CARE Ratings Investor Meet June 2015 · PDF fileInformation Analysis & Grading ... Bank loan...

Investors Meet

Investors Meet June 2015

Disclaimer

2

Certain statements in this document may be forward-looking statements.

Such forward-looking statements are subject to certain risks and uncertainties

like government actions, economic developments, and many other factors

that could cause the Company’s actual results to differ materially from those

contemplated by the relevant forward-looking statements. Credit Analysis and

Research Ltd. will not be in any way responsible for any action taken based on

such statements and undertakes no obligation to publicly update these

forward-looking statements to reflect subsequent events or circumstances.


Contents

Value Proposition

CARE in FY 2015

CARE Over the years

Credit Rating Market – Going Ahead

3


Brief Snapshot

4

Second Largest Rating

Company in India(1)

Second Largest Rating

Company in India(1)

Recurring Nature of

Rating Business

Recurring Nature of

Rating Business

High Margins & ProfitabilityHigh Margins & Profitability

International expansion


Dominant share in rated

companies from BS1000,

ET500 & FE500

Dominant share in rated

companies from BS1000,

ET500 & FE500

Diversified Business Mix


External Rating

Committee

External Rating

Committee

(1) In terms of rating income FY15



5

Ratings

� Manufacturing & Services sector

� Financial sector

� Infrastructure

� Small & Medium Enterprises

� Structured Finance

� Sub Sovereign ratings

� Alternate Inv. Fund, Infra. Dev. Fund

Information Analysis & Grading

� Industry & Customized Research reports

� CARE Industry Risk Metrics (CIRM) reports

� Grading services

� Training

� Valuations


� Already in Maldives

� Launched international rating agency – ARC

Ratings in London

� Exploring markets in neighboring countries ,

Africa and Mauritius

CARE Kalypto

� Risk Solutions for

o Basel II, Credit risks, Operational risks, Fund

Transfer Pricing, Asset Liability

Management, Value at risk, Capital

Adequacy Ratio, IFRS

� Advisory Services

Investment income


Ratings GradingInformation

Analysis

Corporate Financial Sector Public Finance MSME Infrastructure Sector� IPO

� Shipyard

� ESCO

� Educational

institutions

� Maritime training

institutes

� RESCO

� Construction

companies

� Real estate star

� Equigrade

� SME fundamental

� Renewable Energy

Companies/Projects

� Customized research

� CARE industry risk

metrics (150 sectors)

� Research reports by

economic research

team on domestic

economy & global

economic events

� Valuation of Market

Linked Debentures

(“MLDs”),

� Monthly PP-MLD

report

� Debt

� Bank loan

� Issuer

� Corporate governance

� Banks

� NBFCs

� Housing finance

� Insurance

� Mutual funds

� Securitization

programmes

� Alt. Inv. Fund

� Infra. Dev. Fund

� Sub-sovereign entities

� ULBs

� NSIC – SSI rating

� SME rating

� Power

� Roads

� Ports

� IDF

Growing Brand Equity

6

� Strong brand recognition in the ratings market, gained through over 22 years of experience

� Attributes of objectivity and integrity have placed premium on CARE ratings amongst clients and investors

� Received recognition and accreditation from various regulatory bodies and entities

� Sponsors industry events & participates in seminars

� Domain experience across a range of sectors

� Graded the largest number of IPOs since the introduction of IPO grading in India

� Ratings for state enterprises provided for maximum number of states in terms of implicit state ratings

Rating relationship with over 9,828 clients

CARE RatingsCARE Ratings


Strong Rating Credibility - External Rating Committee

7

� Former

Managing

Partner, S.B.

Billimoria & Co.

� Member of

Board of

Directors of a

number of

companies and

organizations

including RBI

Y. H. Malegam

(Chairman)

Y. H. Malegam

(Chairman)

� Former

Managing

Director of State

Bank of Mysore

� Former Deputy

Managing

Director and

Chief Credit

Officer of SBI

P.P. PattanayakP.P. Pattanayak

� Former whole

time member of

SEBI

� Former Chairman

and Managing

Director of

Corporation Bank

and SIDBI

V.K. ChopraV.K. Chopra

� Managing Director,

CARE

� Pub. Interest

Director of MCX

� Director of ARC

Ratings Holdings

� Chairman of CARE

Kalypto & ARC

Ratings SA

D.R. DograD.R. Dogra

� To maintain high standards of professional quality/integrity and address any conflict of

interest, CARE has an external ratings committee comprising a majority of independent

members

� Have had an external rating committee since inception (1993)

� Ratings ratified by highly qualified committee

Steadfast commitment to veracity and objectivity in the opinions provided

V. LeeladharV. Leeladhar

� Former Deputy

Governor, RBI

� Ex-CMD Union

Bank

� Former member

of Board of

Directors of IIBF,

NABARD, NHB

etc.


Strong Rating Credibility - Ratings Process

8

� Established rating procedures

� Separate quality control department

� Continuous criteria development and

improvement

� 3 levels of checks & balances

Quality

Systems & Risk

Management

Quality

Systems & Risk

Management

Information

Technology

Information

Technology

� Implemented integrated information interface

for work flow management

� Established CARE Knowledge Centre (CKC)

� Established Online Research Distribution

System for subscription of research reports

Principled

ratings

approach

Principled

ratings

approach

� Strong policies in place to drive merit based

ratings

� Compensation terms insulated from rating

assigned

� In-line with SEBI, RBI compliance CARE publishes

an annual Default and Transition study of CARE

rated issuers

� CARE’s issued rating exhibit high level of stability

– cumulative default rates and transition rates in

line with industry average and peers

Industry

analogous

default rates

Industry

analogous

default rates

Robust ProcessesPrincipled approach, strong &

transparent disclosures

Compensation terms insulated from rating assigned


Strong Rating Credibility - Ratings Process

9

Aligned with benchmark processes laying strong emphasis on ratings indisputability

Backed by strong team of around 370 analysts

Client approval / PR / Rational

Rating committee

Sector Head & quality control

Preparation of rating Preparation of rating note of submission

to group head

Meeting with Official and due

diligence

Query List

Rating Agreeme

nt

Multi Layer ProcessThree

levels of

checks &

balances


� Recognized by the Capital

Markets Development

Authority, Republic of

Maldives

The Company has along with four partners from Malaysia, Brazil, Portugal and South Africa, launched international credit rating

agency named ARC Ratings, SA, in London on January 16, 2014

Global Footprint

10

Expanding international presence - only leading Indian rating Company with global play

� In process of starting operations

in Mauritius already recognized

by market regulator there

Mauritius

Hong Kong

� Recognized by the Hong

Kong Monetary Authority

Brazil

Portugal

Malaysia

South Africa

Maldives

Nigeria

� Had Signed a MoU for

exploring possibilities of

providing risk management

solutions & training in Nigeria

Ecuador

� Offers

technical

assistance

Mexico

� Provided

technical

assistance

� Exploring opportunities

to start operations in

African countries


Experienced & Professional Management

11

� Over 36 years of experience in financial

sector & credit administration

� Certified Associate of Indian Institute of

Bankers

� Holds Master’s degree in agriculture and

in business administration

� Over 29 years of experience in finance,

commerce and credit risk sectors

� Before joining CARE, worked for Otis Elevator

Company India, DSP Financial Consultants &

Kotak Mahindra Finance

� Holds Master of Management Studies degree

� Qualified Chartered Financial Analyst

Driving a transformational enterprise - hitting the right milestones at the right juncture

Nurtured into the 2nd largest rating Company in India

Charting the course for a Global footprint

Focused on creating value for shareholders

Pushing innovation agenda - introducing novel services thereby changing industry landscape

Building transparency - working closely with investors, regulators, policy makers and other market participants

Developing and upholding confidence in CARE’s risk opinions

At forefront of analyzing and monitoring credit risk since over 20 years

D R Dogra - Managing Director Rajesh Mokashi - Deputy Managing Director


Experienced & Professional Management

12

T.N. Arun Kumar

Chief General Manager, Ratings

� 25 years of experience in

financial services

� PGDM; CFA; FRM

Navin K. Jain

Company Secretary & Compliance

Officer


accounting services

� Masters degree in financial

services management & C.S.

Milind Gadkari

Chief General Manager, Ratings


credit rating, training of

new recruits

� Master’s degree in

management sciences; CFA

Mehul Pandya

Chief General Manager,

Business Development

� 18 years of experience

in rating services

� MBA; CFA

Swati Agarwal Jain


Business Development


credit rating, advisory and

consultancy

� PGDM

Revati Kasture

Chief General Manager


credit analysis and research

services

� C.A.; Cost Accountant

Madan Sabnavis

General Manager, Chief

Economist


development banking,

commercial banking,

engineering & commodity

markets

� Masters degree in

economics

Sanjay Kumar Agarwal

General Manager, Business

Development


corporate and infrastructure

finance, risk management

and banking

� C.A.; ICWA

Amod Khanorkar

General Manager, Ratings


credit rating, valuations

and project appraisal in

infrastructure sector

� PGDM

Chandresh M Shah

Chief Financial Officer


finance and accounting,

taxation, US GAAP, Planning

& Analysis, Investor

relations, M&A

� C.A.

Umesh Ikhe

Chief Technology Officer

� 18 years of experience

� Bachelors Degree in

Computer Science;

Executive General

Management Programme

from Indian institute of

Management

Yogesh Dixit


� 25 yrs of experience in

various areas of financial

service industry like Credit

Ratings, project financing,

SME funding, credit

guarantee etc.

� B.E, M Tech, MBA, CAIIB


Shareholding Snapshot as on March 31, 2015

100% Public Shareholding- Professionally Managed Names of Shareholder holding above 1% Holding %

Life Insurance Corporation of India 9.94

Canara Bank 9.90

IDBI Bank Ltd 6.21

Franklin Templeton Investment Funds 4.79

State Bank of India 4.69

Bajaj Holdings and Investments Ltd. 3.46

Government Pension Fund Global 3.06

Russell Investments Limited 1.83

CLSA Global Markets Pte Ltd. 1.72

Parvest Equity India 1.68

The Wellington Trust Company National

Association 1.64

Reliance Capital Trustee Company Ltd. 1.54

Tata Steel Limited 1.22

GMO Emerging Domestic Opportunities Fund 1.20

Franklin Templeton Mutual Fund A/C 1.10

Tata Investment Corporation Limited 1.06

Aditya Birla Private Equity Trust 1.03

Macquarie Fund Solutions A/C Macquarie Fund 1.02

Total 57.09

9.94

0.49

20.87

13.4925.05

0.72

6.14

23.3

IFI

PSU /

Govt

PSU

Banks

Mutual

Funds

FII

Other

Banks

FPI

Others

13


Value Drivers

• Best-in-class operating model and expansive distribution network

• Seasoned management with sound execution experience

• Parentage of marquee banks

• Strong origination capabilities and relationship management

Second Largest

Ratings Company in

India

Driving Cost

Efficiency and

Productivity

• Strong discipline and governance around capital allocation and expenditure

• Cost efficient business model driven by CARE Knowledge Centre and Ci3 reduced

overall employment costs.

• Higher employee productivity

Strong financial

Profile

• FY09-FY15 Rating Revenue CAGR of 17.7%

• FY09-FY15 Basic EPS CAGR of 16.3%

• Strong cash position of ~Rs 3.33 bn supports multiple growth opportunities as on 31st

March 2015.

14


Value Drivers

Driving towards value

creation for Shareholders

• Dividend friendly track record. Paying dividends since first full year of

operations

• Dividend Payment during FY 2015 of 790% including special dividend of Rs.

65 per share, Rs. 6 interim dividend and Rs. 8 final dividend

Investing in Strategic

opportunities- To Enable

Robust Long Term

Opportunities for Growth

• Best positioned to capture sector opportunities

• In process of implementing global strategic plan

• Increase information analysis capabilities

• Leverage brand to nurture risk solutions and advisory business

• Look at organic and inorganic value across accretive transactions

15


Dominant share in BS-1000

CARE Rating,

46%

CRA-2, 31%

CRA-3, 29%

CRA-4, 13%

CRA-5, 6%

Market Share %

16


Dominant share in ET-500

CARE Rating,

54%

CRA-2, 40%

CRA-3, 35%

CRA-4, 21%

CRA-5, 10%

Market Share %

17


Dominant share in FE-500

CARE Rating,

52%

CRA-2, 40%

CRA-3, 36%

CRA-4, 21%

CRA-5, 9%

Market Share %

18


Financial Performance in FY 2015

Rs crore FY14 FY15 Growth (%)

Rating Revenue 226.91 254.92 12.34

Other Revenue 2.55 2.29 -10.47

Total Revenue 229.46 257.21 12.09

Other Income 35.66 43.56 22.16

Total Income 265.12 300.77 13.45

Total Expenses 84.29 91.86 8.99

Op. Profit 145.18 165.34 13.89

PAT 129.70 147.19 13.49

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Note: Expenses stated in the table above excludes certain costs for ESOP, additional depreciation, finance

charge and contribution to CSR – Rs. 9.53 crores for FY15 and Rs. 1.43 crores for FY14 (pre tax)


Financial position (1)

20

103

154177

206227

265 301

0

80

160

240

320

FY09 FY10 FY11 FY12 FY13 FY14 FY15

Rs

cr

Total Income

76

108

128121

131 145

165

0

35

70

105

140

175

FY09 FY10 FY11 FY12 FY13 FY14 * FY15 *

Rs

cr

Operating Profit

7 6 830

5874

192

0

50

100

150

200

250


%

Dividend Payout Ratio

55

87 87 91108

130 147

0

50

100

150

FY09 FY10 FY11 FY12 FY13 FY14 * FY15 *

Rs

cr

PAT

* Op. Profit & PAT for FY14 and FY15 is excluding charge for ESOP, additional depreciation due to change in useful

lives of assets, finance charge & contribution to CSR


Financial Position (2)

* PAT margin for FY14 and FY15 is excluding certain costs for ESOP, additional depreciation, finance

charge and contribution to CSR – Rs. 6.86 crores for FY15 and Rs. 1.03 crores for FY14 (post tax)

21

53.7 56.7

51.4 52.1 49.8 48.9 48.9

0

10

20

30

40

50

60

FY09 FY10 FY11 FY12 FY13 FY14 * FY15 *

PAT Margin %


Growth in Business (1)

22

711 7581114

3,900

5,263

7,754

9,828

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000


Rs

cr

No. of Active Clients

15791808

2187

5,980

7,439

7,865 7,973

0

1000

2000

3000

4000

5000

6000

7000

8000


Rs

cr

No. of Assignments


Growth in Business (2)

23

1148 1250

1654

4,883

6,074 6,117

5,054

0

1300

2600

3900

5200

6500


Rs

cr

No. of Bank Facilities Rated

189

277

238

307 298

289

317

0

50

100

150

200

250

300

350


Rs

cr

No. of Debentures Rated


Future Growth Drivers: Debt Market

� Market under-penetrated

� To benefit from increased penetration by pension funds and

insurance companies

� Performance will depend on

• Government starts off its spending programme in Q1 of FY16

• Some of the stalled mining and power projects start moving

ahead with the auction of coal taking place successfully

• Lowering of rates further by the RBI by 50 bps in course of the

year

• Industries in the capital goods segment going in for higher

borrowing to finance investment as well as infra companies

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Future Growth Drivers: Bank loan ratings

� Credit has witnessed a pickup which will provide some positive

support for bank loan ratings

• Slowdown however, in credit growth to industry

• Services and retail performing relatively better

� Some traction in bank credit as the telecom companies will be

paying up for the auctions

� Ratings coverage of Bank Loans expected to continue growing

� New bank licenses

• BLR business to be positively affected with a lag

25


Risk factors

� Economic growth does not pick up

• Industrial investment does not pick up

• Infrastructure progress remains sluggish

� Bank credit growth does not improve

• Interest rates remain elevated

• Corporates continue to access ECB market

� Regulatory changes affecting business

� A bad monsoon upsetting the growth prospects

� Higher crude price upsetting all fiscal and monetary calculations

� Interest rates not being lowered but increased in case inflation rises

26


Thank You

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CARE Ratings Investor Meet June 2015 · PDF fileInformation Analysis & Grading ... Bank loan...

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