India Ratings & Research (Ind-Ra) has downgraded HCL Infosystems (HCLI) long-term issuer rating to 'A' from 'A+' and removed it from Rating Watch Negative (RWN). The outlook is stable.

The RWN resolution follows HCLI's completion of business restructuring in FY14 (year end June) under which its systems integration/ solutions, services and learning businesses have been transferred to wholly owned subsidiaries HCL Infotech, HCL Services and HCL Learning, respectively. The parent company will hold the core distribution business. The banking lines are still being distributed. The analysis is based upon HCLI's consolidated financial and business profile.

The downgrade reflects HCLI's revenue scale down, erosion of profitability and forex losses and write-downs related to computing business and SI business translating into net losses. The company's revenue declined at a CAGR 11.75% over FY11-FY14 and it incurred EBITDA losses (excluding other income but including provisions for doubtful debts) of Rs 24 million in FY14 and Rs 286 million in 1HFY15 led by losses in the PC/tablet business, provisioning for doubtful debts and one-off impairments. Net losses amounted to Rs 2,145 million in FY14 and Rs 961 million in 1HFY15. Cash balances also reduced to Rs 5.2 billion in FY14  and Rs 3.7 billion in 1HFY15 and net debt increased to Rs 5.9 billion in FY14 (FY13: net cash positive Rs 1.3 billion) and Rs 6.8 billion in 1HFY15.

However, Ind-Ra expects both operating and forex losses to come down as the company has closed down its loss-making, import-intensive PC/tablet business and shifted from imports to local procurements in most businesses.

Shares of the company gained Rs 3.85, or 7.65%, to trade at Rs 54.20. The total volume of shares traded was 1,287,206 at the BSE (1.14 p.m., Tuesday).