Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CARE Ratings Ltd (BOM:534804, Financial) reported a 14% growth in revenue from operations for FY24, reaching INR 283 crore.
- The company's operating profit for FY24 stood at INR 128 crore, reflecting a 10% increase over FY23.
- The Board of Directors recommended a final dividend of INR 11 per share, bringing the total dividend for the year to INR 18 per share.
- The consolidated business performance for FY24 showed a 19% growth in revenue from operations, reaching INR 332 crore.
- The company has received approval from SEBI to operate as an ESG rating provider, expanding its service offerings.
Negative Points
- The private sector CapEx remains sluggish, impacting overall investment growth.
- There was a slight moderation in the domestic ratings revenue growth in Q4 FY24.
- The non-rating businesses, particularly the analytics division, are still operating at a loss despite showing promising growth.
- Increased expenses in the non-rating segment led to a higher EBITDA loss in Q4 FY24.
- The company faces challenges from volatile commodity prices and geopolitical uncertainties, which could impact future performance.
Q & A Highlights
Q: There has been slight moderation in the domestic ratings revenue growth in Q4. Is this due to the moderation in bank credit to NBFCs because of risk rate changes? And was our market share stable or improving?
A: Yes, Q4 witnessed a slight dip compared to the previous quarter, but we maintained double-digit growth throughout the fiscal year. Our market share has improved, particularly in initial ratings, which have driven significant growth across all four quarters. (Mehul Pandya, Group CEO & MD)
Q: The margins in the ratings segment have been trending better on a YoY basis. Is this due to operating leverage or other factors?
A: The industry is high in operating leverage, which significantly impacts margins. Additionally, increasing wallet share from clientele also contributes to margin improvements. (Mehul Pandya, Group CEO & MD)
Q: What underpins your expectations of sustained strong growth in the analytics business, and how quickly can we improve margins here?
A: We have prioritized key product areas with market traction, leading to significant top-line growth. Although there are losses, the traction witnessed gives us confidence in future growth. (Mehul Pandya, Group CEO & MD; Abhishek, Unidentified Corporate Representative)
Q: How do you view the competitive dynamics in the rating business, particularly in terms of pricing and yields?
A: Pricing is linked to the overall quantum of debt rated. We consider the client type (new or existing) and the competitive landscape when setting prices. (Mehul Pandya, Group CEO & MD)
Q: How long will it take to establish our presence in Africa, and what are the revenue expectations over the next three to five years?
A: Our Mauritian subsidiary is already profitable. The South African subsidiary is awaiting regulatory approval, expected in the first half of the current financial year. Revenue expectations are positive, but specific numbers are difficult to predict. (Mehul Pandya, Group CEO & MD)
Q: Can you explain the increase in other expenses in the non-rating business and the timeline for breakeven?
A: The increase in expenses is due to research costs for product development. We expect two products to go live this fiscal year, and we are focused on achieving breakeven in the next couple of years. (Jinesh Shah, CFO; Abhishek, Unidentified Corporate Representative)
Q: What is the current market for ESG ratings, and what is the revenue potential over the next two years?
A: We received SEBI approval on May 2 and are ready to roll out ESG ratings. We have six products and expect to leverage our strong corporate relationships for business development. (Mehul Pandya, Group CEO & MD; Rohit Inamdar, CEO of CARE ESG Ratings Limited)
Q: How do you see the mix of consolidated revenue between domestic ratings and non-ratings businesses evolving over the next three years?
A: We aim for an 80:20 mix, with 20% from non-ratings businesses. This year, non-ratings contributed 10%, up from 6% last year. We expect continued growth in both segments. (Mehul Pandya, Group CEO & MD)
Q: Can you share the total revenue, EBITDA, and PAT for the Africa, Mauritius entity for FY24?
A: The revenue for Africa was around INR10 crore, with a PAT margin of 30%-35%. (Jinesh Shah, CFO)
Q: What is the potential market size for ESG advisory services, and how is CareEdge positioned in this market?
A: The ESG advisory market is growing, driven by regulatory and customer requirements. CareEdge has grown over 100% in this segment and is well-positioned to meet market needs. (Swati Agrawal, President of CARE Analytics and Advisory Private Limited)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
