Recommendation From Miscellaneous 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 year.

Size of banking assets in India is expected to touch USD 28.5 trillion by FY25. Banks’ total credit stood at USD 1 trillion till the time of filing this report in July, 2016. According to Association of Mutual Funds in India (AMFI), assets of the mutual fund sector have hit an all-time high of about Rs 12.5 trillion as of August 2015. India is one of the most vibrant global economies on the back of robust banking and insurance sectors. The country is also projected to become the fifth largest banking sector globally by 2020, as per a joint report by KPMG-Confederation of Indian Industry (CII).

CRISIL is a provider of ratings, data and research, analytics and solutions. It operates through three segments viz. ratings, research and advisory. It conducts infrastructure advisory and risk solutions business through its subsidiary, CRISIL Risk and Infrastructure Solutions. CRISIL also provides advisory services in urban development and infrastructure financing in India and other emerging countries.

On the financial front, CRISIL reported a strong earnings in Q2CY16. The company’s revenue was posted at Rs 375 crore which has increased by 14 per cent in Q2CY16 as compared to same period in the previous fiscal year. CRISIL maintained its ratings business despite of weak bond issuances and muted demand for working capital by using its innovative structures and products. Its EBITDA too rose by 5 per cent to Rs 97.63 crore in Q2CY16 on yearly basis. CRISIL’s net profit has increased by 8 per cent to Rs 69.81 crore in Q2CY16 as compared to same period in previous financial year.

CRISIL’s top line increased by 15.2 per cent to Rs 734 crore in H1CY16 as compared to same period in previous year. The company’s EBITDA too rose by 9.51 per cent to Rs 210 crore in H1CY16 on yearly basis. Its net profit also rose by 22.4 per cent to Rs 148 crore in H1CY16 as compared to same period in previous fiscal year.

On segmental revenue front, CRISIL earned 63.75 per cent from research, 31.46 per cent from rating services and remaining 4.79 per cent from advisory business during CY16. On geographic segmental revenue front, CRISIL earned 29.63 per cent from Europe, 31.87 per cent from India, 32.57 per cent from North America, 5.92 per cent from rest of the world during CY16.

On a CAGR basis, CRISIL’s net income from operations has grown by 14 per cent from CY11 to CY15. The company’s EBITDA and net profit in the past five years have grown by 10 and 8 per cent respectively.

CRISIL has headcount of 3629 as of CY15. The company’s revenue per employee stood at Rs 39.2 lakh as of CY15. Its net profit per employee remained at Rs 10.2 lakh as of CY15. On the back of strong financials, consistent improvement its CAGR; we recommend our reader- investors to BUY this stock.