Fundamental Analysis Of Crisil: Credit rating agency brings in more clarity and transparency by researching the creditworthiness of the company. These organizations undertake an extensive research of the companies and industries and determine where does the company stand compared to its peers.
Out of the many organizations, we have picked the biggest player- Crisil Ltd. In this article, we will perform a fundamental analysis of Crisil and look at the future prospects of the company.
Fundamental Analysis Of Crisil – Company Overview
Crisil is a globally diversified analytical company whose main task is to provide ratings after an in-depth analysis and they do provide policy advisory services. The majority of the company is owned by S&P Global Inc which is the top credit rating provider in the world.
The company helps in providing transformative solutions that are highly essential for the organization in their process of making decisions. Crisil is India’s premium rating agency which has successfully been able to rate 35,000 and more companies ranging from large and medium scale businesses.
Crisil is one of the foremost rating agencies in providing strategic benchmarking, with a client base of 300+ globally. In terms of reach, the company has its presence worldwide operating in more than 12 countries with a strong employee base of 4700.
Crisil has a wide range of client base which includes micro, small, and medium (MSME) to large corporations. It also includes top global financial institutions. The company also works with commercial and investment banks and other asset management firms at the international level.
Crisil helps businesses make more informed decisions regarding pricing and valuation decisions and also helps them reduce the duration that is required for the timing of the market.
Fundamental Analysis Of Crisil – Segment Analysis
Crisil as a company has identified three business segments,
(1) Rating Services
(2)Research Analytics and Solutions
(3) Consulting
Let us now have a look at each of these segments in a detailed way:
(1) Ratings Services
Rating services being one of the major services the company does, the performance of the segment looks impressive and soundful.
As of 2023, Crisil was able to announce 1,200 new bank loan ratings which is an upside growth of 20% on a year-on-year basis.
With a sharp and well-focused analytical rigor, Crisil under the segment was able to maintain a strong market leader position in the corporate bond market ensuring the quality of the ratings. This is the second largest contributor to the overall revenue of Crisil.
(2) Research Analytics and Solutions
Under this segment, Crisil was able to launch 38 new fixed-income indices for the requirements of the mutual funds, and CRISIL AIF benchmarks were launched as well. The company was able to win large mandates from mutual funds, the World Gold Council, and many more.
To keep the process innovative and updated, Crisil has enhanced the features that are available in Alphatrax,(a wealth tracking solution) to enhance customer satisfaction.
AIF benchmarks continued the process throughout the year, with assets worth 8,500 crores on the Crisil Indices. This remains the biggest contributor to their overall revenue.
(3) Consulting
Crisl in this segment was able to increase its market share from the international market, along with building an order book with large mandates. The company was able to maintain strong traction in sectors of infrastructure and transport. With a greater share, the segment was able to maintain a leadership position at the international levels with the multilateral and bilateral agencies.
Industry Overview
The credit rating industry in India mainly consists of six players namely, CRISIL, CARE, FITCH, ICRA, ONICRA, and SMERA.
The credit rating agencies in India came into existence after the 1980s and currently, all the Credit Rating Agencies in India are under the regulation of SEBI (Securities and Exchange Board of India). Economic surveys are used to place their criticism of the methodologies that were adopted by the Credit rating agencies. But as time passed, Credit rating agencies in India started adapting to the requirements.
The rating industry as a whole saw good growth in the years 2022 and 2023 as compared to the previous years. The wholesale bank credit which was driven by the Micro, Small, and Medium Enterprises (MSME) resulted in healthy growth.
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Fundamental Analysis Of Crisil – Financials
Revenue & Net profit
The Income statement of Crisil shows revenue from operations growing from 2769 crores in FY 2022 to 3140 crores in FY 2023. This is a year-on-year (YOY) growth of 13.39%. The Net profits of Crisil as of FY 2022 stood at 564 crores. In FY 2023 it was increased to 658 crores. The company’s revenue as well as net profit from past years is witnessing a gradual increase.
The company was able to achieve better revenue from the operations due to its intensity in the bank loan rating(BLR) market in which the company was able to publish more than 1200 new BLRs in FY 2023, along with other factors such as increasing preferences by the Indian banks for the credit rating agencies is also an added advantage.
The table below shows the revenue from operations of the company:
| Fiscal Year | Revenue from operations (In Crores) | Net Profit (In Crores) |
|---|---|---|
| 2023 | 3140 | 658 |
| 2022 | 2769 | 564 |
| 2021 | 2301 | 466 |
| 2020 | 1982 | 355 |
| 2019 | 1732 | 344 |
Profit margins
The operating profit margin (OPM) of the company increased from 26% in FY 2022 to 28% in FY 2023 as per its income statements. The net profit margin of the company stood at 20.96% as of FY 2023. In the previous FY 2022, the net profit margin of the company was 19.52%.
Both the operating profit margin (OPM) and Net profit margin (NPM) of the company have increased in FY 2023 along with the increase in the revenue and earnings of the company.
The table below shows the operating profit margin and net profit margin of the company:
| Fiscal Year | Operating profit margin | Net profit margin |
|---|---|---|
| 2023 | 28% | 20.96% |
| 2022 | 26% | 19.52% |
| 2021 | 27% | 19.59% |
| 2020 | 26% | 17.18% |
| 2019 | 26% | 19.06% |
Return ratios
The Return on Equity(ROE) and Return on Capital employed(ROCE) are two important return metrics to look at. The Return on equity(ROE) of the company stood at 33.1% as of FY 2023. On an average of 3 years, the Return on Equity (ROE) of the company stood at 32%.
The Return on capital employed(ROCE) by the company stood at 42.4%.On an average of 3 years, the return on capital employed(ROCE) is at 40.4%. With continuous improvements in the revenue and profits each year, both the Return on Equity and Return on capital employed of the company are getting better making it impressive and stable for the investors.
The table below shows the operating profit ROE and ROCE of the company:
| Fiscal Year | ROE (%) | ROCE (%) |
|---|---|---|
| 2023 | 33.10% | 42.40% |
| 2022 | 33.49% | 40.42% |
| 2021 | 32.23% | 38.30% |
| 2020 | 28.56% | 34.82% |
| 2019 | 29.80% | 41.72% |
Leverage ratios
The debt-to-equity ratio of the Crisil company as of 2023 is at 0.02 which is quite low. In FY 2022 the company had a debt of 0.06 and in FY 2023 has reduced its debt portion by making the repayments which helped it bring the debt down to 0.02.
Further, the interest coverage ratio of the company was 117 times which in FY 2023 was increased to 238 times which signifies the safety of the company in making the interest payments. The reduction in the debt portion of the company has led to an increase in the interest coverage ratio.
The table below shows the Debt-to-equity and Interest coverage ratio of the company:
| Fiscal Year | Debt to Equity | Interest Coverage Ratio |
|---|---|---|
| 2023 | 0.02 | 238 |
| 2022 | 0.06 | 117 |
| 2021 | 0.05 | 70.25 |
| 2020 | 0 | 32.85 |
Fundamental Analysis Of Crisil – Key Metrics
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹4,922.00 | Market Cap (Crores) | ₹35,989.00 |
| EPS | ₹90.10 | Stock P/E | 54.7 |
| ROE | 33.10% | ROCE | 42.40% |
| Promoters Holding | 66.6 | FII Holding | 7.19% |
| Debt to Equity | 0.02 | P/B | 16.4 |
| Operating Profit Margin | 28.00% | Net profit margin | 20.96% |
Fundamental Analysis Of Crisil – Future Plans
- Crisil Company is well known for providing independent and unbiased ratings through which they can gain a greater market share and is aiming to maintain the market leader position.
- Crisil is building up new plans for the banks in their lending business, with proper strategy and allocation of funds.
- Crisil to keep its segment more active is offering risk solutions and consulting solutions, especially in the area of planning and making strategies along with implementation and management of risk.
Read more: Fundamental Analysis of Canara Bank
Conclusion
As we come to the end of the article “Fundamental Analysis Of Crisil”, to give a quick brief. We went through the company overview, segments, industry overview, and plans of the company were analyzed. Do drop your views in the comment section below.
Written by Nishanth P
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