IPO Update : ICRA Limited

Rating Agency rated as Good, Go for it

ICRA Limited has entered the capital markets with a issue of 25.81 Lac Equity Shares at a price band of Rs. 275-330. Investment Guru rates the issue as “Good” and recommends investors to apply for the IPO. You would need a good luck factor to get allotment since the equity base is small and issue is expected to generate good response from investors. The issue looks attractive from both listing gains as well as investment perspective.

Lets walk through the highlights of the offer:

The objective of the issue is to provide an exit route to the existing shareholders. Hence, there are no proceeds to the company out of the issue. However, the issue would enhance brand name of the company and provide public markets to the company’s equity shares.

The company was established in 1991 as a credit rating agency by a consortium of financial/ investment institutions, commercial banks and financial services companies. The company is primarily engaged in the business of providing rating services. In addition, we, along with our Subsidiaries, provide (i) consulting services, (ii) information technology based services, (iii) information services, and (iv) outsourcing services.

Total revenue has increased from Rs. 333.67 million in fiscal 2003 to Rs. 559.09 million in fiscal 2006, at a CAGR of 18.77%. During the same period, profit after tax has increased from Rs. 97.05 million to Rs. 142.08 million, at a CAGR of 13.55%. In the nine months ended December 31, 2006 the company’s revenues stood at Rs. 512.50 million and profit after tax was 135.87 million.

Best in its Class When it comes to Credit rating, ICRA is the second largest company next only to Crisil. The company enjoy strong market position for credit ratings in the financial sector and structured finance. For the nine months period ended December 31, 2006, the volume of debt rated was Rs. 988.64 billion and the number of published issuers rated by the company outstanding as on December 31, 2006 was 399.

The company boasts of Rich database and research support for its products and services portfolio.

Moody’s India, which is part of the Moody’s Group, is the promoter of ICRA. In addition, Moody’s Investors Service, which is an international rating agency, has entered into the Technical Services Agreement with the company pursuant to which it has been providing technical services . Further, ICRA provides certain outsourcing services to Moody’s Investors Service.

The company has been successful in diversifying its Revenue Stream. The share of Revenue from rating services has declined from 70% in Fy2004 to 56% in FY06 while the share of IT based services have grown to 15%. This helps the company in insulating itself from overdependence on single source of Revenue.


The EPS for the year 2006 stood at Rs. 12.63. The weighted average EPS for last three years stands at 11.47. On the last year’s EPS, the issue comes at a PE of 26. The issue price looks reasonable given the Crisil stock price which quotes at PE of 43.

The company managed return on Networth @13.67% . However this is lower than Crisil’s RONW of 19.5%.


Issue opens : 20-03-2007

Issue Closes : 23-03-2007

Registrar : INTIME SPECTRUM REGISTRY LIMITED

Company's Website: ICRA Website