Yassir A. Pitalwalla and Ashwin Ramarathinam
Mumbai: Rating agency Icra Ltd made its debut on the Bombay Stock Exchange at Rs797.60, or a 142% premium to its initial public offer (IPO) price of Rs330 per share, after trading as high as Rs880.
The IPO was subscribed 75 times, creating an appetite for the shares as investors bet they were undervalued given the company’s earnings potential.
Credit rating agencies are expected to see a boom in business as the banking regulator, the Reserve Bank of India (RBI), talks about the need for bank loans to be rated and corporates borrow more to fund their expansion plans.
The capital markets regulator, Securities and Exchange Board of India (Sebi), too, has made grading of equity IPOs compulsory, further boosting the business of credit-rating agencies.
“The business of rating companies will jump when IPO ratings become mandatory,” said Hatim Broachwala, an analyst with Khandwala Securities Ltd, in an interview on the telephone.
“Most of the IPOs we have brought to the stock market in the last quarter or so have done well,” claimed Falguni Nayar, managing director of Kotak Mahindra Capital Ltd, which was lead manager of the Icra offering as well as thoseof recent successful offerings such as MindTree Consulting Ltd. Icra is the second credit rating agency to be listed on the Indian stock exchanges after Standard & Poor’s subsidiary Crisil Ltd.
Crisil, owned 55.08% by S&P, claims to be the fourth-largest credit rating agency in the world based on number of ratings assigned.
Crisil’s stock rose 5% to Rs2,913.55 on Friday. It has a market capitalization of about Rs2,101 crore and a price to earnings ratio of 58.66.
In comparison, Icra now has a market cap of Rs797.6 crore.
Moody’s Investor Service, the largest shareholder of Icra at 28.91%, has a market cap of $17.27 billion (Rs 74,261 crore) and a price to earnings ratio of 24.01, based on its last traded price of $62.02 per share on the New York Stock Exchange.
Icra’s “stock was also helped by its attractive pricing, compared with its rival Crisil”, said Broachwala, who had a “subscribe” rating for Icra’s IPO.
Gautam Chakravorthy and Paresh Jatakia of Bloomberg contributed to this story.