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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September 2020 Quarter Update

Financial Results & Highlights

Standalone Financials (In Crs)
  Sep-20 Sep-19 YoY % Jun-20 QoQ % 9MSep20 9MSep19 YoY
Sales 268 290 -7.59% 230 16.52% 742 738 0.54%
PBT 67 100 -33.00% 43 55.81% 168 171 -1.75%
PAT 50 71 -29.58% 32 56.25% 127 120 5.83%

 

Consolidated Financials (In Crs)
  Sep-20 Sep-19 YoY % Jun-20 QoQ % 9MSep20 9MSep19 YoY
Sales 522 480 8.75% 484 7.85% 1464 1330 10.08%
PBT 114 148 -22.97% 93 22.58% 324 359 -9.75%
PAT 90 105 -14.29% 66 36.36% 245 249 -1.61%

Detailed Results 

    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

Standalone Financials (In Crs)
Jun-FY21 Jun-FY20 YoY % Mar-FY21 QoQ % 6MFY21 6MFY20 YoY%
Sales 230 224 2.68% 243 -5.35% 473 448 5.58%
PBT 43 31 38.71% 57 -24.56% 100 71 40.85%
PAT 32 22 45.45% 45 -28.89% 76 49 55.10%

 

Consolidated Financials (In Crs)
Jun-FY21 Jun-FY20 YoY % Mar-FY21 QoQ % 6MFY21 6MFY20 YoY%
Sales 484 428 13.08% 458 5.68% 942 851 10.69%
PBT 93 99 -6.06% 117 -20.51% 210 212 -0.94%
PAT 66 67 -1.49% 88 -25.00% 154 143 7.69%

 

Detailed Results 

    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

Consolidated Financials (In Crs)
Mar-20 Mar-19 YoY % Dec-19 QoQ %
Sales 462.62 422.88 9.40% 484.25 -4.47%
PBT 116.77 112.3 3.98% 132.1 -11.60%
PAT 88.12 76.64 14.98% 95.33 -7.56%

 

Detailed Results 

    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 26th 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

Standalone Financials (In Crs)
Q3CY19 Q3CY18 YoY % Q2CY19 QoQ % 9 Months (Sep ’19) 9 Months (Sep ’18) YoY%
Sales 294.95 281.74 4.69% 286.21 3.05% 870.73 864 0.78%
PBT 152.97 97.28 57.25% 69.14 121.25% 298.35 272.83 9.35%
PAT 114.75 65.29 75.75% 46.36 147.52% 212.21 183.77 15.48%

 

Consolidated Financials (In Crs)
Q3CY19 Q3CY18 YoY % Q2CY19 QoQ % 9 Months (Sep ’19) 9 Months (Sep ’18) YoY%
Sales 435.88 425.46 2.45% 415.76 4.84% 1267.43 1281.46 -1.09%
PBT 147.98 130.5 13.39% 99.21 49.16% 359.49 362.66 -0.87%
PAT 105.13 90 16.81% 66.85 57.26% 248.62 249.35 -0.29%

 

Detailed Results 

    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

Standalone Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 302.53 310.68 -2.62% 301.21 0.44%
PBT 69.14 82.12 -15.81% 76.24 -9.31%
PAT 46.36 55.32 -16.20% 51.1 -9.28%

 

Consolidated Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 428 453.41 -5.60% 422.88 1.21%
PBT 99.21 114.31 -13.21% 112.3 -11.66%
PAT 66.85 77.13 -13.33% 76.64 -12.77%

 

Detailed Results 

    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

                                                                Standalone Financials (In Crs)
Q4FY19 Q4FY18 YoY % Q3FY19 QoQ % FY19 FY18 YoY %
Sales 301.21 305.32 -1.35% 352.57 -14.57% 1270.86 1224.59 3.78%
PBT 76.24 93.43 -18.40% 107.74 -29.24% 380.57 346.05 9.98%
PAT 51.1 63.16 -19.09% 93.76 -45.50% 277.53 237.26 16.97%

 

 

                                                                Consolidated Financials (In Cr)
Q4FY19 Q4FY18 YoY % Q3FY19 QoQ % FY19 FY18 YoY %
Sales 422.9 427.6 -1.10% 496.46 -14.82% 1821.9 1683.84 8.20%
PBT 112.3 117.85 -4.71% 136.93 -17.99% 499.59 433.61 15.22%
PAT 76.64 82.21 -6.78% 113.75 -32.62% 363.1 304.43 19.27%

Detailed Results 

    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:

Particulars (INR Cr) December, 2013 December, 2018 Growth
Revenue 1111 1748 57%
Operating Profit 361 471 30%
PAT 298 363 22%

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.

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