risk, with its top 10 clients contributing to around 45%(PY: 45.30%) of its overall revenues in CY20. However, the group has a long-standing relationship withmost of its clients.Key Rating WeaknessesElongated working capital cycle with high receivables position: The operating cycle of India Combinedremained elongated with a collection period of 226 days during FY20 as compared with 203 days duringFY19. Most of the receivables are from UST Singapore and the payments are made on a mutually agreedbasis. The group as a strategy keeps cash at the Singapore level for acquisitions. The operating cycle stoodelongated at 197 days in FY20 as against 175 days in FY19 due to stretched receivables.Highly fragmented and competitive industry: The IT/ITES industry in India is highly fragmented anddominated by a large number of large and medium players. In India, UST Group is much smaller thanestablished players like TCS, Infosys, Cognizant, Wipro, Tech Mahindra etc. Globally, it faces competitionfrom big companies like IBM, Accenture, and several other companies, big and small. The industry facesintense competition due to low entry barriers. The IT industry also faces challenge from rapidtechnological changes, which may lead to obsolescence of certain software/services.Liquidity: Adequate- The liquidity characterized by sufficient cushion in accruals vis-à-vis repaymentobligations and cash balance of Rs.73.3 crore (PY: 127.4 crore) as on March 31, 2020. The current ratiostood comfortable at 2.84x (PY: 2.39x) as on March 31, 2020. In order to meet its working capitalrequirements, the UST group has availed fund-based working capital limits aggregating Rs.445.5 crore, inform of export packing credit, packing credit in foreign currency and cash credit/book overdraft limits.XIPL has sanctioned working capital limits of Rs.12 crore but the limits are unutilised. At India Combinedlevel, the cash balance as on March 31, 2020 stood at Rs.73.31 crore. Group did not avail moratoriumoffered by banks as a relief measure for Covid-19.Industry OutlookThe Indian IT-BPM industry size grew 7.7% to USD 191 billion in FY20 (estimated by NASSCOM). Majorproportion (51%) of the industry’s revenues were generated from IT services, followed by BusinessProcess Management (20%), engineering R&D (16%), hardware (8%) and products (5%). The industrycontinues to be one of the largest employers in the country and attracts large number of start-ups.The ongoing pandemic has acted as one of the biggest catalysts for digital transformation in most firmsacross the globe. After softness in the initial part of Q1-FY21, recovery was quick. As the quarterprogressed, deal wins grew, operating margins expanded, employee attrition fell, utilization levels roseand cash flows rose for the Indian IT services industry. Companies are expected to invest more towardsbuilding operational resilience, analytics, automation, cloud and cyber security, etc.Analytical approach: Combined; CARE has taken a combined view on five UST group companies, namely,US Technology International Private Limited (USTIPL), US Technology Resources Private Ltd (USTRPL), USTGlobal Technology Services (India) Private Ltd (USTSPL), UST Global Information Technology Parks PrivateLtd (USTGPL) and Xpanxion International Private Limited (XIPL) as all the five companies have synergies in2CARE Ratings Limited

Press Releaseoperations, exhibit cash flow fungibility, are owned and managed by common promoters with crossholding in few of the entities.Applicable criteriaCriteria on assigning ‘Outlook’ and ‘Credit watch’ to Credit RatingsCARE’s Policy on Default RecognitionRating Methodology: Notching by factoring linkages in Ratings (Parent-Subsidiary linkages, Group linkagesand Joint ventures)Criteria for Short Term InstrumentsLiquidity Analysis of Non-Financial Sector EntitiesCriteria for rating credit enhanced debtRating Methodology – Service Sector CompaniesFinancial ratios – Non-Financial SectorAbout the company:Kerala-based UST group, is engaged in the business of providing software development and supportservices majorly to multinational customers of UST Global (refers to companies under UST HoldingsLimited, Bermuda engaged in providing IT services, operating under common management) and also todomestic clients. The operations of UST Global are spread across the USA, Mexico, Europe, Singapore,Philippines, Asia Pacific regions and India. UST Global has an onsite and off-shore development model.UST Global Inc. (based in USA), UST Global (P) Ltd (based in UK) are the main front end (onsite) companieswhich procure the orders and UST Global (Singapore) Pte. Ltd (USTGS) aggregates the off-shore work andfurther passes it down to USTIPL, USTSPL and USTRPL, all based in India.USTIPL and USTSPL provide off-shore development services for the clients of UST Global, USTRPL providesservices primarily to the other clients based in India. Apart from these three companies, USTGPL isengaged in the development and leasing of Technology Park for the group companies based in India. XIPL,incorporated on June 24, 1998 is in to Concept Design & Prototyping, Product & Software Engineering,Assurance Services, and Digital Solutions. XIPL, which was acquired by the UST group in FY15 provides,offshore contract software development and support services to its parent company.Brief Financials (Rs. crore)- StandaloneTotal operating incomePBILDTPATOverall gearing (times)Interest coverage (times)FY19 (A)88.6211.7810.021178FY20 (A)127.0022.2015.401109A: Audited;Status of non-cooperation with previous CRA:Not ApplicableAny other information:Not ApplicableRating History for last three years: Please refer Annexure-2Covenants on instruments rated: NAComplexity level of various instruments rated for the company: Please refer Annexure-3Annexure-1: Details of Instruments/Facilities3CARE Ratings Limited