CARE Ltd

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A.K. Prabhakar akprabhakar@rathi.com

Shweta Prabhu shwetaprabhu@rathi.com

Issue Details
Issue Details Issue size (offer for sale) Bid/Issue opens on Bid/Issue closes on FV Price Band

504cr - 540cr Dec 7th 2012 Dec 11th 2012 10 Rs. 700 - 750

Capital Structure (in crs) Authorised share Capital Issued capital before the issue Present offer for sale Issued capital after the issue
Share holding Pattern % Financial Institutions Non Institutions Total

Aggregate value 30.00 28.55 7.19 28.55

Pre Issue 66.61 33.39 100.00

Book Running Lead Managers Kotak Mahindra Capital Company BofA Merrill lynch Edelweiss Financial Services ICICI Securities IDBI Capital SBI Capital Markets Registrar to the offer Karvy Computershare Pvt Ltd

Objects of the Issue To carry out sale of 7,199,700 equity shares by the selling shareholders and also to achieve the benefit of listing the Equity shares on the Stock Exchanges.

Company Description They are a leading, full service credit rating company in India, and for the year ended March 31, 2012, they were the second largest rating company in India in terms of rating turnover. They offer a wide range of rating and grading services across a diverse range of instruments and industries along with general and customized industry research reports. The existing shareholders include domestic banks and financial institutions, such as IDBI Bank, Canara Bank, SBI and IL&FS, among others. The list of clients includes banks and other financial institutions, private sector companies, central public sector undertakings, sub-sovereign entities, small and medium enterprises (SMEs) and micro-finance institutions, among others. They also have experience in providing specialized grading services, including IPO grading, equity grading, and grading of various types of enterprises, including ESCO, RESCO, shipyards, maritime training institutes, construction companies and rating of real estate projects, among others. Business Highlights Established presence in rating debt instruments and bank loans facilities Since incorporation in April 1993, with an experience of 19 years in this field they have completed 19,058 rating assignments and have rated Rs. 44,036.03 billion of debt as of September 30, 2012. They have rating relationships with 4,644 clients as of September 30, 2012.

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Experienced management They have an experienced Board of Directors and key managerial personnel. O.V. Bundellu, non-executive Chairman, was the Deputy Managing Director of IDBI Bank and has over 38 years of experience in commercial banking and development banking. D.R. Dogra, the Managing Director and Chief Executive Officer, has over 34 years of experience in the financial sector and in credit administration. In addition, Rajesh Mokashi, the Deputy Managing Director, has over 27 years of experience in finance, commerce and credit risk assessment. D.R. Dogra and Rajesh Mokashi have been associated with the Company since 1993, the year of incorporation. This brings in the knowledge, expertise and experience to the company. Strong Financials and robust track record The business has grown consistently since incorporation in 1993, and have been profitable and have paid dividends every year since first full year of operations. The unconsolidated total income has increased from Rs. 54.9cr for the financial year 2008 to Rs. 217.1cr for the financial year 2012 at a CAGR of 41% during such period; and unconsolidated profit after tax has increased from Rs. 26.6cr for the financial year 2008 to Rs. 115.7cr for the financial year 2012 at a CAGR of 44.3% during such period. On margins front the EBITDA margins stood at 76.4% and 75.3% for FY11 and FY12 respectively and unconsolidated profit after tax margin was 51.1% and 53.3% for the financial years 2011 and 2012, respectively. They have maintained a highly liquid, strong net worth position, with no debt on a consolidated basis as of September 30, 2012 and cash of Rs. 28crs in the same period.
Particulars (Rs. In crs) Revenue from operations Other Income Total Income Total Exp PBT Current tax Deferred tax PAT Equity FV EPS
Source: DRHP

Sep-12 91.2 12.7 103.9 34.0 69.90 19.30 0.9 49.8 28.50 10 17.46

FY12 190.4 28.3 218.7 57.1 161.60 45.20 0.7 115.7 28.50 10 40.61

Consistent Dividend payer For FY12 the company has given 100% dividend for the year. Venturing new markets CARE can venture in newer markets like the overseas one as they have no presence outside India. It may also use the available cash for any acquisitions to grow in the newer markets. Recommendation CARE has good financial track record with consistent dividend payment history. At the higher band of the price it will trade at 18x its FY12 earnings which is comparatively cheaper than its peers, though it will face competition

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from them in terms of size and market exposure going forward. But it does have scope for expansion and tap the untapped markets in future. We feel investors can SUBSCRIBE with a longer term perspective. Peer comparison
Name of the company (Rupees in crs) CARE CRISIL ICRA Sales 218.7 849.7 228.7 FV 10 1 10 EPS 40.6 28.98 54.01 PE 18.47 35.37 26.94 RONW 30.72 49.9 17.9 BV 131.98 59.00 301.6

Note: Financials are for FY12 except Crisil which is FY11 numbers CARE PE calculated @750

Concerns SME rating, in which CARE plans to increase its focus, is relatively a low margin segment. State of the economy has an impact on the number of debt/ loans and IPO issues which may impact the business growth.

Disclaimer This report has been issued by Anand Rathi Share & Stock Brokers Ltd.(ARSSBL ), which is regulated by SEBI. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities, options, future or other derivatives related to such securities (related investment). ARSSBL and its affiliated may trade for their own accounts as market maker/ jobber and /or arbitrageur in any securities of this issuer(s) or in related investments, and may be on the opposite side of public orders. ARS, its affiliates, directors, officers, and employees may have a long or short position in any securities of this issuer(s) or in related investment banking or other business from, any entity mentioned in this report. This research report is prepared for private circulation. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial situation and the particular needs of any specific investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report.

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