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Analyst Meet / AGM - Analyst Meet

In rating business, while pricing will be a challenge, volumes will drive the growth

Crisil

18-Feb-2017, 03:13
The company held its analyst meet on 17^th February 2017 and was addressed by Ashu Suyash MD

Key Highlights

On geographical basis, around 37% of total revenue come from India, around 30% from US, 25% from UK and rest from the rest of the world.

In CY 2016, Crisil rated India's first hybrid issuance in the insurance sector, infrastructure investment trust, hybrid instruments by road BOT players and launched and assigned India's first rating on new Infra EL scale.

Bond market saw moderate growth in CY 2016 on YoY basis. Generally, growth was seen in large corporate issues, SME ratings, bank ratings while structured finance and securitisation activities were lower.

Going forward, lot of volume is expected in bond rating business led by lot of government initiatives. However, management expects pricing will be a big challenge going forward.

Ticket size will be lower and ratings have been extended to individuals and professionals as well.

Management expects economies of scale and higher revenue per employee will help in offsetting any pricing challenge.

In 2016, Sebi has enhanced standards and regulations for credit rating agencies leading to higher disclosure requirements and transparency. New Expected loss (EL) ratings on present value of future earnings were introduced from infrastructure projects to enable them to borrow from bond market. Guidelines in commercial paper market and implementation of insolvency and bankruptcy code will further enhance the debt market and improve the liquidity.

Of the total Rs 101 lakh crore of outstanding funding to corporate sector, corporate bond and commercial papers account for 22% of total borrowings. There is a gradual improvement of corporate bond and commercial paper market in past 4 years. CY 2016 also saw some 100 bps improvement in share of corporate bond and commercial paper segment within the total outstanding funding of the corporate.

Overall Credit growth was in single digit in CY 2016 and there was a de-growth seen in Nov'16 and Dec'16 due to demonetisation. Wholesale credit remained subdued due to low investment demand. Crisil expects overall improvement in credit growth due to improvement in consumption demand and less of investment demand.

Overall CY 2017 looks to be better than CY 2016, wherein the challenges of implementation of the policies and political outcomes were seen.

In Research business, after performing strongly in CY 2016, the outlook for CY 2017 continues to remain optimistic. Increasing requirements of complex research due to regulatory requirements and inhouse risk assessment requirements has led to new opportunities for both existing products and newer products. Strong demand remains for benchmarking analytic tools and analysis in the international arena.

While political uncertainty did result in some lower US business in Dec'16 quarter, post the election outcome, things have returned to normalcy in business in US. Non US market, has seen some deal challenges, but management expects the business momentum to continue to remain strong.

Advisory business should see some better numbers in CY 2017 as compared to CY 2016. Due to regulatory and hybrid products introduction, together with improvement in infrastructure, power and road projects going forward, the segment should do well in coming year. However, fluctuations from quarterly prospective will remain as its difficult to time the segment.