CARE Ratings Limited — Q4 FY25 earnings call

Call held 14 May 2025

Management summary

CARE Ratings delivered a robust performance in Q4 and FY25, driven by strong growth in both domestic and overseas ratings businesses, coupled with increased contributions and improved profitability from non-ratings verticals. Strategic initiatives like verticalized business development, technology adoption, and expansion into new areas such as IFSC and ESG ratings have yielded positive outcomes. The company remains focused on outperforming industry growth and leveraging operating efficiencies.

Highlights

  • Consolidated revenue from operations for FY25 reached INR402.3 crores, marking a growth of 21% Y-o-Y.

  • Consolidated operating profit stood at INR155.3 crores, reflecting a growth of 39% Y-o-Y with an operating margin of 39%.

  • Consolidated PAT for FY25 was INR140 crores, registering a growth of 37% over FY24.

  • Domestic Ratings business (standalone) reported highest ever income from operations at INR336.7 crores, up 19% Y-o-Y.

  • Non-Ratings businesses contributed INR42.2 crores to revenue in FY25, with CareEdge Analytics significantly reducing losses to single digits and CareEdge Advisory achieving double-digit margins.

  • The Ratings to non-Ratings business mix stood at 89.5% to 10.5% in FY25, with a long-term target to transition to an 80-20 mix.

  • CareEdge Global IFSC rated US$3 billion in debt and 39 sovereigns within two quarters of operation, becoming the first Indian agency in global scale ratings.

  • A final dividend of INR11 per share was recommended, bringing the total FY25 dividend to INR18 per share.

Key financials

  1. Consolidated Revenue ₹402.3 Cr +21%YoY
  2. Consolidated Operating Profit ₹155.3 Cr +39%YoY
  3. Consolidated Operating Margin 39%
  4. Consolidated PAT ₹140 Cr +37%YoY
  5. Standalone Income from Operations ₹336.7 Cr +19%YoY
  6. Standalone PAT ₹147.9 Cr +24%YoY

What they filed

Q1 FY27: revenue up 19.1%, net profit up 26.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue117 96 110 94 136 +16%112 +17%131 +19%112 +19%
EBITDA56 30 47 28 68 +21%40 +33%61 +30%35 +25%
Net profit47 28 43 26 57 +21%37 +32%53 +23%33 +27%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Domestic Ratings Business (Standalone)
    ₹336.7 Cr Income from Operations₹155.2 Cr Operating Profit46% Operating Margin₹147.9 Cr PAT
  • Non-Ratings Businesses (Advisory, Analytics, ESG)
    ₹42.2 Cr Revenue Contribution
  • Ratings Subsidiaries (Consolidated - Standalone)
    ₹23.4 Cr Revenue Contribution

Guidance & targets

Business Mix

  • Ratings to non-Ratings business mix Business Mix · long-term · High confidence 80-20
    Our long-term target remains to transition towards an 80-20 mix underpinned by strong growth across both the segments.

    — Mehul Pandya, MD and Group CEO

  • Ratings to non-Ratings business mix Business Mix · over a 3-year period · Medium confidence nearer to 80-20
    I think in my earlier interactions, I told that over a 3-year period, we'd like to reach nearer to that, right.

    — Mehul Pandya, MD and Group CEO

Growth

  • Company growth Growth · ongoing · Medium confidence better than the industry
    Rajiv, our effort continues to ensure that we continue our growth, which could be better than the industry, right.

    — Mehul Pandya, MD and Group CEO

Profitability

  • Operating margins Profitability · future · Medium confidence remain range bound
    But at the same time, as we have seen this is the kind of the level at which we are operating now, we'd like to remain range bound.

    — Mehul Pandya, MD and Group CEO

Cost Management

  • Employee cost to operating revenue Cost Management · ongoing · Medium confidence remain range bound
    See, we would like to remain range bound as far as our employee cost to operating revenue is concerned.

    — Mehul Pandya, MD and Group CEO

Market context

  • GDP growth Macroeconomic · FY26 · High confidence 6.2%
    Looking ahead, we project the GDP growth to moderate to 6.2% in FY '26.

    — Mehul Pandya, MD and Group CEO

Risks & concerns

  • Volatile global trade policies and geopolitical concerns

    medium

    Identified as key headwinds for the Indian economy in FY26, potentially leading to subdued private sector investment.

    Management acknowledged

  • Subdued private sector investment

    medium

    Expected to remain subdued in coming quarters due to global trade policy uncertainties and geopolitical concerns.

    Management acknowledged

  • Initial losses in ESG rating business

    low

    Management states they are absorbing losses in the evolving ESG space, viewing it as a patient investment with long-term potential.

    Management acknowledged

  • Limited depth of bond market for lower-rated categories

    low

    The bond market is mostly for AA and AAA categories; a significant jump requires deepening for other rating categories, which is a gradual process.

    Management acknowledged

Areas of evasion (2)

  • Specific volume of debt rated in FY25
  • Direct comparison of CARE's growth drivers vs. competitors

Q&A highlights

3 direct
Drivers of strong domestic ratings growth despite subdued borrowing activity and efforts to improve pricing. Direct
our market share, if you look at the bond market, that has increased on a year-on-year basis. This is largely because the bond market and the securitization market are largely an investor-driven market. Sachin just mentioned the quality of ratings, which have come out from CARE consistently over the past years. And that has also improved our presence and our acceptance.

Reveals that market share gains in bond and securitization markets, driven by rating quality and focused segment targeting, are key drivers of growth beyond overall market borrowing volumes, along with continuous pricing efforts.

Asked by Rajiv Mehta

Reasons for the industry's high revenue growth in FY25 despite mixed macro data, and the future outlook for subsidiary margins, especially ESG. Direct
it's a focused aspect in terms of having more clientele come to you as well as a consistent push on improving the pricing. Both these aspects, they play out as far as strategy is concerned... Coming to your aspects in terms of the future as far as the ESG space is concerned, yes, it's an evolving space. It's an evolving domain at this juncture, right. And there is a lot of, I would say, conceptual acceptance which is required to be there...

Management attributes growth to focused strategy, pricing, and consistent rating performance, and acknowledges initial losses in ESG as an evolving space requiring patient investment and market awareness.

Asked by Balaji

The shift in corporate borrowing towards bond markets, its structural nature, and the timeline for achieving the 80-20 Ratings to non-Ratings business mix, including potential inorganic opportunities. Direct
I think in my earlier interactions, I told that over a 3-year period, we'd like to reach nearer to that, right... And any opportunity which could be coming our way, I mean, we are perfectly well positioned in terms of evaluating that and taking the right decisions.

Confirms the structural shift towards bond markets (though gradual) and reiterates the 3-year timeframe for the 80-20 business mix target, while also indicating openness to strategic inorganic growth opportunities.

Asked by Abhijeet Sakhare

2 min read 5 chapters

Detailed narrative

Strong Financial Performance in FY25

CARE Ratings reported a robust financial performance for FY25. Consolidated revenue from operations grew by 21% Y-o-Y to INR402.3 crores, while consolidated PAT increased by 37% Y-o-Y to INR140 crores. The operating profit also saw a significant jump of 39% Y-o-Y, reaching INR155.3 crores with an operating margin of 39%. The domestic Ratings business (standalone) achieved its highest ever income from operations at INR336.7 crores, a 19% Y-o-Y increase, with a PAT of INR147.9 crores, up 24% Y-o-Y.

Strategic Diversification and New Verticals

The company's diversification strategy is yielding results, with non-Ratings businesses contributing INR42.2 crores to revenue in FY25. CareEdge Analytics significantly reduced its losses to single digits, and CareEdge Advisory reported healthy top-line growth with double-digit margins. The Ratings to non-Ratings business mix currently stands at 89.5% to 10.5%, with a long-term target to achieve an 80-20 mix within three years. New ventures like CareEdge Global IFSC have successfully rated US$3 billion in debt and 39 sovereigns within two quarters, and CareEdge ESG received regulatory approval as a Category 1 provider, completing 6 ESG ratings.

Operational Efficiency and Technology Adoption

Management emphasized a focus on 'Quality-led growth' and enhancing operational efficiency through automation and AI-driven tools. This has enabled the company to execute more cases with a similar team size, contributing to improved margins. The integration of AI into credit processing, monitoring, and risk regulatory reporting through the EdgeAvira.AI platform is a key part of their tech-led enterprise evolution, aiming to derive maximum efficiencies and operating leverage benefits.

Macroeconomic Outlook and Industry Trends

The Indian economy is estimated to have grown by 6.5% in FY25, moderating from 9.2% in FY24, with a projected moderation to 6.2% in FY26 due to global trade policies and geopolitical concerns. Corporate bond issuances rose by 6% to INR11 lakh crores, and CP issuances increased by 14.5% to INR15.7 lakh crores in FY25. Management noted a structural shift towards bond markets for long-term financing, though the market still needs to deepen for lower-rated categories.

Capital Allocation and Shareholder Returns

The Board recommended a final dividend of INR11 per share, bringing the total dividend for FY25 to INR18 per share. Management highlighted a strong cash balance and significant investments in growing non-Ratings businesses and rating subsidiaries (ESG, GIFT City) over the past three years. They anticipate that further fund infusion into these divisions may not be required as they are expected to scale up independently, while remaining open to inorganic opportunities that align with strategic segments and offer synergies.

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