CARE Ratings surges 13%, hits over 6-year high on healthy Q2 results

Thus far in the month of October 2024, CARE Ratings has outperformed the market by surging 32%, compared to the 5% decline in the BSE Sensex during the period

Shares of CARE Ratings hit an over six-year high of Rs 1,332.30, as they rallied 13 per cent on the BSE in Thursday’s intra-day trade.  The rally in the stock came after the company reported 31 per cent year-on-year (YoY) growth in consolidated profit after tax (PAT) at Rs 46.88 crore for the July-September quarter (Q2) of financial 2024-25 (FY25). The company had posted PAT of Rs 35.73 crore in a year ago quarter (Q2FY24). In the previous quarter (Q1FY25), it had reported PAT of Rs 21.38 crore.

 

The stock is trading at its highest level since September 2018. It had hit a record high of Rs 1,808 on April 10, 2015. Meanwhile, thus far in the month of October 2024, CARE Ratings has outperformed the market by surging 32 per cent. In comparison, the BSE Sensex was down 5 per cent during the same period.

 

In Q2FY25, CARE Ratings' revenue from operations grew 22 per cent year-on-year (Y-o-Y) to Rs 117.37 crore, while earnings before interest, taxes, depreciation, and amortisation (EBITDA) jumped 33 per cent Y-o-Y to Rs 55.72 crore; and margin stood at 47 per cent.

 

The management said the company has shown good performance in ratings as well as non-rating businesses. "Reflective of the company’s commitment towards quality led growth, the ratings business continued to show momentum in initial ratings of capital market instruments, securitisation and bank debt," the management said.

 

Fundraising activity in the economy improved post-election in Q2FY25. Corporate bond issuances (public issues and private placements) reached Rs 3.11 trillion; a 68 per cent increase compared to the same quarter last year. Commercial paper issuances also grew by 14 per cent, totalling Rs 3.74 trillion in Q2FY25 compared to the same period last year.

 

Overall, bank credit offtake remained healthy, increasing by 15 per cent Y-o-Y as of August FY25, around the same as the previous year. However, there was a slowdown in the growth of bank credit to the NBFC segment (11.9 per cent as of August 2024 from 21.3 per cent a year earlier) and the personal loans segment (16.9 per cent versus 18.3 per cent), due to increased risk weightage for these segments, CARE Ratings said.

 

Meanwhile, industrial credit offtake improved significantly, rising to 9.8 per cent (Y-o-Y) as of August 2024, compared to 5.3 per cent a year ago. Credit disbursements to large enterprises (constituting a share of 72 per cent in the total industrial credit) improved with a growth of 7.7 per cent as of August 2024 compared to a growth of 4.3 per cent a year ago.

 

Overall, CARE Ratings expects India's GDP growth to remain healthy at 7 per cent in FY25, supported by improvements in domestic consumption and investment.

 

Meanwhile, the company's ratings business continues to benefit from a favourable regulatory environment. "The Securities Exchange Board of India (SEBI) and Reserve Bank of India (RBI) continue to support enhanced financing through the capital market route. The risk appetite across rating levels is a constraining factor and it would augur well to have newer classes of investors like Alternate Investment Funds that may invest in credit-enhanced structures as well as high-yielding credits," ICRA said in its FY24 annual report.

 

With increasing regulatory oversight, greater need of data driven analytics by market participants and increasing use of ESG parameters in decision making, the market for risk analytics, data, research, financial analysis, consultancy, and related support services remains attractive. The recent inclusion of India in global emerging market indices augurs well for the company’s business, the rating agency said.