Results of rating agency Crisil Ltd for the quarter ended March reflect growth in business from its rating and research segments. Income from its ratings business at Rs65 crore was higher than that in the year-ago period by 10.3%. The rise in income from research services was 20% higher at Rs64.6 crore. Total revenue for the quarter registered a rise of 17% at Rs142.8 crore.
But profit growth was not so impressive. Operating profit for the quarter was flat at Rs40.9 crore, lower than analysts’ expectations. An Emkay Global Financial Services report prior to the results stated that earnings before interest, tax, depreciation and amortization (Ebitda) was likely to grow by 36.7% at Rs61.7 crore. The disappointment was due to “other expenses” of Rs8.9 crore, which included a Rs3.8 crore foreign exchange loss. In contrast, the company had clocked a foreign exchange gain of around Rs1.3 crore in the year-ago period. The one-time expense brought down the operating profit margin from 33% to 29% in the two comparable quarters.
Crisil registered a 32.3% rise in profit before tax over the year-ago period. However, out of the Rs61.8 crore profit, around Rs18.3 crore was due to “other income” from sale of office space during the quarter.
Nonetheless, analysts are optimistic about prospects for 2010. In a statement earlier this year, the management had projected a rise in ratings during the year as companies raise money to fund capital expenditure plans. Rating revenue accounts for around 46% of Crisil’s total income, while research comprises around 45%. In the March quarter, the rise in rating revenue came from the small and medium enterprises segment.
Graphic: Naveen Kumar Saini/Mint
Crisil is a debt-free firm with fee-based income. Hence, higher revenue will translate directly into higher profit margins. Crisil’s shares were marginally higher on the National Stock Exchange at Rs5,571 each on Friday.
While analysts believe that research and advisory services could get more competitive in the future, that impact could get outweighed by strong growth in loan ratings as the economy improves.
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