Ratings agency CRISIL has reported poor sequential growth while posting a slight increase in overall sales. Its net sales and net profits increased by 7.4% and 7.5%, respectively
Ratings agency CRISIL’s standalone total income for the second quarter fiscal ended 2012-13 marginally increased 7.42%, year-on-year (y-o-y) to Rs172.32 crore from Rs160.42 crore for the same period last year. Its net profit increased 7.46%, y-o-y to Rs43.22 crore from Rs40.22 crore in the corresponding quarter of the previous year. This was helped by the forex gain to the tune of Rs7.98 crore. If you look at the results on a quarter-to-quarter basis, the company posted a sequential decline in both sales and net profits—sales declined by 8.02% while net profit declined by nearly a fifth, which is damaging. The company had stated that its growth during the quarter was impacted by the slowdown in the economy and volatility in the stock markets.
The rating agency posted poor revenue growth, clocking only 7% growth when compared to its three-quarter y-o-y revenue growth of 19%. Revenue growth was driven by growth in Bank Loan Ratings and small and medium enterprises (SME) ratings. Similarly, its operating profit grew only by 6% to Rs55.39 crore. However it de-grew on a sequential basis, by 26.29%, from Rs75.15 crore recorded in the March 2012 quarter. This was impacted by the slowdown in the economy and volatility in the stock markets. Its return on equity stood at a respectable 55% despite the poor results, while its valuation, with its market capitalisation quoting at almost 33 times its operating profits would seem trifle high considering current results. In the current economic situation, new firms especially, would find it tough to raise capital which will give impetus to CRISIL to rate its capital for the public.
In June 2012, CRISIL signed an agreement to purchase UK-headquartered Coalition Development, along with Coalition’s subsidiaries, for around £29 million. Coalition provides high-end analytics, mainly to leading global investment banks. Coalition’s acquisition will help the company to widen service offerings, diversify its client base and deepen client relationships, significantly enhancing its position in the global financial markets. During the quarter, CRISIL achieved an important milestone by assigning its 10,000th bank loan rating.
Further, according to the press release, CRISIL Risk and Infrastructure Solutions Ltd (CRIS), a wholly-owned subsidiary of the company, won several international mandates including a prestigious mandate for a coal project in Indonesia. CRISIL Risk Solutions (CRS) continues to expand its product offerings and client segments and has won key mandates relating to validation of Internal Capital Adequacy Assessment Process framework from a foreign bank, model validation from two public sector banks and an advanced portfolio risk management tool from a large public sector bank.
Much of its revenues come from its research division, which contributes to nearly 47% of its total income, while ratings services is only 41% of the revenues. Its advisory services contributes to 41% of the current, has remained the same.
The company’s board has also approved the resignation of Shrikant Dev as the company secretary and has appointed Neelabja Chakrabarty to fill the spot with effect from 18 July 2012.