CARE Ratings

CARE Ratings delivered robust financial results for FY24. Standalone revenue from operations grew 14% to INR283 crores, with PAT increasing 15% to INR119 crores. Consolidated revenue saw an even higher growth of 19% to INR332 crores, and consolidated PAT rose 20% to INR103 crores. For Q4 FY24, standalone revenue was INR75 crores (up 10% YoY) and PAT was INR35 crores (up 35% YoY), while consolidated revenue was INR90 crores (up 16% YoY) and PAT was INR25 crores (up 22% YoY). The Board recommended a final dividend of INR11 per share, bringing the total FY24 dividend to INR18 per share.

The company is actively diversifying its revenue streams, with the rating to non-rating business mix shifting to 90:10 in FY24, up from 94:6 in FY23. Management aims to further increase the non-rating contribution to an 80:20 mix over time. This shift is supported by significant growth in non-rating subsidiaries; the analytics division's top-line grew over 100%, and the advisory & consulting division grew over 65%, becoming marginally profitable. The core ratings segment also maintained strong growth at 14% for FY24.

CARE Ratings is expanding into new high-potential areas. Its subsidiary, CARE ESG Ratings Limited, received SEBI approval on May 2, 2024, and is ready to offer 6 ESG rating products, including core and transition ratings. Additionally, the company is establishing an entity in IFSC-GIFT City to provide sovereign credit ratings and global scale ratings, aiming to capitalize on India's inclusion in global bond indices and fill a domestic market gap.

The company's international presence is growing, particularly in Africa. The Mauritian subsidiary, operational since 2015, is profit-making and dividend-paying, contributing INR10 crores in revenue and a 35% PAT margin for the Africa region in FY24. A South African subsidiary is awaiting its regulatory license, which is expected in H1 FY25. Management expressed confidence in replicating its Mauritian success in South Africa, citing the significant bond market size there.

The Indian economy demonstrated remarkable resilience, growing 7.6% in FY24, primarily driven by a 10.2% surge in gross fixed capital formation. Corporate bond issuances increased 19% to INR10.2 lakh crores, and bank credit to industries grew 8.5%. While private sector capex remained sluggish, management noted promising signs with manufacturing capacity utilization surpassing long-term averages, anticipating a pickup in private investment in the near future, despite global geopolitical uncertainties.

While non-rating subsidiaries like analytics are still incurring losses, management is focused on achieving breakeven for this entity within 'a couple of years' by prioritizing credit risk management and monitoring products. The company is also investing significantly in technology, including leveraging Generative AI, to enhance analyst productivity and strengthen internal controls, aiming to become a tech-driven hub for efficiency and innovation.