India Ratings & Research (Ind-Ra) has affirmed Tera Software long-term issuer rating at 'BBB-'. The outlook is negative. The affirmation reflects Terasoft's higher operating margins, lower debt and comfortable credit metrics in FY14 (year end March), despite a significant decline in the top line.

EBITDAR margins were 22.9% in FY14, net adjusted debt was Rs 452.1 million (Rs 678.5 million), net financial leverage (adjusted net debt/EBITDAR) was 1.9x (2.4x), EBITDAR interest coverage marginally improved to 2.3x (2.2x) and revenue fell to Rs 1,016 million.

The outlook remains Negative as the company has a large amount of cash locked in terms of receivables from its major customers. Although its debtors decreased to Rs 1,160 million in 1HFY15 from Rs 1,522 million at FYE13 and payments due are majorly from state or central agencies, any further delay in receiving payments may impact the liquidity of the company.

Shares of the company declined Rs 0.35, or 1.15%, to trade at Rs 30.15. The total volume of shares traded was 11,051 at the BSE (12.21 p.m., Wednesday).