Shares of India’s leading rating agencies, CRISIL and ICRA, jumped on huge volumes after the CARE announced its IPO price band. Market participants and traders believe that this could be possibly on account of the valuations gap between the listed players and the ICRA, which proposing its IPO at Rs 700-750 a share. Traders also said that listed players are trading at cheaper valuations compared to CARE.
However, analysts advise caution while investing in these stocks purely on the basis of the news of valuations gap. “There is no logic why there should be a spurt in the share prices of listed peers. One should also look at the fact that most of these listed stocks are thinly traded,” said SP Tulsian of sptulsian.com.
Shares of ICRA jumped almost 20 per cent to Rs 1576 with the total traded volumes 75,000 share on BSE. Volumes were significantly higher compared to the two-week average daily volumes of just 522 share. Besides, only 18 per cent traded volumes in the counter were held for delivery. Similarly the average volumes were higher in the case of CRISIL with only 13-14 per cent delivery volumes at BSE.
| ON A HIGH | |||
| In Rs crore | CARE | ICRA | CRISIL |
| Price (Rs) | 750.00 | 1576.00 | 1060.75 |
| Mcap | 2141.46 | 1576.00 | 7546.00 |
| Sales | 218.80 | 207.40 | 827.00 |
| Net profit | 115.70 | 54.00 | 206.40 |
| Book value per share | 131.98 | 301.00 | 59.00 |
| PE (x) | 18.50 | 29.20 | 36.60 |
| Sales/mcap | 10 | 8 | 9 |
| PBV (x) | 6 | 5 | 18 |
| Note: CARE rating price band is Rs700-750, Financial numbers are for the year ended March 2012 except for Crisil which has December as year end. | |||
“There could be any reason; may be the move is operator driven or may be there is something else we do not know. But certainly there is no logic that the move could be justified by the gap in the valuations,” says Deven Choksey, managing director, KR Choksey Shares & Securities.
On the contrary, analysts say listed players are trading at higher valuations than the valuations of CARE. Based on the FY12 financial numbers, CARE’s IPO is priced at about 18.5 times its earnings compared to ICRA and CRISIL, which are trading at 30-37 times their earnings. Also, even on the price to book value basis the listed peers are trading at higher valuations, which indicate that there should not be any reason for the spurt in the share prices purely on the valuations basis. “If valuations of the listed companies are higher compared to the CARE, there should be correction in the share prices of the listed companies, but that is not the case,” adds Tulsian.
