Credit-rating agency Icra Ltd’s long-delayed initial public offering (IPO) of shares worth Rs85.16 crore for 25.81% of the company’s paid up equity capital is expected to allow its promoter and single-largest shareholder, Moody’s Investors Service, to hike its stake in the company through capital market purchases.
Moody’s has been keen to increase its stake in the company by buying out existing shareholders.
Indeed the upcoming IPO constitutes an offer for sale by IFCI Ltd, the original promoter of Icra, which is selling its entire 21% stake. The Unit Trust of India and the State Bank of India too are offering part of their shareholding for sale in the IPO.
So far, thanks to objections from the Union ministry of finance, Icra’s promoters have been unable to sell their stake in the company directly to Moody’s.
“From Moody’s perspective, S&P’s control of Crisil and Moody’s minority position in Icra disadvantages Moody’s in a strategically important capital market,” says a senior official of Moody’s Corporation, the parent of Moody’s Investors Service, who requested anonymity.
Following the listing, Moody’s will be able to acquire up to 5% stake in Icra without making an open offer. It could buy more if it’s willing to make an open offer for 20% of the company’s equity.
“We hope to develop our relationship with Moody’s and explore opportunities to grow our business,” Naresh Takkar, managing director of Icra, said.
While Standard & Poor’s, the prime competitor of Moody’s, has 55.08% of Crisil, India’s largest credit-ratings agency, Fitch, the world’s third-largest rating agency owns 100% of Fitch Ratings India.
Credit Analysis and Research is currently the only ratings agency in India that is not controlled by a foreign credit agency.
State Bank of India, the country’s largest bank, holds a 9.99% stake in Icra while Life Insurance Corporation of India holds a 7.65% stake.
Other large shareholders include Punjab National Bank, which hold 5.25%, and General Insurance Corporation of India, which holds a 5.1% stake.
“Icra will be the only Moody’s affiliate around the world to be publicly listed,” says the Moody’s official who hopes that further stake sales in the open market by government-owned banks and financial institutions would allow it to hike its shareholding in Icra to a majority shareholding.