Credit Analysis & Research Ltd (CARE), one of India’s largest credit rating agencies, is coming up with its maiden public offering where early investors like IDBI Bank and SBI are selling their shares. CARE has filed its draft red herring prospectus (DRHP) with market regulator SEBI for an IPO where the company is looking to dilute over 25 per cent stake. Interestingly, the IPO is a secondary offering and the company is not raising any fresh capital.
The issue will see shares sales by some of the early investors, such as the IDBI Bank, Canara Bank, SBI, IL&FS and Federal Bank. Other investors like Milestone Private Equity Fund, ING Vysya and Tata Investment are also selling small part of their holdings.
Currently, the major shareholders in the company include IDBI Bank (25.79 per cent), Canara Bank (22.81 per cent), SBI (9.61 per cent), IL&FS Financial Services (8.99 per cent) and The Federal Bank (6.2 per cent).
The company also saw increasing interest from private equity investors last year. While Aditya Birla Private Equity has 4.27 per cent stake in the firm, Milestone owns over 4 per cent stake. Bajaj Holdings and Investment Ltd also acquired 5.98 per cent stake last year.
While the valuation that the company is looking at is not indicated, Aditya Birla PE had picked up its stake at the valuation of Rs 1,500 crore in September last year. Milestone and Bajaj also picked up their shares last year at a similar valuation. CARE’s peers, CRISIL and ICRA (owned by Moody’s), trade at a PE ratio of 29.95 (as of October 3) and 21.01 (as of September 30), respectively.
CARE is second largest credit rating company in India in terms of rating income, coming after CRISIL, owned by the Standard & Poor’s (S&P). Besides credit rating, the company also offers general and customised industry research reports. Since its incorporation in April 1993, CARE has completed 9,844 rating assignments and have rated Rs 31,190 billion of debt as of March 31, 2011.
CARE reported an increase in total income from Rs 30.13 crore in FY07 to Rs 176.62 crore in FY11, growing at a CAGR of 55.6 per cent during the period. Its profit after tax had increased from Rs 13.56 crore for FY07 to Rs 91.05 crore for FY11, rising at a CAGR of 61 per cent during the period.
