CRA Ltd. (formerly Investment Information and Credit Rating Agency
of India Ltd.) was set up in 1991 by leading financial/investment
institutions, commercial banks and financial services companies as an
independent and professional Investment Information and Credit Rating
Agency. Today, ICRA is the second largest credit rating agency in India
after CRISIL. Beside Ratings, ICRA Group offers Consulting services, IT
based services, Information services and Outsourcing services through
its subsidiaries.

Triggers

• ICRA’s rating business has been historically the major growth
  driver. Lower penetration level of the corporate bond market coupled
  with growth in economic activities in India, particularly the fixed
  asset investment activities has resulted in sharp growth in the rating
  business volumes for ICRA over the last few years.Over FY07-09, the
  business has grown at a CAGR of 50.9%. Currently it contributes 65% to
  ICRA’s consolidated revenues. Going forward, it could continue to do
  well on the back of growing thrust on infrastructure &
  implementation of Basel II norms. In FY10, we expect ratings business
  to grow by 25% & at a faster rate in FY11.

• With the implementation of Basel II norms, the rating business is
  likely to get a regulatory push. There are approximately over 18,000
  borrower entities, with greater than Rs. 100 mn facilities, which could
  be rated by 2010. ICRA is likely to leverage its strength & exploit
  the potential of this new opportunity. ICRA rated 1101 entities in
  Basel II in FY09, which increased significantly from 230 in FY08. Basel
  II related revenue contributed around 43% of total Rating revenues
  (FY08: 20%). Over the next 2-3 years, ICRA expects BLR (Bank Loan
  Ratings) volumes to increase at a decent pace, which could be a major
  catalyst for future growth of its Ratings business.

• ICRA has a strong alliance with Moody’s Investors Services, which
  holds 28.5% stake in ICRA. The agreement enables ICRA to get an access
  to Moody’s global research base & also benefits its in-house
  research capabilities. We feel that this growing relationship could
  provide larger business opportunities for ICRA going forward.

• ICRA has ramped up its consultancy business at a decent pace since
  incorporation of its wholly owned subsidiary ‘ICRA Management
  Consulting Services Ltd’ (IMAcS) in December 2004. The revenue from
  this business has grown at a CAGR of 12% over FY07-09. Though FY09 has
  been a dull year for advisory segment, we expect the situation to
  improve from H2FY10 on account of economic revival. Rise in investments
  by Indian corporates coupled with rising government spend on
  infrastructure activities could create more opportunities for
  consulting services. We expect consulting revenues to grow by 7.5% in
  FY10 & at a faster pace in FY11.

• ICRA has a healthy cash balance & liquid investments of Rs. 1.4
  bn in its books (as on March 31, 2009). The Company has remained
  debt-free ever since it was incorporated, and has always sought to
  finance all its expansion & diversification plans with internal
  accruals. With NIL interest liability, ICRA has been able to operate at
  high PBT margins & healthy return ratios. Also, the surplus cash
  enables ICRA to strengthen its presence in non-ratings segments through
  acquisitions.

• Besides ratings, ICRA also has presence in other business segments
  like Consulting services, IT based services, Information services, and
  Outsourcing services. This well diversified business model enables ICRA
  to mitigate the risk of downturn in its core business of ratings.

• Since 1999, ICRA has a good track record of paying consistent
  dividends to its shareholders. Since FY06, the dividend payouts in %
  terms have stayed in the range of 22.5-35%. Going forward, we expect
  ICRA to continue to enrich its shareholders’ wealth with healthy
  dividend payouts.

• ICRA’s consolidated turnover & PAT (adjusted) have grown at a
  CAGR of 35.7% & 46.7% over FY06-FY09. After a boom period from FY08
  till H2FY09, we expect some kind of consolidation in FY10, since the
  effect of global slowdown has not been fully reflected in FY09
  financials. In FY10, we expect turnover & PAT (Adj.) to grow by
  22.9% & 13.8%, respectively, which will mainly be driven by ratings
  business. Other businesses are also expected to pick up, once ICRA
  scales up the size of its operations. We expect FY11 to be a much
  better year in terms of revenue & profitability growth on account
  of improvement in the global economic situation.