Care Ratings conducted a conference call 10 May 2024 to discuss its financial results for the quarter ended March 2024. Mehul Pandya, MD and CEO of the company addressed the call:

Highlights:

The company has strengthened its brand presence with an extensive outreach campaign.

Teams in ratings, economics and industry research have been tirelessly working to produce high quality content resulting in an impressive output of 329 reports in FY24.

Senior management, sector specialist, industry research team, economic experts and business development leaders actively participated in over 100 knowledge sharing forums during FY24. This commitment to sharing knowledge and expertise underscores dedication to driving growth and progress within the industry.

In addition, the presence across media platforms has experienced a significant surge over the past year and continues to expand in the current quarter.

The company is actively disseminating valuable insights to audiences.

The company would remain steadfast in its pursuit for excellence and innovation. It aims to elevate CareEdge to new heights of success.

Business performance

On a consolidated basis, the company posted 19% growth in the revenues to Rs 332 crore in FY2024. The operating profit margin stood at 34% and FY24 PAT was at R 103 crore with a growth of 20% over FY23.

There is a shift in business mix with rating to non-rating ratio now standing at 90-10 as compared to 94-6 in FY23.

The shift comes on the back of the rating segment growth of 14% while the increasing contribution is witnessed from the non ratings businesses.

A notable aspect of performance of the company lies in investment in subsidiaries, which are demonstrating promising growth.

The analytics division of the subsidiary has shown more than 100% growth over a small base of last year, while investing in people, products and technology and operating at a similar loss as compared to the last year.

The advisory consulting division has actually shown more than 65% growth on the top lines and becoming marginally profitable.

The company remains optimistic about the trajectory of non-rating subsidiaries. It aims to raise the share of non-rating business to 20% of overall revenues in the near term.

Key initiatives to diversify business offerings

The subsidiary Care ESG Ratings shall function as an ESG ratings provider after having received the approval from SEBI on 2 May 2024.

The company has been making efforts on the ESG side for over a couple of years and the approval to operate as an ERP shall provide value addition to the users of such ratings.

The company shall offer sovereign credit ratings and Global Scale rating of the debt Securities through its subsidiary incorporated in the IFSC Gift City.

The company expects the inclusion of India''s in the global bond indices would enhance the fund flow into the country thereby creating opportunities for ratings.

The subsidiary Care Ratings Africa has signed a MoU in the area of credit trading.

The company is optimistic on the growth potential in these new business lines and look forward to their contribution in the growth of Care Edge group.

As a part of transformative journey, the company has invested tremendous effort in enhancing and automating the rating processes and improving efficiencies across or organizational functions

The company aims to become tech driven and will continue to invest in people, technology, branding and growth initiatives to achieve this goal.

The company is also exploring the use case of AI in strengthening internal controls.

The company has reprioritized a few products and taken some products to market having potential for growth.

The company expects to improve margins, going forward.

The company has two subsidiaries in Africa one is already up and operating and the other one is just established and is awaiting the regulatory license which is expected to be received in H1FY2025.

The subsidiary which is already operating since 2015 has been already a profit making and dividend paying entity

Analytics division clientele is in the BFSI segment so principally the mandates are from the banking and financial institutions as well as the NBFCs.

In the advisory consulting business, the clientele is corporate.

There are two products which are ready to go to the market stage and certain products will go live in the next year.

As per the company, the break even in business such as risk solutions business and analytics business is of paramount importance and absolute priority.

The company has six products on the ESG ratings side, three on the plain ESG rating side and three products on the core ESG rating side. The company is ready to assign ratings across these six product categories.

Economy

Despite facing headwinds from various global fronts, the Indian economy showcased remarkable resilience in the past year. There were challenges stemming from weakening external demand, geopolitical tensions and weather related adversities. Nevertheless, the domestic economy stood strong demonstrating robust growth estimated at a healthy 7.6% in FY24.

This growth was propelled by a buoyant gross fixed capital formation rising 10.2% largely attributed to the government''s focus on capital expenditure.

However, there was subdued growth in private consumption primarily due to the weather related uncertainties and slow rural demand recovery.

On a positive note, urban demand remained robust and the anticipation of a favorable Monson augurs well for rural demand recovery in FY25.

In terms of investments, the government led capital expenditure continues to drive the growth, while the private sector capex remains sluggish. However, there are promising signs with the manufacturing sector''s capacity utilization surpassing the long-term average and higher investment announcement indicating an improving intent to invest. As per the company, facilitating private capex will be one of the key parameters in the policy framework.

The fundraising through corporate bond insurances increased 19% to Rs 10.2 lakh crore in FY24. The issuances of commercial paper remain stable at Rs 13.8 lakh crore.

Bank credit to Industries grew by 8.5% in FY24 compared to 5.6% last year, largely driven by 7% growth in large Industries. However, some moderation was witnessed in credit to NBFCs and personal loans due to the increased risk weights.

As per the company, an improvement in merchandise exports and inclusion in global bond indices is anticipated to bolster foreign portfolio investment inflows.

The Indian economy stands comfortably, while there needs to be watch on challenges posed by volatile commodity prices and geopolitical uncertainties.