August 13, 2024

Grant Thornton Bharat LLP: Rating reaffirmed

Summary of rating action
Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Long term - Fund based - Cash
35.50 35.50 [ICRA]A+(Stable); reaffirmed
Credit
Long term - Non-fund based –
50.00 50.00 [ICRA]A+(Stable); reaffirmed
Bank guarantee
Total 85.50 85.50
*Instrument details are provided in Annexure-I

Rationale
While assessing the ratings, ICRA has taken a consolidated view of two entities — Grant Thornton Bharat LLP (GT) and Grant
Thornton Advisory Private Limited (GTAPL) — given the strong operational, financial and managerial linkages between the
entities, which is also reflected in the shareholding, common promoters and operational synergies. Both entities are primarily
involved in the consultancy business and are collectively referred to as the GT Group.

The rating reaffirmation factors in the GT Group’s healthy financial performance in FY2024, which is expected to sustain in
FY2025 as demonstrated by a CAGR of ~21% in the last five years ending FY2024, including a ~27% YoY growth in FY2024. The
operating margins moderated slightly in the last couple of years owing to higher overhead costs. Nonetheless, the operating
margin is expected to remain healthy at over 15% in the near term. Moreover, the financial risk profile remains healthy with
sustained low debt levels and strong debt protection metrics. The rating continues to factor in the Group’s established business
position and long operational track record with wide service offerings in the consulting business in India. Its membership in
the global network of Grant Thornton International (GTI, a network of leading global accounting and consulting firms), which
provides brand strength and benefits in terms of access to the extensive knowledge base, compliance with international quality
standards and processes, also supports the rating. Leveraging the same, the GT Group has developed a diversified customer
base, including reputed Government and private sector companies. Repeat businesses from its clientele continue to support
the Group’s revenue growth.

The rating is, however, constrained by the GT Group’s moderate capital base due to continued sizeable capital withdrawals
(by partners in case of GT) and limited pricing flexibility owing to stiff competition from other established consulting firms
within the Group’s operational segments. While capital withdrawals towards the share of profits earned are likely to continue,
healthy revenue and profitability growth are likely to support the strong liquidity levels. Moreover, the rating continues to
factor in the vulnerability of operations to regulatory/reputational risks, given the dynamic regulatory environment and
increasing challenges in retaining key personnel.

The Stable outlook reflects ICRA’s opinion that the GT Group will sustain its operating profile owing to a diverse service offering
and a wide client base along with its membership with the GTI global network. Such factors are expected to enable the Group
to sustain its business growth, profitability levels and liquidity position commensurate with the rating level.

Key rating drivers and their description

Credit strengths
Healthy financial risk profile: The Group’s revenues have been increasing at a healthy CAGR of 21% during the last five years
ending FY2024 and achieved a combined revenue of ~Rs. 1,050 crore. This was supported by higher revenues from technology-
enhancement projects, audit/compliance and services provided to various public sector undertakings, Government entities
and private companies. Going forward, the revenue growth is expected to remain healthy in the near term. In the last two
years, operating margins have slightly moderated on account of higher overhead costs. Nonetheless, it is expected to remain

www.icra .in
Page | 1
 healthy at over 15% in the near term. Further, the capital structure remains conservative with nominal debt levels. ICRA notes
that the fully compulsorily convertible debenture is expected to be completely repaid in the current year. Consequently, the
debt protection metrics also remain strong.

Benefits of GTI network membership – GT and GTAPL are members of the GTI network. While the GT Group has an established
business position and an operational track record of several decades in the consultancy space within the domestic market, it
also benefits from the brand strength it derives from being a member of the GTI network. The Indian operations procure
support from the international methodologies, processes and knowledge base of the GTI network. Each of the member firms
shares processes and knowledge with others through the network, and the Group can draw upon the expertise of other
member firms to provide a wide range of services to its clients and work on cross-border assignments.

Diverse client and service base – Given its diverse service offerings, a strong brand and an established operational track record,
the GT Group developed a wide client base that includes reputed names from the private sector, the public sector and
multilateral agencies. This also results in repeat business from its clients. The advisory business accounts for the majority of
the Group’s revenues over the years and has widened its service offerings within this segment. Additionally, the GT Group
provides services to various international GTI member firms, resulting in revenue diversification to some extent.

Credit challenges
Intense competition limits pricing flexibility, operations remain exposed to employee attrition – The Group faces stiff
competition from other established consulting majors (Ernst & Young, PricewaterhouseCoopers, KPMG and Deloitte), which
limits its pricing flexibility. Given the strong relationship-driven nature of operations, employee attrition is generally a major
concern for consulting firms. The loss of a significant number of key employees could materially affect the GT Group’s service
delivery and profitability. The Group has a reasonable track record in employee retention, reflecting favourably on its brand
strength, employee policies and compensation packages. However, the Group’s ability to attract and retain quality manpower
remains a challenge.

Moderate capital base owing to regular capital withdrawals – As applicable to any partnership model, the capital structure
remains vulnerable to the risk of large capital withdrawals by the partners. ICRA notes that in the last years, average capital
withdrawals stood at ~52% of profits, resulting in a moderate capital base for the entity. Nevertheless, the Group’s debt
protection metrics remain comfortable. The extent of withdrawals and the impact of the same on liquidity, leverage and
financial risk profile remain a key rating sensitivity.

Exposed to reputation and regulatory risks – The GT Group faces high market/reputational risks due to the stringent controls
by regulatory authorities. Besides, any adverse event can lead to its de-affiliation from the global network and impact future
revenue prospects.

Liquidity position: Strong

The Group’s liquidity position is strong, supported by the steady generation of internal accruals, undrawn bank lines, free cash
balances (~ Rs. 100 crore as of March 2024) and no major debt repayment liability. A steady increase in the Group’s internal
accruals and regular capital contribution by the partners led to a limited reliance on external debt. ICRA notes the investment
of ~Rs. 22 crore made by the Group in a group entity (Unravel Realty LLP for purchase of land) in FY2023 as well as the capital
withdrawals towards share of profits earned, which continue to remain high.

Rating sensitivities
Positive factors – A significant increase in the scale of operations and a sustained improvement in profitability while
maintaining strong credit metrics along with a strong liquidity position could result in a rating upgrade.

Negative factors – The rating could be downgraded if there is a considerable decline in revenue, profit margins and cash flow
generation on a sustained basis. Additionally, stretching of the working capital cycle due to the accumulation of debtor levels
on a sustained basis and substantial capital withdrawals, leading to a weakening of the liquidity position, could also lead to a
rating downgrade.

www.icra .in
Page | 2
 Analytical approach
Analytical Approach Comments

Applicable rating methodologies Corporate Credit Rating Methodology

Parent/Group support Not applicable

For arriving at the ratings, ICRA has taken a consolidated view of GT and GTAPL, given the
strong operational, financial and managerial linkages between the two entities also
Consolidation/Standalone
reflected by shareholding, common promoters and operational synergies. Additionally,
both the entities are majorly involved in similar line of consulting business.

About the company

Grant Thornton Bharat LLP (GT), a limited liability partnership firm majorly owned by GTAPL, is part of the global network of
accounting firms under Grant Thornton International, a non-practising, international umbrella entity. Grant Thornton
International has a long track record in the advisory and auditing business and a wide international presence. GT broadly offers
three lines of services: tax and regulatory services, specialist advisory services and international assurance services. The firm
has a pan-India presence and has the experience of working with a wide variety of clients. Advisory services operation is the
largest revenue contributor with about 65-70% share.

Key financial indicators (audited)

GT Group FY2022 FY2023
Operating income 570.1 824.2
PAT 116.2 122.2
OPBDIT/OI 23.4% 17.3%
PAT/OI 20.4% 14.8%
Total outside liabilities/Tangible net worth (times) 0.4 0.5
Total debt/OPBDIT (times) 0.1 0.1
Interest coverage (times) 27.6 61.2
Source: Company, ICRA Research; All ratios as per ICRA’s calculations; Amount in Rs. crore; PAT: Profit after tax; OPBDIT: Operating profit before depreciation,
interest, taxes and amortisation

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for past three years

Current (FY2025) Chronology of rating history for the past 3 years
FY2024 FY2023 FY2022
Amount
Aug 13,
Instrument Type Rated Date Rating Date Rating Date Rating
2024
(Rs Crore)
[ICRA]A+
03-Jul-23
Long term - Fund based - Long- [ICRA]A+ (Stable) [ICRA]A+
35.5 29-Apr-22 - -
Cash Credit term (Stable) [ICRA]A+ (Stable)
8-Jun-23
(Stable)
[ICRA]A+
03-Jul-23
Long term - Non-fund Long- [ICRA]A+ (Stable) [ICRA]A+
50.0 29-Apr-22 - -
based -Bank Guarantee term (Stable) [ICRA]A+ (Stable)
8-Jun-23
(Stable)

www.icra .in
Page | 3
 Complexity level of the rated instruments

Instrument Complexity Indicator

Long term - Fund based – Cash Credit Simple
Long term - Non-fund based – Bank Guarantee Very Simple

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: Click Here

www.icra .in
Page | 4
 Annexure I: Instrument details

Date of Coupon Amount Rated Current Rating and

ISIN Instrument Name Maturity
Issuance Rate (Rs. crore) Outlook
Long term - Fund based -
NA - - - 35.5 [ICRA]A+(Stable)
Cash Credit
Long term - Non-fund
NA - - - 50.0 [ICRA]A+(Stable)
based – Bank Guarantee
Source: Company

Please click here to view details of lender-wise facilities rated by ICRA

Annexure II: List of entities considered for consolidated analysis

Instrument Name Ownership Consolidation Approach

Grant Thornton Bharat LLP - Full Consolidation

Grant Thornton Advisory Private Limited - Full Consolidation

www.icra .in
Page | 5
 ANALYST CONTACTS
Rajeshwar Burla Ashish Modani
+91 40 6939 6443 +91 22 6114 3414
[email protected] [email protected]

Manish Pathak Maitri Vira

+91 0124 454 5397 +91 79 6923 3012
[email protected] [email protected]

RELATIONSHIP CONTACT
L. Shivakumar
+91 22 6114 3406
[email protected]

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
[email protected]

Helpline for business queries

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

[email protected]

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency
Moody’s Investors Service is ICRA’s largest shareholder.

For more information, visit www.icra.in

www.icra .in
Page | 6
ICRA Limited

Registered Office
B-710, Statesman House, 148, Barakhamba Road, New Delhi-110001
Tel: +91 11 23357940-45

Branches

© Copyright, 2024 ICRA Limited. All Rights Reserved.

Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance,
which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer concerned to
timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest
information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable,
including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been
taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no
representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group
companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of
opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.