Credit Analysis & Research Ltd- IPO "Subscription Preferred"

Credit Analysis & Research Ltd Registered Office: 4th Floor Godrej Coliseum,Somaiya Hospital Road Sion(E) , Mumbai - 400022 , Maharashtra , India. Phone : 91-22-67543456   Fax:91-22-67543457 Email :  investor.relations@careratings.com Website :  www.careratings.com Public offer of 7,199,700 equity shares of a face value of Rs10 each (The "Equity Shares") of Credit Analysis and Research Limited (The "Company") through an offer for sale by the selling shareholders for cash at a price of Rs[*] per equity share (including a share premium of Rs[*] per equity share) aggregating up to Rs[*] crores (The "Offer"). The offer will constitute 25.22% of the post-offer paid-up equity share capital of the company. Price Band: Rs700 to Rs750 per equity share of face value of Rs10 each. The floor price is 70 times the face value and the cap price is 75 times the face value. Issue Money Payable On Opens On Closes On Application Allotment 07-Dec-12 11-Dec-12 Rs 700.00-750.00 Rs 0.00-0.00 Minimum Application for shares in Nos : 20   Further Multiples of : 20 Rs Cr Lead Managers to the Issue Project Cost 0.00 DSP Merrill Lynch Ltd Edelweiss Financial Services Ltd ICICI Securities Ltd IDBI Capital Market Services Ltd Kotak Mahindra Capital Company Ltd SBI Capital Markets Ltd Project Financed through Current Offer 503.98 Post Issue Equity Share Capital 28.55 Issue Price Rs700.00

Objects of the Issue: The objects of the issue are to: 1. Carry out sale of 7,199,700 Equity Shares by the Selling Shareholders; and 2. To achieve the benefits of lisitng the Equity Shares on the Stock Exchanges.

(Credit Analysis & Research Ltd) CARE IPO Grading CARE, being a credit rating company in India, is exempted by SEBI from obtaining the IPO grading for its Initial Public Offer. None of the rating companies including CRISIL, FITCH or ICRA graded CARE IPO.

Company Overview:

CARE Ratings commenced operations in April 1993 and over nearly two decades, it has established itself as the second-largest credit rating agency in India. With the rating volume of debt of around Rs.44,051 bn (as on September 30, 2012) , CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings has also emerged as the leading agency for covering many rating segments like that for banks, sub-sovereigns and IPO grading.

CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Shareholding Pattern:

With majority shareholding by leading domestic banks and financial institutions in India, CARE’s intrinsic strengths have also attracted many other investors.

CARE was promoted in April 1993 by major Banks/FIs (financial institutions) in India. The three-largest shareholders of CARE are IDBI Bank Ltd., Canara Bank and State Bank of India. The other share holders include Federal Bank Ltd., IL&FS Ltd., ING Vysya Bank Ltd. etc.

Company Financials:

Particulars	For the year/period ended (in Rs. Million)
	31-Dec-12	31-Mar-11	31-Mar-10	31-Mar-09	31-Mar-08
Total Income	2,171.93	1,722.55	1,520.26	999.31	549.11
Profit After Tax (PAT)	1,157.02	879.49	856.90	523.99	266.85

Outlook & Valuations:

The company has fixed the price band at Rs. 700-750 per share. Based on FY12 annual EPS of Rs. 40.55, CARE will be trading at P/E range of 17.27 x to 18.5 x. This is at a significant discount to peers like ICRA & CRISIL which are trading at 27 x and 35 x respectively. For FY12 the consolidated revenues from operation stood at Rs. 190 Cr with Net Profit of Rs. 116 Cr resulting in Net Margin of 61.05 % with EPS of Rs. 40.55 CARE has consistently maintained high PAT margin of 53 % with strong ROE of 34 %. It is a debt free company. 85 % of its revenue comes from ratings business. Fastest growing rating agency, huge long-term growth opportunity driven by higher private sector infrastructure spending, favorable regulatory developments & development of bond market, superior margins & return ratios and diversifying products & geographies are key value drivers for CARE Ratings in our view. CARE Ratings issue is quoted 21.4x FY13 annualized earnings. Rating business are traded at 35-37x in the market. We believe strong growth, better margins, superior return ratios and likely diversification should command valuation multiple closer to peers valuation. Hence we recommend subscribe to the issue with medium-term investment objective. We also expect 15 per cent listing gains on the issue from upper band.

Retail Investors can subscribe up to maximum of Rs. 2,00,000 per application. CARE has strong financial position and is high cash-generating business and which is available at very reasonable valuations.

In the valuation front, the company's IPO is priced quite low compared to its peers. Based on the FY12 financial numbers, CARE's IPO is priced at about 18.5times (on higher price band) its earnings compared to CRISIL and ICRA which are trading at 31 to 41 times of their earnings.

Also, even on P/BVPS basis, CRISIL and ICRA are trading at higher valuations compared to CARE. Hence, Broker’s and Investor Advisors are positive on the issue and recommend 'subscribe' on the IPO.

IPO Launch Data:

Rating agency CARE's initial public offer(IPO) received 4 per cent subscription on the first day of the public issue today. 

The IPO attracted bids for 2.56 lakh shares against 71.99 lakh shares on offer by 1700 hrs, as per data available with the National Stock Exchange. 

The category reserved for non-institutional investors received one per cent subscription, while shares reserved for retail investors got subscribed 10 per cent, data showed.

The offer period will close on Tuesday, December 11.