Recommendation From Other Financial Services Sector
This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 yearCRISIL
CREDITABLE PERFORMANCE MAKES IT NUMERO UNO IN RATINGS
HERE IS WHY
Attractive valuations
Business expansion
Debt-free company
Credit Rating Information Services of India, popularly known as CRISIL, operates as a ratings, research, risk and policy advisory company. CRISIL is an India-based analytical company, majorly owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The business divisions of the company may be broadly classified as: Rating- the company rates all kind of organisations such as industrial companies, banks, SMEs, non-banking financial institutions, insurance providers, mutual funds, infrastructure entities, state governments, and urban local bodies
In the absence of a credible tracking and grading tools, stakeholders in the Indian infrastructure sector were forced to rely on rare data points for information gathering and evaluation. This slowed down the decision-making and posed bottlenecks to reliable investment decisions. The company has been providing objective research and high-end analytics to support strategic and tactical decision-making, including competitor analytics, capital analytics, client analytics and country analytics. The company provides a comprehensive range of risk management tools, analytics and solutions to financial institutions, banks and corporates in India, the Middle-East, Africa, South Asia and South-East Asia.
The company’s growth is led by Pragmatix, which was acquired earlier this year by CRISIl. The company's infrastructure advisory also won orders from multilateral and government entities, including those from the energy sector.
On the financial front, on a standalone basis, net sales of the company on a YoY basis have remained stable at Rs.281.74 crore in Q2FY19 as against Rs.280.21 crore in Q2FY18. The profit after tax (PAT) has grown 18 per cent in Q2FY19 and came in at Rs.65.29 crore versus Rs.55.33 crore posted in Q2FY18. On the annual front, the net sales of the company grew 4 per cent and stood at Rs.1177.38 crore in FY18 as against Rs.1129.64 crore in FY17. On the valuation front, the company is available at a PE multiple of 42.39 on its TTM earnings as against the industry of 34.28x. The return on equity (RoE) stood at 29.02 per cent and the return on capital employed stood at 42.38 per cent.
The recovery in corporate capex and improvement in banking credit growth are likely to boost overall prospects for rating agencies such as CRISIL. Besides, the government’s impetus on infrastructure is likely to drive the company's advisory business going forward. With the company’s new offerings in transaction banking, lending and securities services, it has expanded its business in new client segment such as regional banks. Being a market leader, CRISIL is well-positioned to reap the benefits of new opportunities in years to come. The company also has robust return ratios (ROCE of 42.7% and ROE of ~30%). Considering the confluence of the above factors, we recommend our reader-investors to BUY the stock.
