Flattish numbers from the company, de-growth in IT subsidiary led to muted performance. Ratings business growth in-line with the industry. Here are detailed notes.
- There is significant growth in new ratings business (to newer corporates). Seeing challenges in the surveillance segment. Revenue growth has been largely in-line with the industry (~7% for 9MFY22 in-line with ICRA)
- New ratings business is always loaded towards the second half of a fiscal year whereas surveillance business is more dominant in Q2 and Q4 of a fiscal year
- In terms of surveillance business, 90% of revenues are accounted in the month that surveillance is completed. Some competitors recognise surveillance revenue uniformly over 12 months which is not CARE’s practise
- Care’s presence is smaller in the SME segment with most of its presence in large to medium sized companies. Don’t believe rating industry pricing is right for SME segment
- In ratings business, Care is focusing on business from infrastructure, BFSI, and corporate clients. A lot of commodity companies have deleveraged with strong balance sheet. In that segment, mid-sized companies are the ones who are raising bank funding (and not the larger companies)
- Buyback is still not at the board level
- Objective is to move business mix towards capital market (from bank loan ratings which can be impacted during the Basel III norms)
- Other businesses: 9M revenues in African subsidiary grew to 5 cr. (from 3.29 cr.), Nepal business grew by 7.24%, advisory business (CART) grew to 5.7 cr. (from 3.68 cr.). The IT subsidiary did badly (-16% in 9FY22) due to exodus of tech talent and inaccessibility of certain geographical markets due to covid.
Disclosure: Invested (position size here)