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Credit Analysis & Research Ltd IPO Review By KM Global (Apply)

Review By K.M. Global Financial Services Ltd on December 8, 2012

Issue Period: December 7th-11th
Issue Price (Rs): 700-750
Issue Size (Rs Cr): 504-540
Minimum Order Size: 20 Shares
Mcap (Rs Cr): 2,000-2,141
Listing: NSE, BSE
Promoters: Professionally Run, No Identifiable Promoter
Grey Market Estimate Premium: Rs 180


BRLM: Kotak Investment Banking, ICICI Securities Ltd, BofA Merrill Lynch, Edelweiss, IDBI Capital, SBI Capital Markets


Offer For Sale

IDBI Bank: 24,54,400 Shares
Canara Bank: 21,71,200 Shares
SBI: 9,14,500 Shares
IL&FS: 8,55,500 Shares
Federal Bank: 5,84,100 Shares
Tata Investment: 1,00,000 Shares


Anchor Investors

Centaura: 186,620 Shares (14.0 Rs Crores)
Birla Sun Life: 138,667 Shares (10.4 Rs Crores)
Goldman India Fund: 100,000 Shares (7.5 Rs Crores)
Eastspring Invest: 100,000 Shares (7.5 Rs Crores)
Wellington Mgmt: 100,000 Shares (7.5 Rs Crores)
DB Intl Asia: 100,000 Shares (7.5 Rs Crores)

CARE IPO Review by KM Global FinservCARE Ratings is the second largest rating company in India in terms of rating turnover. They offer a wide range of rating and grading services across a diverse range of instruments and industries. CARE also provides general and customized industry research reports. Since incorporation in April 1993, CARE has completed 19,058 rating assignments and has rating relationships with 4,644 clients as of September 30, 2012.

Strengths & Expansion Plans

  • Significant Entry Barriers - There are currently 6 rating agencies registered in India. CARE's extensive track record and full service format should help it retain market share. The firm is trying to capitalize on its brand & leadership position by diversifying into global markets and new product lines such as SME & Real Estate Ratings.
  • Riding Financial Sector Growth - We expect the growth in bank loans and debt instruments to remain strong due to rising financial intermediation and supportive government policies. CARE's addressable market opportunity should grow at a faster pace which provides substantial growth visibility.


  • Changing Regulatory Requirements - Under the Basel II framework the RBI has allowed banks to move to the internal rating based approach for assessing credit risk. If banks move to internal ratings, over 20% of CARE's revenues could be at risk.
  • Rising Competition - New entrants and global players have been competing on pricing to gain market share which could lead to a fall in CARE's margins and returns.


CARE Ratings is headed by Mr. D.R. Dogra who holds the positions of MD and CEO. He has over 34 years of experience in the financial sector and in credit administration. He is associated with the company since inception and was appointed to the board in 2008. Prior to joining CARE he was associated with Dena Bank as a credit manager.

Rajesh Mokashi is the Deputy MD of the company. He joined CARE when the operations commenced and has more than 27 years of experience in finance, commerce and credit risk sectors. Rajesh has been associated with OTIS Elevators, DSP financial consultants and Kotak Mahindra Finance in the past.

As per CARE's HR policy, key managerial personnel are required to retire from employment by the age of 60.

Conclusion / Investment Strategy

We recommend that investors subscribe to the IPO of CARE Ratings as the issue has been priced at a valuation well below its peers such as ICRA and CRISIL. CARE has delivered consistent earnings growth while maintaining a return on equity of over 30%.

Retail investors should apply for the minimum order size as the issue is expected to be heavily oversubscribed which will lead to a low allotment ratio to most investors.

Reviewer recommends Subscribing to the issue.

Review By K.M. Global Financial Services Ltd on December 8, 2012