CRISIL-3QCY2012RU

7/31/2019 CRISIL-3QCY2012RU

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Please refer to important disclosures at the end of this report 1

)

EBITDA 91.2 83.9 8.7 59.7 52.8

EBITDA margin (%) 33.7 38.1 (446) 27.6 610

Source: Company, Angel Research

For 3QCY2012, CRISILs net sales grew by 23.1% yoy to `271cr. The company

reported a 446bp yoy contraction in its OPM to 33.7%. The net profit declined by

0.7% yoy to `60cr.

: For 3QCY2012,CRISILs top line reported a 23.1% yoy growth to `271cr. Its rating segment

witnessed a 22.6% yoy growth to `103cr, backed by decent growth in the bank

loan rating segment. The research segment growth picked up during 3QCY2012,

registering a 37.6% yoy growth to `152cr (10.2% yoy in 2QCY2012). The

advisory segment performance remained sluggish growing by 3.3% yoy

(de-growth of 21.6% yoy in 2QCY2012) to `15cr. Going ahead, Coalition

Development Ltd will drive the next leg of growth for CRISIL. For 3QCY2012, the

EBITDA declined by 8.7% yoy to `91cr on the back of margin contraction. The

EBITDA margin contracted by 446bp yoy to 33.7%, largely due to higher staff

cost, which increased to 44.5% of sales in 3QCY2012 from 40.5% of sales in

3QCY2011 and forex loss of `7cr in 3QCY2012 as against profit of `9cr in

3QCY2011. The net profit came in at `60cr, down 0.7% yoy; while margincontracted by 531bp yoy to 22.0%, largely due to increased tax rate. CRISILs tax

rate increased to 29.9% of PBT in 3QCY2012 vs 26.0% of PBT in 3QCY2011.

The company reported other income of `3cr during the quarter as compared to

`5cr reported in 3QCY2012.

: In June 2012, CRISIL signed an agreement to buy 100%

of equity shares of the UK-headquartered Coalition Development along with its

subsidiaries, which we expect would drive the next leg of growth for CRISIL.

Accounting for Coalition Developments revenue, we expect CRISIL to post a

20.6% CAGR in revenue and 14.5% CAGR in PAT over CY2011-13 and continue

to maintain its leadership position. Despite the recent buy back, the stock is

available at a rich valuation of 24.4x CY2013E earnings, which is at the higher

end of its historical range of 13.4x-26.9x and five-year median of 19.4x one-yearforward EPS.

Key financials (Consolidated)

% chg 17.5 31.1 21.5 19.7

% chg (0.2) 28.6 10.8 18.4

EBITDA Margin (%) 34.5 34.2 33.3 33.8

P/E (x) 32.5 32.0 28.9 24.4

RoE (%) 49.6 51.1 49.0 46.6

RoCE (%) 47.4 62.6 64.3 62.0

P/BV (x) 16.9 15.9 12.7 10.3

EV/Sales (x) 10.2 7.7 6.3 5.2

EV/EBITDA (x) 29.6 22.4 18.9 15.4


CMP `994

Target Price -

Investment Period -

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 53.0

MF / Banks / Indian Fls 16.8

FII / NRIs / OCBs 10.9

Indian Public / Others 19.3

Abs. (%) 3m 1yr 3yr

Sensex 9.4 12.2 8.5

CRISIL (9.5) 9.7 125.6

Face Value (`)

BSE SensexNifty

Reuters Code

6,652

0.6

1262/748

5,423

Credit Rating

Avg. Daily Volume

Market Cap (`cr)

Beta

52 Week High / Low

1

18,7925,719

CRSL.BO

CRISIL@IN

022-3935 7800 Ext: 6847

[email protected]

Performance Highlights

3QCY2012 Result Update | Credit Rating

October 18, 2012


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CRISIL | 3QCY2012 Result Update

October 18, 2012 2

Exhibit 1:3QCY2012 Performance highlights

Total Expenditure 179.8 136.2 32.0 156.9 14.6 484.1 399.8 21.1

OPM (%) 33.7 38.1 (446) 27.6 610 32.5 33.7 (114.6)

Depreciation 9.2 7.4 24.8 8.0 15.6 25.0 21.6 15.9

Interest - - - - - - - -

Other Income 3.2 5.3 (40.0) 9.6 (67.0) 17.5 13.5 29.2

Tax 25.4 21.6 17.8 17.6 65.2 44.1

Exceptional Items - - - - - - - -

NPM (%) 22.0 27.3 (531) 20.2 186.2 22.4 25.0 (263)


Revenue growth picks up in 3QCY2012

For 3QCY2012, CRISILs top-line reported a 23.1% yoy growth to `271cr. Its

rating segment witnessed a 22.6% yoy growth to `103cr, backed by a decent

growth in the bank loan rating segment. The research segment growth picked up

during 3QCY2012 (Coalition Development numbers included), registering a

37.6% yoy growth to `152cr (10.2% yoy in 2QCY2012). The advisory segments

performance remained sluggish, growing by 3.3% yoy (de-growth of 21.6% yoy in

2QCY2012) to `15cr. Going ahead, Coalition Development will drive the next leg

of growth for CRISIL.

Exhibit 2:Growth picks up yoy


220225 230

217

271

(10)

(5)

0

5

10

15

2025

30

35

40

45

0

50

100

150

200

250

300

3QCY2011 4QCY2011 1QCY2012 2QCY2012 3QCY2012

Net Sales (LHS) Growth (qoq) Growth (yoy)

(`cr) (%)


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October 18, 2012 3

EBITDA margin contracts on back of high staff cost and forex loss

For 3QCY2012, the EBITDA declined by 8.7% yoy to `91cr on the back of margin

contraction. The EBITDA margin contracted by 446bp yoy to 33.7%, largely due to

higher staff cost, which increased to 44.5% of sales in 3QCY2012 from 40.5% of

sales in 3QCY2011 and forex loss of `7cr in 3QCY2012 as against profit of `9cr

in 3QCY2011

Exhibit 3:OPM trend


Bottom-line flat yoy on account of higher tax and lower other income

CRISILs net profit came in at `60cr, down 0.7% yoy; while margin contracted by531bp yoy to 22.0%, largely due to increased tax rate. The tax rate increased to

29.9% of PBT in 3QCY2012 vs 26.0% of PBT in 3QCY2011. The company

reported other income of `3cr during the quarter as compared to `5cr reported in

3QCY2012.

Exhibit 4:PAT trend


38.1

35.6 35.8

27.6

33.7

25

30

35

40

45


(%)

60.2 55.8 57.0 43.7 59.7

27.324.9 24.8

20.2

22.0

0

5

10

15

20

25

30

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0


Net Profit (LHS) NPM (RHS)

(`cr) (%)(`cr) (%)


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October 18, 2012 4

Outlook and valuation

In June 2012, CRISIL signed an agreement to buy 100% of the equity shares of the

UK-headquartered Coalition along with its subsidiaries, which we expect to drive

the next leg of growth for CRISIL. Accounting for Coalition Development revenues,we expect CRISIL to post a 20.6% CAGR in revenue and 14.5% CAGR in PAT over

CY2011-13 and continue to maintain its leadership position. Despite the recent

buy back, the stock is available at rich valuation of 24.4x CY2013E earnings,

which is at the higher end of its historical range of 13.4x-26.9x and five-year

median of 19.4x one-year forward EPS.

Exhibit 5:P/E band


Company background: CRISIL is Indias largest credit rating agency, with a

market share of around 60%, and is one of the biggest research houses in India.

With the recent acquisition of UK-headquartered Coalition Development, robust

credit demand and strong infrastructure spend; the company has witnessed a

strong growth across all its segments. The company has also recently finished

buyback of shares, which is the second time in a span of two year. The buyback

was carried out at a price of `871/shareaggregating to `80cr.

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

Dec-

05

Aug-

06

Apr-

07

Dec-

07

Aug-

08

Apr-

09

Dec-

09

Aug-

10

Apr-

11

Dec-

11

Aug-

12

Price 10x 15x 20x 25x 30x


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October 18, 2012 5

Profit and loss statement (Consolidated)

% chg 4.4 17.5 31.1 21.5 19.7Total Expenditure 338 413 544 670 797

Establishment Expenses 55 71 78 105 125

Other Expenses 75 84 115 139 166

Personnel 208 258 352 427 505

Other - - - - -

% chg 11.3 9.2 29.9 18.4 21.5

(% of Net Sales) 37.1 34.5 34.2 33.3 33.8

Depreciation& Amortisation 15 21 30 35 46

% chg 11.5 6.5 28.7 18.5 20.3

(% of Net Sales) 34.3 31.1 30.6 29.8 30.0

Interest & other Charges - - - - -

Adj.Other Income 23 68 23 23 21

(% of PBT) 11.1 25.6 8.2 7.0 5.5

Share in profit of Associates - - - - -

% chg 10.9 27.3 4.3 16.9 18.4

Extraordinary Expense/(Inc.) - - - - -

Tax 47 59 69 93 111

(% of PBT) 22.5 22.2 25.1 29.0 29.0

Add: Share of earnings of associate - - - - -

Less: Minority interest (MI) - - - - -

% chg 14.4 27.8 0.5 10.8 18.4

Prior period items - - - - -

% chg 14.4 (0.2) 28.6 10.8 18.4(% of Net Sales) 29.9 25.4 25.0 22.8 22.5

% chg 14.4 30.1 1.6 10.8 18.4


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October 18, 2012 6

Balance sheet (Consolidated)

Equity Share Capital 7.2 7.1 7.0 7.0 7.0Preference Capital - - - - -

Reserves& Surplus 427 387 406 512 636

Minority Interest

Total Loans - - - - -

Deferred Tax Liability - - - - -

Gross Block 184 310 334 466 591

Less: Acc. Depreciation 64 85 108 143 189

Capital Work-in-Progress 64 0 1 0 -

Current Assets 323 343 443 489 589

Cash 158 161 258 273 344

Loans & Advances 62 51 54 59 65

Other Current Assets 11 22 44 46 48

Debtors 92 109 88 110 132

Other - - - - -

Current liabilities 200 214 285 323 378

Deferred Tax assets (Net) 10 14 13 15 15


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October 18, 2012 7

Cash flow statement (Consolidated)

Profit before tax 207 267 275 322 381

Depreciation 15 21 30 35 46Change in Working Capital 16 (14) 71 13 31

Less: Other income 23 70 23 23 21

Direct taxes paid 47 59 69 93 111

Inc./ (Dec.) in Fixed Assets (54) (62) (25) (131) (125)

Inc./ (Dec.) in Investments 1 91 10 - -

Inc./ (Dec.) in loans and advances (9) 11 (3) (5) (6)

Other income 23 70 23 23 21

Issue/(Buy Back) of Equity - (79) (79) 0 -

Inc./(Dec.) in loans - - - - -

Dividend Paid (Incl. Tax) (85) (168) (90) (123) (147)

Others (16) (5) (24) (2) -

Inc./(Dec.) in Cash 28 4 96 16 70


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October 18, 2012 8

Key ratios

P/E (on FDEPS) 42.3 32.5 32.0 28.9 24.4P/E (on basic, reported EPS) 42.3 32.5 32.0 28.9 24.4

P/CEPS 38.7 29.4 27.9 25.0 20.8

P/BV 15.7 16.9 15.9 12.7 10.3

Dividend yield (%) 1.1 2.1 1.2 1.6 1.9

Market cap. / Sales 12.3 10.5 8.0 6.6 5.5

EV/Sales 12.0 10.2 7.7 6.3 5.2

EV/EBITDA 32.3 29.6 22.4 18.9 15.4

EV / Total Assets 14.8 16.3 15.3 12.2 9.7

EPS (Basic)

EPS (fully diluted) 22.3 29.0 29.4 32.6 38.6

Cash EPS 22.3 29.0 29.4 32.6 38.6

DPS 24.3 31.9 33.7 37.6 45.2

Book Value 10.0 20.0 11.0 15.0 18.0

60.0 55.6 59.0 74.0 91.6

EBIT margin

Tax retention ratio 34.3 31.1 30.6 29.8 30.0

Asset turnover (x) 77.5 77.8 74.9 71.0 71.0

ROIC (Post-tax) 4.0 3.5 4.8 5.4 4.7

Cost of Debt (Post Tax) 106.4 83.6 109.3 115.0 99.7

Leverage (x) - - - - -

Operating ROE - - - - -

106.4 83.6 109.3 115.0 99.7

ROCE (Pre-tax)

Angel ROIC (Pre-tax) 46.6 47.4 62.6 64.3 62.0

ROE 183.6 130.2 146.1 162.2 140.4

40.6 49.6 51.1 49.0 46.6

Asset Turnover (Gross Block)

Asset Turnover (Net Block) 2.9 2.6 2.6 2.5 2.3

Asset Turnover (Total Assets) 4.4 3.7 3.7 3.7 3.3

Operating Income / Invested Capital 1.4 1.5 2.0 2.2 2.1Inventory / Sales (days) 4.0 3.5 4.8 5.4 4.7

Receivables (days) - - - - -

Payables (days) 58 58 43 36 37

WC cycle (ex-cash) (days) 122 120 110 110 106

(21) (19) (29) (38) (37)

Gross debt to equity

Net debt to equity - - - - -

Net debt to EBITDA - - - - -

Interest Coverage (EBIT / Interest) - - - - -


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October 18, 2012 9

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any wayresponsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. WhileAngel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.

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Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or

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Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in

connection with the use of this information.

Disclosure of Interest Statement CRISIL

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)

Reduce (-5% to 15%) Sell (< -15%)

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors

CRISIL-3QCY2012RU

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