This company is slowly, but surely, coming into its own and carving out its own niche against its more illustrious competitor, Crisil, in ratings and analytics. ICRA, formerly The Investment Information and Credit Rating Agency of India, is the second-largest ratings agency in terms of rating volumes (after Crisil), with a 25 per cent market share. Besides, ICRA has several other businesses such as consulting, knowledge process outsourcing and business intelligence services, among others.
Business Performance.At present, 67 per cent of its revenue arises from its ratings business; the balance from others. ICRA has been slowly gaining momentum in its ratings business. As of 31 March, its year-on-year (yoy) growth in ratings was a healthy 12.8 per cent, to Rs 139.45 crore. Its bread-and-butter ratings business is expected to grow in higher single digits, at 8-9 per cent, due to its expansion to other Asian countries and move into the small and medium enterprises grading segment. ICRA's other businesses€"consulting, KPO and other services€"are gaining traction. Together, they bring in 33 per cent of revenues, and last year did business of Rs.68.01 crore, up nearly 10 per cent yoy.
ICRA is on an expansion spree and has announced expansion to Asia after establishing a foothold in Sri Lanka and Indonesia in 2010. Besides, ICTEAS, a subsidiary, recently acquired BPA Technologies, to expand its non-ratings business. BPA is a California-based firm providing global business consulting and software technology services. As of 31 December 2011, it had a turnover of $10 million. The ratings business is steady. Combine it with intelligence and analytics, and it becomes a good cash generator. That's what ICRA has been focusing on lately. ICRA's fixed costs are low and, hence, for the last fiscal its return on capital employ-ed (RoCE) was 37 per cent.
Financial Performance. For the year, ICRA registered a consolidated net profit of Rs 53.87 crore, a 12 per cent yoy growth, while revenues grew 8 per cent to Rs 228.79 crore. In the next few years, ICRA's revenues are expected to grow by around 10 per cent following growth in its ratings and analytics business. But its operating margins could be tight as its people costs last year rose 20 per cent to Rs 106 crore, and continues to be a concern. Hence, its operating profit margin has shrunk to 35.35 per cent compared to 37.44 per cent in FY11.
Given its expansion plans, employee costs might continue to rise but, with its new expansions and business focus, things should even out. At a price-earnings ratio (PE) of 22.79, the stock is definitely not inexpensive. Though, compared to its peer, CRISIL (with a PE of 37), ICRA's valuation appears reasonable. And in the long run, it should be able to deliver good shareholder returns.
Business Performance.At present, 67 per cent of its revenue arises from its ratings business; the balance from others. ICRA has been slowly gaining momentum in its ratings business. As of 31 March, its year-on-year (yoy) growth in ratings was a healthy 12.8 per cent, to Rs 139.45 crore. Its bread-and-butter ratings business is expected to grow in higher single digits, at 8-9 per cent, due to its expansion to other Asian countries and move into the small and medium enterprises grading segment. ICRA's other businesses€"consulting, KPO and other services€"are gaining traction. Together, they bring in 33 per cent of revenues, and last year did business of Rs.68.01 crore, up nearly 10 per cent yoy.
ICRA is on an expansion spree and has announced expansion to Asia after establishing a foothold in Sri Lanka and Indonesia in 2010. Besides, ICTEAS, a subsidiary, recently acquired BPA Technologies, to expand its non-ratings business. BPA is a California-based firm providing global business consulting and software technology services. As of 31 December 2011, it had a turnover of $10 million. The ratings business is steady. Combine it with intelligence and analytics, and it becomes a good cash generator. That's what ICRA has been focusing on lately. ICRA's fixed costs are low and, hence, for the last fiscal its return on capital employ-ed (RoCE) was 37 per cent.
Financial Performance. For the year, ICRA registered a consolidated net profit of Rs 53.87 crore, a 12 per cent yoy growth, while revenues grew 8 per cent to Rs 228.79 crore. In the next few years, ICRA's revenues are expected to grow by around 10 per cent following growth in its ratings and analytics business. But its operating margins could be tight as its people costs last year rose 20 per cent to Rs 106 crore, and continues to be a concern. Hence, its operating profit margin has shrunk to 35.35 per cent compared to 37.44 per cent in FY11.
Given its expansion plans, employee costs might continue to rise but, with its new expansions and business focus, things should even out. At a price-earnings ratio (PE) of 22.79, the stock is definitely not inexpensive. Though, compared to its peer, CRISIL (with a PE of 37), ICRA's valuation appears reasonable. And in the long run, it should be able to deliver good shareholder returns.
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