CRISIL Ltd

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About the Company

CRISIL (formerly Credit Rating Information Services of India Limited) is a global analytical company providing ratings, research, and risk and policy advisory services. CRISIL’s majority shareholder is Standard & Poor’s, a division of McGraw Hill Financial and provider of financial market intelligence. It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers. Their businesses operate from India, the US, the UK, Argentina, Poland, China, Hong Kong, and Singapore.

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Q4CY2023

Financial Results & Highlights

Detailed results

1. The company clocked in a 14% growth in profit before tax and a 20% growth in profit after tax.
2. The company has clocked in 23.2% revenue growth in the last quarter of the financial year.
3. Income from operations was up 16.5% for the quarter and 20.3% for the year.
4. A final dividend of Rs 23 per share was recommended.

Conference call highlights

1. The company had a policy that allows it to not give any specific quantitative guidance on its future performance,  operational details relating to specific business segments, and customer contracts details.
2. The company was recognized among the 100 best companies for women in 2022 for the seventh consecutive year and won the National CSR Award 2020 in the category of Corporate Awards for Excellence in CSR, which was announced in 2022. 
3. The company has acquired a 100% stake in Peter Lee Associates ( an Australian research and consulting firm). After this acquisition, the company expects itself to be the foremost player in the growing market of benchmarking analytics across financial services globally. 
4. The company stated that the business environment of benchmarking and risk solutions is somewhat uncertain and turbulent.
5. The company finds currency risk and cybersecurity risk as the key risks.
6. The company stated that it is waiting for finer details regarding ESG details and look at it as a huge opportunity.
7. The company stated that this rating industry consists of 6-7 players and there is no sign of a decrease in competition.
8. The company achieved the second-highest volume of its tenure this year and the last quarter added substantial value.
9. The company stated that they are considering this period of 2-3 years as an investment period. Once they start seeing the results of the investments, the company will see a huge expansion of the margins in all of their business segments.
10. The company stated that the increased fragility of the global financial system is not contributing to the company’s business.
11. When asked about the fluctuating employee cost on a QoQ basis, the company answered that employee cost is subjective to many variables such as head counts, incentives, bonuses, and long-term incentives.
12. When asked about the breakup of the decrease in margin from 24% in the same quarter last year to 21% this quarter, the company denied giving any breakup according to their policy.
13. The company stated that the growth they’ve achieves is 100% organic and there is no room for inorganic growth.
14. When asked why doesn’t the company focuses on scaling up the Rating business as it has many more lucrative margins than the other business, the company emphasized the fact that they are trying to de-risk the business by acquisitions and trying to create moats around it.
15. The company stated that there has not been any exponential growth in the bond markets and once it starts growing, the rating business will grow automatically
16. The company stated that it is a highly competitive industry and every deal gets negotiated but CRISIL has a premium positioning in the market.
17. The company stated that it has a strong partnership with S&P and it provides rating service, data, and technology transformation.
18. When asked about the expansion in debtor days, the company stated that there was an issue in “timing”, the customers who were supposed to make the payment in December, made it in January.
19. The company stated that it looks at Basel IV as a big opportunity.
20. In the GR&RS segment, about 30% to 35% of revenue is annuity revenue. 
21. The company stated that it has no plans to deal with nonfinancial companies as of now.

Analyst’s View

CRISIL is a leading, agile, and innovative global analytics company, driven by its mission of

making markets function better. It provides ratings, benchmarks, analytics, and solutions

to enable its clients to make decisions with conviction. The company has been in the business for more than 30 years now. It remains to be seen how the company’s near-term performance will pan out given the steady rise in inflation. Given the company’s strong working, CRISIL Ltd. is a good Consulting stock to watch out for.

Q1CY2022

Financial Results & Highlights

Detailed Results:

1. The current quarter was good for the company with consolidated revenues rising by 21% YoY while profits rose 45% YoY.
2. The company performed negatively sequentially due to a higher base in the previous quarter.
3. The board of directors has declared an interim dividend of Rs 7 per share. 
4. CRISIL ratings revenue grew 9.7% YoY while the overall ratings business grew as lending activity improved in the period. The company also added new clients in this business. This was despite bond issuance in Q1 being 22% YoY lower than last year.
5. The ratings business also saw 10.7% YoY rise in segment profits with margin of 47.6% in Q3 vs 47.2 last year.
6. The research business grew 26.3% YoY in revenues in the quarter aided by increased engagements with key clients in the banking space. 
7. The research division also saw segment profit skyrocket 79.7% YoY in Q1. It also saw margin improve to 24.3% from 17% a year ago.
8. The Advisory segment saw revenues in this division grew 10% YoY in the quarter with the Infrastructure Advisory business getting large wins from multilaterals and the Business Intelligence and Risk Solutions business increasing its overseas client footprint. 
9. The segment however saw profits rise by 57.7% YoY in Q1 with a margin of 11% vs 7.6% last year. 
10. CRISIL saw forex gain of Rs 9.76 Cr in the current quarter vs forex loss of Rs 4.67 Cr last year.
11. The management had approved arrangement for amalgamation of two wholly owned subsidiaries (Crisil Risk and Infrastructure Solutions Limited and Pragmatix Services Private Limited) as a going concern with the company on Dec 13, 2021. 

Analyst’s View:

CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research, and advisory. The company saw a good Q1 with YoY rise in both sales and margin in the ratings and research businesses. It also reported good profits for its advisory business as compared to losses the previous year. The infrastructure advisory business also saw large client wins. Coalition Greenwich continued its good momentum. It remains to be seen what the road is ahead for the core ratings business given the quantum of bond issuance is still below last year’s levels. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere.

Sep 2021 Quarter Update

Financial Results & Highlights

*Contains profit of Rs 29.7 Cr from discontinued operations

**Contains profit of Rs 103.8 Cr from discontinued operations

Detailed Results:

1. The current quarter was good for the company with consolidated revenues rising by 16% YoY while profits rose 26% YoY.
2. The board of directors has declared an interim dividend of Rs 9 per share.
3. The 9M numbers were also good with revenues rising 14% YoY and profits rising 21% YoY.
4. CRISIL ratings revenue grew 21.5% YoY while the overall ratings business grew 12.1% YoY in Sep quarter as lending activity improved in the period. The company also added new clients in this business. This was despite bond issuance in 9M 2021 being 28% YoY lower than last year.
5. The ratings business also saw 24.1% YoY rise in segment profits with margin of 41.9% in Q3 vs 37.95 last year.
6. The research business grew 20.9% YoY in revenues in the quarter & 19.8% YoY in 9M aided by new mandate wins and Global Risk & Research Solutions grew due to market changes and new regulations.
7. The research division also saw segment profit skyrocket 135% YoY in Q3 and 57.1% YoY in 9M. It also saw margin improve to 21.9% from 11.2% a year ago.
8. Coalition Greenwich grew on continuing demand for benchmarking analytics from its core client segments. It also organized the annual Competitive Challenges Conference which is a very popular event in the global asset management industry.
9. The Advisory segment saw revenues in this division grew 10.9% YoY in the quarter with the Infrastructure Advisory business getting large wins from multilaterals and the Business Intelligence and Risk Solutions business increasing its overseas client footprint.
10. The segment however saw profit fall 69.2% YoY in Q3 and a 117% YoY rise in 9M.
11. CRISIL saw forex gain of Rs 4.89 Cr in the current quarter vs forex loss of Rs 5.91 Cr last year.

Analyst’s View:

CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research, and advisory. The company saw a good Q3 with rise in both sales and margin in the ratings and research businesses. It also saw good response to its first domestic ESG conference. The infrastructure advisory business also saw large client wins. Coalition Greenwich continued its good momentum. It remains to be seen how long it takes for the Greenwich integration to be complete and what is the road ahead for the core ratings business given the quantum of bond issuance is still below last year’s levels. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere.

June 2021 Quarter Update

Financial Results & Highlights

Detailed Results:

1. The current quarter was decent for the company with consolidated revenues rising by 14% YoY while profits rising 53% YoY.
2. The board of directors has declared an interim dividend of Rs 8 per share.
3. The rating business fell 5.2% YoY as the quantum of bond issuances plunged 61% YoY.
4. The research business grew 20.2% YoY in revenues in the quarter aided by client additions for Greenwich and good growth in the Global Research & Risk Solutions business.
5. The India Research unit hosted the inaugural CRISIL India ESG Leadership Summit engaging with 900+ clients from 600+ organizations.
6. The India research business also launched ESG scores for 225 Indian corporates across 18 sectors.
7. The Advisory segment saw revenues in this division grew 14% YoY in the quarter with new wins and the Business Intelligence and Risk Solutions business gaining good traction.
8. CRISIL saw forex gain of Rs 5.24 Cr in current quarter vs forex gain of Rs 3.6 Cr last year.

Analyst’s View:

CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research, and advisory. The company saw a good response to the research business with the launch of ESG ratings for 225 Indian corporates while the ratings business has taken a hit due to a continued fall in corporate bond issuance. The profits which were subdued due to Greenwich in the past few quarters have bounced back well to post a growth of more than 50% YoY. The advisory business has also done well due to deal wins and pipeline conversion. It remains to be seen how long the Greenwich integration takes and what is the road ahead for the core ratings business. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere.

March 2021 Quarter Update

Financial Results & Highlights

Detailed Results

1. The current quarter was dismal for the company with consolidated revenues rising by 11% YoY while profits fell 5% YoY. 
2. The board of directors has declared an interim dividend of Rs 7 per share.  
3. The rating business rose 11.7% YoY driven by strong surveillance fees, new client additions and Global Analytical Center (GAC) deepening coverage across practices including ESG. 
4. The research business grew 18% YoY in revenues in the quarter due to existing and new mandates across transformation, change and regulatory offerings and increased demand from buy-side for research in the areas such as distressed and private debt. 
5. India Research successfully hosted the 5th edition of India Outlook Seminar engaging with over 700 clients from 400+ organisations. It also saw increased demand for data, research and analytics underpinned by uptick in capital market and industrial activity. 
6. Coalition Greenwich saw client wins in the US, Asia-Pacific and Europe during the quarter & it released over 15 reports, including Coalition Index reports and thought leadership research. 
7. The Advisory segment saw revenues in this division grew 12.5% YoY in the quarter with Infrastructure advisory saw increased demand across government and multilateral-supported programs. 
8. CRISIL saw forex losses of Rs 4.7 Cr in current quarter vs forex gain of Rs 16.6 Cr last year. 

Analyst’s View

CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research, and advisory. The company saw a good response to the rating business while the research business grew steadily with the addition and integration of Greenwich Associates to the company’s umbrella. Although the profits for the company are subdued due to the addition of Greenwich this drop in profits is expected to be temporary only. The advisory business is expected to rise going forward due to the revival in demand and govt push for infra development. It remains to be seen how long the Greenwich integration takes and when will it start delivering according to the company’s expectations. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere.  

December 2020 Quarter Update

Financial Results & Highlights

Detailed Results

1. The current quarter was encouraging for the company with consolidated revenues rising by 26% while profits rose 16% YoY.
2. Excluding Greenwich Associates, revenues would have risen 2.6% YoY while profits would have risen 16.2% YoY.
3. In the CY20, the revenues have risen 14% YoY while profits have risen 3.2% YoY. Excluding Greenwich Associates, revenues would have risen 1.4% YoY while profits would have risen 17.8% YoY in the year.
4. The board of directors has declared a final interim dividend of Rs 14 per share. This brings up the total dividend in CY20 for CRISIL up to Rs 33 per share.
5. The rating business rose 6.5% YoY due rise in corporate bond issuances in the quarter.
6. The research business grew 40.9% in revenues in the quarter and 22.8% in CY20 due to rising traction in non-financial and credit risk. Greenwich Associates was also a big contributor to revenue growth in the quarter. Excluding Greenwich, revenue was lower by 1.0% in the quarter and higher by 1.2% for 2020.
7. India Research introduced new analytics and district-level risk tracking dashboards to aid decision-making as the pandemic unfolded.
8. The Advisory segment saw good traction with new mandates won in regulatory reporting, credit risk, and select city infrastructure projects. However, delays in clients’ decision-making and implementation affected business. Revenues in this division grew 16.9% in the quarter with CY20 revenues falling 5.9% YoY.
9. Greenwich Associates saw revenues of Rs 121 Cr and a post-tax loss of Rs 0.77 Cr. It also saw CY20 revenues come in at Rs 225.71 Cr and a post-tax loss of Rs 50.58 Cr.
10. CRISIL launched India’s first AIF benchmarks.

Conference Call Highlights

1. The management expects banks, mutual funds, or other segments to come back to normalcy in the second half of 2021 with the demand revival happening in a continuous manner leading to more demand for new borrowing and ratings.
2. The management states that it has done quite a bit to restructure the business in ways to align our products and services to some of the emerging areas of interest for our customers like ESG.
3. The company has started on the migration of back end processes for Greenwich which got delayed due to COVID-19.
4. The company is also seeing increased adoption of AI and ML across clients and thus is expected to give forward more offerings in digital format.
5. In AI/ML, the company is seeing opportunities in providing better calibrated models that will aid decision-making.
6. The management admits that margins have fallen in the last few years due to headwinds in the research business and tapering of demand, especially on the regulatory remediation side. But it is seeing demand coming back on the risk side in the traded risk and the model risk sides.
7. The company has shown margin expansion excluding the numbers from Greenwich and expects this expansion to continue as opportunities are rising in all segments.
8. The main driving force in the advisory business is the deep domain knowledge in the different domains of infra advisory and other advisory services according to the management.
9. Given the push on infra development by the Govt of India, the management remains optimistic about the prospects of the infra advisory business going forward.
10. Typically, the pricing for capital market ratings is around 2.5 times that of the bank loan rating.

Analyst’s View

CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research, and advisory. The company saw a good response to the rating business while the research business grew steadily with the addition of Greenwich Associates to the company’s umbrella. Although the profits for the company are subdued due to the addition of Greenwich without which PAT growth would have been 16% YoY in CY20, this drop in profits is expected to be temporary only. The advisory business is expected to rise going forward due to the revival in demand and govt push for infra development. It remains to be seen how long the Greenwich integration takes and when will it start delivering according to the company’s expectations. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere.

September 2020 Quarter Update

Financial Results & Highlights

Detailed Results 

1. 1. The current quarter was encouraging for the company with consolidated revenues rising by 8.75% but profits fell 14% YoY.
   2. Excluding Greenwich Associates, revenues would have risen 0.3% YoY while profits would have risen 5.1% YoY.
   3. In the 9MSep20, the revenues have risen 10% YoY while profits have fallen 1.6% YoY. Excluding Greenwich Associates, revenues would have risen 1% YoY while profits would have risen 18.5% YoY in the 9M period.
   4. The board of directors has declared a third interim dividend of Rs 7 per share.
   5. The rating business declined 4% YoY due to a sharp slowdown across investment and consumption-oriented sectors. Global Analytical Center (GAC) saw an increase in support coverage for S&P Global Ratings which included support for key initiatives such as environmental, social, and governance evaluations, and inferencing impact of Covid-19.
   6. The research business grew 22.1% in revenues due to robust growth in the Global Research & Analytics business and contribution from Greenwich. The focus in this space was on client renewals and new mandates. Excluding Greenwich, this segment would have grown only 3.5% YoY.
   7. Overall performance in the advisory business was affected by an across-the-board reduction in infrastructure spends. Revenues in this division fell 6.4% YoY.
   8. The company also saw consolidated forex losses of Rs 5.91 Cr in the Sep quarter.

Analyst’s View

CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research, and advisory. The company saw a good response to the rating business while the research business grew steadily with the addition of Greenwich Associates to the company’s umbrella. Although the profits for the company are subdued due to the addition of Greenwich without which PAT growth would have been 18% YoY, this drop in profits looks to be temporary only. The advisory business suffered a lot due to reduced spending by clients on projects. It remains to be seen how long the pandemic lasts and what second-order effects the COVID-19 situation will have on the company’s performance going forward. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere. The valuation multiple of the company continues to be near the lowest level in the last ten years which makes it an attractive potential investment for the long term.

June 2020 Quarter Update

Financial Results & Highlights

Detailed Results 

1. 1. The current quarter was encouraging for the company with revenues rising by 13% and profits staying flat YoY respectively.
   2. Excluding Greenwich Associates, revenues have risen 2.2% YoY while profits have risen 28.5% YoY.
   3. In the 6MFY21, the revenues have risen 11% YoY while profits have risen 7.7% YoY.
   4. The board of directors has declared a second interim dividend of Rs 6 per share.
   5. The rating business grew 10.1% YoY due to new client additions and higher issuance. Global Analytical Center (GAC) saw an increase in support coverage for S&P Global Ratings and increased participation in data transformation initiatives.
   6. The research business grew 17.5% in revenues due to robust growth in Global Research & Analytics business and contribution from Greenwich. Model & risk offerings saw new deal wins.
   7. Excluding Greenwich, the research division would have seen revenues decline 1.1% while profits would have been up 29.8% YoY.
   8. The advisory business saw good wins but overall performance was affected by the delays in the closure of contracts in the quarter. Most of these delays were caused by disruption from the COVID-19. Revenues in this division fell 4.2% YoY.
   9. The company also saw forex gains of Rs 3.6 Cr in the June quarter.

Analyst’s View

CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research, and advisory. The company saw a good response to the rating business while the research business grew steadily with the addition of Greenwich Associates to the company’s umbrella. The advisory business suffered a lot due to delays in contract closures from COVID-19. The company has guided that the oncoming period will be tough for both the Indian and World economy. It remains to be seen what second-order effects the COVID-19 situation will have on the company’s performance going forward. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere. The valuation multiple of the company continues to be near the lowest level in the last ten years which makes it an attractive potential investment for the long term.

March 2020 Quarter Update

Financial Results & Highlights

Detailed Results 

1. 1. The current quarter was encouraging for the company with revenues rising by 9.4% and profits rising 15% YoY respectively.
   2. The company now boasts more than 100,000 customers in more than 9 countries worldwide.
   3. The company completed the acquisition of Greenwich Associates LLC o 26^th Feb 2020.
   4. Excluding Greenwich Associates LLC, the company saw revenue growth of 7.1% YoY and Pat growth of 26.8% YoY in the March quarter.
   5. The rating business grew 14.6% YoY with segment profits growing 21% YoY. With a margin improvement of 600 bps to 43% in the March quarter.
   6. The research business grew 7.7% in revenues. Model & risk offerings saw good responses in USA & EU. Growth in India was led by the launch of new reports on industry research and an investment research module in Quantix, an integrated data and analytics platform. The margin profile in this business fell 500 bps to 21% in the quarter while profits fell 11% YoY.
   7. The advisory business saw good wins but overall performance was affected by the delays in the closure of contracts in the quarter. Most of these delays were caused by disruption from the COVID-19. Revenues in this division fell 26% YoY with profits falling 83% YoY.
   8. The company also saw forex gains of Rs 16.78 Cr in the March quarter.
   9. The company is pointing that due to COVID019, there can be a global recession and a prolonged slowdown in India. GDP estimates for FY20 remain at 5% while FY21 estimates are at 1.8%.

Analyst’s View

CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research and advisory. The company saw a good response to the rating business while the research business grew steadily with the addition of Greenwich Associates to the company’s umbrella. The advisory business suffered a lot due to delays in contract closures from COVID-19. The company has guided that the oncoming period will be tough for both the Indian and World economy. It remains to be seen what second-order effects the COVID-19 situation will have on the company’s performance going forward. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere. The valuation multiple of the company continues to be near the lowest level in the last ten years which makes it an attractive potential investment for the long term.

Updates on Quarter ending Sep 2019

Financial Results & Highlights

Detailed Results 

1. 1. The current quarter was encouraging for the company with consolidated revenues rising 4.69% and 2.45% respectively in standalone and consolidated terms.
   2. The profits for the company grew substantially by 57% in standalone and 13.4% in consolidated terms.
   3. The company now boasts more than 100,000 customers in more than 9 countries worldwide.
   4. In the ratings business, the company managed to deliver revenues rise of 16.2% YoY while profits from this division soared 39% YoY due to margin improvement of 700 bps to 42.9% in current quarter.
   5. Similarly, in the 9 Months till Sep ’19, revenues for the ratings division rose 10% YoY and profits rose 22.5% with a rise in margins of 400 bps to 38.9% in current 9M period.
   6. Ratings business was buoyed by the 39% YoY rise in bond issuances in 9MFY19. This was mainly due to a surge in securitization transactions.
   7. In the research segment, the company saw growth for its offerings across data and credit analytics in the Indian market and global benchmarking analytics for CIB industry.
   8. The revenues for the research segment declined 3.5% YoY in the quarter and 7.4% YoY in 9M. Profits declined 28% YoY in the quarter and 30% YoY in 9M.
   9. Overall growth for the segment was impacted as the risk and analytics space continued to see a decline in demand for traditional regulatory assignments such as CCAR, and DFAST.
   10. In the advisory business, the revenues for the quarter were flat and 9M revenues rose 10% YoY. Quarterly profits rose to Rs 4.8 Cr from Rs 0.1 Cr last year and 9M profits rose to Rs 10.2 Cr from Rs 3.3 Cr last year, emphasizing a big rise in margins in this business.
   11. The company also launched a new risk assessment model called ICON in the quarter.

Analyst’s View

CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research and advisory. The company has witnessed a decline in profitability in the research division which is their biggest revenue generator. But the rating business of the company is performing well and covering up some of the slack left by the research business. The company’s advisory division is developing well and is expected to help the company exploit a new avenue for growth for the company that has seen a decline in its dominant category of research. It remains to be seen how the company will be able to grow its divisions to get back on the growth track. Nonetheless, given the company’s stellar track record and the nascent opportunity of the rating business in a country that is still new to securitization, CRISIL remains a potentially good value creator in the long run for discerning investors. Valuation also continues to be near the lower band of the last 10-year average.

Q1 2020 Updates

Financial Results & Highlights

Detailed Results 

1. 1. The current quarter was dismal for the company with revenues falling 2.6% and 5.6% respectively in standalone and consolidated terms.
   2. The profits for the company declined further by 16% in standalone and 13% in consolidated terms.
   3. The Board has declared a second interim dividend of Rs 6 per share.
   4. The decline in profitability has been attributed to the adverse foreign exchange movement of the past 6 months.
   5. In the research segment, their Risk & Analytics business has been impacted by changing regulatory stance in the USA.
   6. The rating business maintained its growth momentum by focusing on new client acquisition and continued traction in the securitized market. The company also saw strong YoY growth in corporate bond ratings.
   7. However, the growth in this segment was moderated by a drop in the number of issuances for bank loan ratings.
   8. In the financial research division, the company saw good traction in the ESG (Environmental, Social and Governance) area, data analytics and automation-based solutions.
   9. In terms of consolidated operating revenue, the ratings and advisory services were flat for the quarter while research services operating revenue fell more than 8% YoY.
   10. In terms of consolidated segment profits, the rating division grew more than 5% YoY while the research division fell 39% YoY. The advisory division turned profitable generating a profit of Rs 1.26 Cr.

Analyst’s View

CRISIL has been a trusted rating company for a long time in India. They have established themselves as a reputed name in their operational fields of ratings, research and advisory. The company’s results have not been good due to a decline in profitability in the research division which is their biggest revenue generator. Moreover, they have not been posting any meaningful growth for several quarters now. It remains to be seen how the company plans to revive its biggest revenue generator while building its nascent advisory division which the company has high expectations. Nonetheless, CRISIL is in an industry which has very little competition and thus it represents a consistent bet on the credit rating services industry. Valuation of the stock has come to a reasonable level in recent times. The only challenge for them is to bring back growth which is absent for a long time. Until growth comes back, looks like the market will not get excited.

Q4 2019 Updates

Financial Results & Highlights

Detailed Results 

1. 1. The company delivered modest growth in FY19 with consolidated revenues growing only 8% YoY.
   2. The profit growth in the last financial year has been marginally better with consolidated PBT and PAT rising 15% and 19% YoY.
   3. The company has seen corporate bond issuance rising and overall credit growing at a rate of 13.5% yearly which is good for ratings agencies like CRISIL.
   4. Rating business grew 13% YoY supported by surge in corporate bond issuances and securitisation transactions.
   5. Institutional SME continued traction with addition of new clients and retention of existing clients
   6. CRISIL Coalition continued to deliver strong performance with healthy renewals and additions in competitor and client analytics offerings; Financial Research added buy-side clients and saw encouraging conversions for its SPARC platform.
   7. The research division on the other hand witnessed a YoY decline of 10.4% in Q1 revenues.
   8. The company is maintaining that this decline has been mainly due to changing landscape for risk analytics and there are no issues regarding new client acquisitions and existing client renewals.
   9. The advisory division has grown almost 31% YoY in the last quarter. This has been driven by demand for business intelligence and risk solutions.
   10. Infrastructure Advisory business gained share in segments such as smart cities and airports as well as in select emerging markets.
   11. Crisil emphasize on the fact that there is a huge demand for data analytics, risk and infrastructure offerings.

Analyst’s View

CRISIL has been a trusted financial services and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research and advisory. But the research division of the company has been declining due to a variety of factors. Thus it remains to be seen how the company addresses this shortfall in revenues and how it plans to leverage their expertise in other divisions to come out on top in the future. Crisil of future would have a bulk of revenues coming from the analytical division. And Crisil is positioning itself for that. In 2018, Crisil acquired 100% stake in Pragmatix Services Private Limited.

Headquartered in Mumbai, Pragmatix provides analytics and solutions to retail and commercial banks, financial institutions, asset managers, insurers and telecom companies. Pragmatix provides solutions across the risk, sales, and finance domains in India, Middle East and North America. Pragmatix’s intellectual property includes a proprietary enterprise data analytics platform with pre-configured data models, KPIs and algorithms that offer accelerated business solutions. Pragmatix’s capabilities including the proprietary technology platform and deep domain expertise will enhance Crisil’s business intelligence, analytics and risk management offerings for financial sector clients in India and globally.

Crisil’s share price today is almost the same of what it was five years ago in 2014. If we compare financial numbers of  year-end 2013 and 2018, we get the following:

While there has been some growth in earnings, there has been no growth in stock price. One may argue that valuations in 2013 were so high that it factored in future earnings growth of several years.

At around Rs 1400 per share, we note the following:

1. The biggest rating company in India is available at a market capitalization of INR 10,000 Cr.
2. P/E (TTM) = 28, ROE=33%, Dividend yield = 2%, Zero Debt. Lots of cash on books
3. Free Cash flow positive for several years & a negative working capital.

Then why is the stock, not doing well for the last five years?

In one word if we have to answer the above question, it is:  Growth

It remains to be seen whether market will wait for the growth to reflect in numbers or anticipate it in advance.

Disclaimer

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