CRISIL Ltd

1. 2. Financial Sector Ratings: CRISIL rates a large number of financial sector entities, including banks and non-banking financial institutions, housing finance companies, securities firms, etc. CRISIL uses the ‘CRAMEL’ framework to rate finance companies. This entails assessment of six major parameters: capital, resource raising ability, asset quality, management, earnings, and liquidity.In addition, CRISIL also assesses instrument-specific risk factors and has developed ratings framework and methodologies to evaluate the same.
   3. New structured products: CRISIL has developed specific criteria for rating of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) that focus on assessment of quality of the underlying asset portfolio and cash flows, take into account the leverage, experience of the investment manager, risk management policies, etc. CRISIL was the first credit rating agency in India to introduce the Financial Strength Rating (FSR) for insurance companies in March 1998. Leveraging on its expertise in this sector, CRISIL developed a sound methodology and rated the first hybrid issuance by an Indian insurance company in April 2016.
   4. SME Solutions: CRISIL’s SME (Small and Medium Enterprises) offerings provide an independent verification, evaluation and assessment to establish credibility and enhance confidence of potential customers, suppliers and lenders. CRISIL’s ratings provides SMEs access to funding and faster credit as its ratings are considered credible by lenders. CRISIL’s rating is an indicator of overall credit worthiness of the entity, arrived at by analysing operating performance and financial strength.
2. Research: The company analyses millions of data points using a large network of primary data sources to provide its clients with long-term and short-term future outlook on 86 core sectors in India including automobiles, consumer products, construction and capital goods, infrastructure, metals and others. The company also provides an in-depth analysis of the factors that affect the performance and profitability of these sectors.

   Industry research: CRISIL captures the influence of industry variables, the extent of positive/negative impact on the cash flows and debt repayment ability of companies over a 3-4 year’s horizon. The risk score for an industry is arrived at by aggregating the scores assigned to the relevant parameters like demand supply outlook, cost structures, competition and financial performance.

   Capital market research: The company plays a key role in India’s fixed-income markets andis the largest provider of valuation of fixed-income securities to mutual funds, insurers and banks, and the sole provider of debt and hybrid indices to mutual funds and life insurers. CRISIL also pioneered independent equity research in India, and is the country’s largest independent equity research house.

3. Advisory: A leading advisor to governments, multilateral agencies, investors, large public and private sector firms, CRISIL Infrastructure Advisory provides a comprehensive range of advisory services in urban, energy and natural resources, transport and logistics, and infrastructure financing across India and other emerging countries. The company’s focus areas include policy and regulatory advisory, public private partnership frameworks, capacity enhancement and institutional strengthening for government and infrastructure agencies, implementation support to large infrastructure programmes, among others.

Management team

Ms Ashu Suyash (MD and CEO): Ms Suyash leads CRISIL’s Indian and global businesses, steering its efforts to deliver high quality analytics, opinions and solutions to corporations, investors, financial institutions, policy makers and governments. She also serves as a member of the Operating Committee for S&P Global. She has spent 30+ years in the financial services sector. Prior to joining CRISIL in 2015, she served as the CEO of L&T Investment Management Limited and prior to that, she held several key positions at Citibank during her 15+ years’ stint. Over the years, she has been recognised among the top 50 women in business in India and Asia by various publications.

Mr. Gurpreet Chhatwal (President & Business Head): He leads the large and mid-corporate ratings businesses at CRISIL. He is responsible for analytical execution, managing client relationships, enhancing CRISIL’s franchise through thought leadership and outreach. He is also responsible for spearheading the innovation agenda at CRISIL Ratings, while continuing to focus on raising the rating standards at an industry level.

Mr. Amish Mehta (Chief Operating Officer): He is a Chartered Accountant with over 25 years of experience across a variety of leadership roles in several large companies across different industries and functions. He had previously worked as the Chief Financial Officer with Indus Towers Limited and prior to that, as the Director Finance with Castrol India Limited. 

Mr Sanjay Chakravarti (Chief Financial Officer): He is a Chartered Accountant with over 24 years of experience in financial management, strategy, taxation, treasury and accounting. In his most recent role, Mr. Chakravarti was the CFO of Shoppers Stop Ltd, where he spent 12 years.

Industry

Global banks continue to make strategic investments in long-term business transformation and process reengineering initiatives, sustaining demand for regulatory and non-regulatory change management offerings. This has driven an appetite for automation and data analytics driven solutions, as firms look to adapt technology to improve their operational performance and gain competitive advantage. The global banking industry continues to face global headwinds and increasing margin pressures. Though the regulatory environment has matured across the US, the EU environment remains volatile. In addition, trade wars and Brexit-related developments have added to the business uncertainties.

Corporate bond issuances in India rose during the year, albeit driven by issuances from a smaller base of issuers comprising public sector financial institutions and financial sector entities with strong parentage. Certain issuers, especially non-banks and housing finance companies with wholesale lending model, continue to face resource-raising challenges. Going forward, muted private expenditure, combined with slowing domestic and export demand, are likely to constrain wholesale credit demand. Besides sluggish demand for wholesale bank credit, the BLR market remains affected by the guidance from several large banks increasing the minimum threshold exposure that would require a bank loan rating. The securitisation market continues to see buoyant issuances on the back of investor preference for securitisation in a cautious environment and partial credit enhancement (PCE) scheme announced by the government.

On the regulatory front, the Securities and Exchange Board of India (SEBI) announced a series of changes aimed at higher disclosure by credit rating agencies (CRAs), in the interest of investors. It brought in standardization in monitoring and recognition of defaults and also prescribed standardised and uniform probability of default (PD) benchmarks for all CRAs. SEBI has instructed CRAs to seek inputs directly from audit committees of issuers of listed securities they rate. It has also asked for greater disclosures from listed issuers on any defaults on their financial obligations.

Valuation

CRISIL is India’s leading credit rating company having a ~35% revenue market share and we expect this market share to increase further supported by introducing innovative products and rating instruments, providing top notch industry research & analytics and continuous investments in new platforms and solutions. Further we note that it has a strong parentage in the form of Standard & Poor (S&P), who is the world's leading credit rating agency by market share. We expect that CRISIL’s investment in people and technology over the years will ensure seamless operations helping them deliver growth in an uncertain and difficult environment. Further, we expect Greenwich acquisition to boost overall revenues and deepen relationships with customers helping cross sell of other segment products. The company has maintained a good ROE of ~30% from the past 3 years.