CRISIL- RESEARCH DONE 7 MONTHS AGO
BUSINESS:Rating, Research and Advisory (3 segmental business)
Rating business: IN 2019 rating business accounted for 32% of business.
Started in 1987 and currently working as Full-service rating agency.
They rate entire gamut of debt instruments and serve lenders, investors, issuers, market intermediaries and regulators by covering manufacturing companies, banks, NBFCs, PSUs,Financial institutions, state governments,state governments , urban local bodies and mutul funds.
Issuers and Borrowers: Ratings enhance their access to funding.
Investors and Lenders: Suppliment their internal evaluation process.
Research business:IN 2019 Research business accounted for 60% of business
Indian research:
Provides insight, Opinion and analysis on the Indian economy.
Plays a key role in India’s fixed income market being largest provider of valuation of fixed income securities to mutul funds, insurance and banking industry.
Global research:
Within which offer Financial research to both Buy side and Sell side helping clients gain differentiated insights across domain such as Investment research, digital marketing, sales and marketing, client analytics and portfolio analytics.
Advisory business: In 2019 Advisory business accounted for 8% of business.
Focus areas include policy and
regulatory advisory, public private partnership frameworks, capacity enhancement
and institutional strengthening for government and infra agencies etc.
Management and
shareholding:
· Strong parentage S&P with promoter holding at 67.24%
· FPI holding at 5.52% and GIC holds 3.55 with LIC holding 6.62, Total institutional holding at 17.67%
· MD and Chief executive- AshuSuyash
More than 26 years of experience in financial sector and Prior to CRISIL in June 2015 she served as CEO of L&T Investment Management and also woked with Citi bank for span of 15 years
· GurpreetChhatwal President Ratings at Crisil limited who has been with CRISIL since 21 years and also alumni of IIM Lucknow.
· Dimitrilondos President and Business head of CRISIL Global prior to which have worked with PWC and Deutsche Bank
· PawanAgrawal Chief Risk Officer also been with since long term and should his excellence in areas of analytics and modeling.
TRIGGERS
· During and after slowdown and recession importance of credit rating agencies increase a lot
(December ending Financial year)
· Rating business in 2007 to 2008 rose by 45% also number of employees rose by 14%
· Rating business in 2008 to 2009 rose by 26% also number of employees rose by 9.6%
· In Concall company highlighted that of the companies which have gone to NCLT or bank accounts which have gone to NPA are those companies not rated by them which results in banks and other lenders prefer CRISIL over other rating agencies at these times.
Important Highlights:
· Revenue and Profit although showed subdued growth but business has remain resilent especially at this current times.( in 5 years Revenue and profit have growth by around 25%)
· Company is debt free all along with very attractive ROCE and ROE at 43% and 30.8%.
· Dividend yield has been good around 2%
2015
· Ratings clients in 2015 , 91000 SME grading and above 20800 large and mid scale corporate grading.
· CRISIL –GRA coverage of 3300 stocks
· Revenue per employee which was 22.9 lakhs in 2006 rose to 39.2 lakhs in 2015 while profit per employee in 2015 is 10.2 lakh.
· With Post graduates accounted for 64%, Graduates 31% and 5% others and 94% of them below 40years.
· Rating business in 2015 accounted for 31% , Research 64% and advisory 5%.
· Employee cost accounted for 49% of Revenue.
· Rakesh&RekhaJhunjhunwala 5.62% stake.
2018
· Rating clients 1,40,000 MSME and more than 28000 large and Mid scale operations.
· In 3 years added 49000 MSME and 7200 Large and Mid scale corporate.
· i.e. on on average 16,333 MSME and 2,400 L&M sacle corporate p.a.
· Rakesh&RekhaJhunjhunwala 5.50% stake.
· Rating business in 2018 accounted for 29% , Research 63% and advisory 8%.
· Employee cost accounted for 49% of Revenue.
· Revenue per employee which was 39.2 lakhs in 2015 rose to 45.52 lakhs in 2018 while profit per employee in 2015 was 10.2 lakh rose to 12.27 lakh in 2018.
2015/2018/2019 FINANCIALS
· Income per employee rose from 22.9 lakh in 2006 ,39.2 lakh in 2015, 45.52 lakh in 2018 and 46.9 lakh in 2019 and these becomes important as employee cost accounts for around 50% of revenue or 67% of total expenses.
· Operating Profit per employee rose from 11.2 lakh in 2015 ,12.27 lakh in 2018, 12.34 lakh in 2019 .
· So company is not only using its workforce effectively in increasing its revenue but also using it efficiently as operating profit has been increasing.
· Rating Business accounts for 31% in 2015, 29% in 2018 & 32% in 2019 also rose by 17% in 3 years and rose by 7.3% from 2018 to 2019. (Which is expected to rise at greater pace in 2020 & 2021 due to reason stated above )
· Research Business which accounts for 64% in 2015,2018 But fall to 60% in 2019 linked mostly to global economy which was already slowing in 2019 and which is expected to further shrink in 2020 before showing a recovery in 2021.
· Advisory business which accounts for 4.8% in 2015, 7.7% in 2018 & 8.2% in 2019 also is expected to grow in 2020 and 2021.
· From 2019 to 2018 company assigned around 10000 SME grading and 5000 Large and mid-sized corporate while average for 2015 to 2018 was 16333 in SME and 2400 in Large and mid sized corporate p.a. thus slowed grading in SME but more than double in Large and Mid sized , which although hard to say but I feel the trend to be continue more in slowing economy.(Rating Business)
· Rakesh/RekhaJhunjhunwala stake which was 5.62% in 2015, reduced marginally to 5.50% and further marginally to 5.48% in 2019 still holds significant share.
· Also one interesting fact is CRISIL holds around 8.9% share of CARE rating which is part of its non current investment which accounts for 12% of its total assets.
· Also in Current assets investment accounts for 15% of total assets so in total around 27% of assets is investment.
· Cash and cash equivalent account for 20% of total assets i.e. cash per share around 48 per share.
· Companies FCF/ebitda in 2019 is at 79 rose from 64 in 2018 so its clear company generates high cash with its biggest asset is its employee not Plant and machinery thus asset light business.
· Investments and cash and cash equivalent account for around 50% of Total Assets thus very asset light business .
CONCERN
·
High weightage of Research may result in decline in revenue at
larger pace as global economies are facing deep problems.
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