CARE (Credit Analysis & Research) IPO Analysis

CARE (Credit Analysis & Research) IPO Analysis

CARE (Credit Analysis & Research) IPO Analysis , Review, Stocks, Investments, Indian Stock Markets,

Credit Analysis & Research has come up with a public issue of 7,199,700 Equity Shares of Rs 10 each in a price band of Rs 700-750 per equity share to raise up to Rs 540 crore.

The issue opens on Dec 07 2012 and closes on Dec 11 2012.

Credit Analysis & Research (CARE) is a second largest full service credit rating company in India, offering rating and grading services across a diverse range of instruments and industries including IPO grading, equity grading, and grading of various types of enterprises, including shipyards, maritime training institutes, construction companies and rating of real estate projects, among others.

The company with over 19 years of experience in rating debt instruments and related obligations covering a wide range of sectors, has rating relationships with 4,644 clients. CARE’s established presence in rating debt instruments and bank loans and facilities, domain experience across a range of sectors such as manufacturing, services, banks and infrastructure, strong rating credibility and brand presence along with strong financial position and profitability are its major strength.

On the flip side, the company’s dependence on its rating services business could be considered risky. However, given its diversification plan involving several risks, may lead to losses or lower returns from such activities. Further, migration to internal rating based approach for credit risk could have negative impact on results of operations and revenues of the company. Moreover, given the financial services industry that the company operates in, it may also run high on the risk of retaining key personnel, along with the risk of its limited experience in markets outside India.

Credit Analysis & Research has come up with a public issue of 7,199,700 Equity Shares of Rs 10 each in a price band of Rs 700-750 per equity share to raise up to Rs 540 crore. The company will not be receiving any proceeds from the Offer, and all proceeds shall go to the Selling Shareholders. Based on the EPS of Rs 40.52 for the year ended March 31, 2012, the P/E at the lower end of the Price Band comes at 17.28x and at the higher end of the Price Band it comes at 18.51x, while its competitors are ICRA and CRISIL trading at TTM PE multiple of 24.80x and 37.80x. The company is second largest rating agency in the country and has witnessed 40 per cent growth in profits and revenue in the last few years is having further plans of diversifying into new businesses along with increased global footprint.

The issue is attractive compared to it’s competitors as it is a debt free company and the rating business is expected to grow with more opportunities in offering alongwith the development of corporate bond market. It can be held in the portfolio for long term investment as well.

The financial performance of the companies over the past few years is given below (in Rs millions)

Particulars Mar 2011 Mar 2010 Mar 2009 Mar 2008
Net Sales 1708.69 1379.73 973.88 522.24
Total Income 1766.28 1537.97 1031.53 551.65
PBIDT 1362.20 1257.18 822.13 408.04
PBT 1340.10 1243.15 812.23 402.06
PAT 910.59 870.47 546.75 270.96
Reserves 2929.02 2090.33 1269.90 759.92
Net Worth 3024.20 2185.51 1347.65 837.67
Total Debt 0.00 0.00 0.00 0.00
ROCE 51.45 69.90 73.23 55.20
RONW 34.96 49.27 50.04 37.50
PATM(%) 53.29 63.09 56.14 51.88
CPM(%) 54.59 64.11 57.16 53.03
CEPS 97.99 92.93 71.59 35.62

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