CRISIL conducted a
conference call on 19 April 2024 to discuss the financial results for the
quarter ended March 2023 and prospects. Amish Mehta, MD&CEO addressed the
call:
Highlights:
The company has demonstrated
resilience and created significant impact through its work and sustainability
efforts. The trinity of integrity, insight and impact has given a winning edge to the company in the market.
The company operates in
12 countries and has a strong employee base of 4600 employees comprising 39%
women and 40 nationalities.
The company has recently set
up a delivery center in Colombia for North American clients which has augmented
global delivery model.
The company continues to
invest in talent to be future ready.
The company sees the
global banks turning cautious with delayed discretionary spending while they
continue to focus on operational efficiencies, regulatory compliance and
business transformation.
Increased volatility due
to macro uncertainties translates to a greater need for enhanced values and actionable
insight from benchmarking solutions.
The company is seeing
active dialogue around the possibility of leveraging GenAI across
industries. The company continues to explore ways to enhance client offerings
and internal workflows through the use of GenAI.
Corporate bond
insurances grew 9% in Q12024 as against 28% growth for full year 2023.
The company continues to
add new clients across businesses and recorded increase in already strong net
promoter score from last year.
Bank credit growth was
16.5% driven by demand from retail and services sectors, while large corporate
credit was growth was steady at 6.6%.
Overall the medium-term
growth prospect for India is expected to be healthy thanks to strengthened
corporate balance sheet, a robust banking system, government capex focus and broad
basing of private investments.
Crisil ratings
consolidated market leadership position with healthy revenue growth during the quarter
given the investor preference for best-in-class ratings.
Global analytical center
continues to strengthen its support to S&P global in newer areas.
The research analytics
and solution segment saw traction in credit risk data and analytics and
consulting Offerings for Market
Intelligence & Analytics (MI&A).
Global businesses saw
the impact of slowdown in discretionary spending by global financial
institutions.
Global Research &
Risk Solutions (GR&RS) business witnessed momentum in lending solutions and
regulatory support and the business added new logos during the quarter.
Global Benchmarking
Analytics (GBA) business continued to strengthen client engagement through new
benchmarking solutions.
Investments in digital
technology, digital capabilities, talent and new solutions and franchise
activities continued well during the quarter.
The revenue growth
momentum for Q12024 was impacted by slow performance in one of global
businesses in the research analytics and solution segment. The high base with
strong revenue growth of 20.2% in Q1 last year also impacted the revenue growth
in Q1 of 2024.
PBT was flat, but PAT
declined 5.5% due to increase in the tax rates.
Rating Business
There are two main
drivers of the revenue pools for the rating agencies in India - corporate bond
market and bank credit growth.
The company has market
share of 60-70% in the bonds rating
On the corporate bonds side,
the issuers and the capital market investors are awaiting a decisive turnaround
in the interest rate outlook for the market to pick up in the coming year.
Bank credit grew by
strong 6.3% in Q1 of 2024 supported retail and service sectors. However, the large
corporate segment growth remains lackluster.
Crisil Ratings estimates
growth rate for bank credit at 14% and NBFC sector at 15 to 17% in FY2025.
So the company anticipates
the capital market issuances to remain sluggish in the near term due to the
prevailing high interest rate conditions.
The company anticipates the
capital market issuance to revive in H2 of 2024 with softening interest rates
and gradual revival of private sector capex.
The company is seeing rating
segment revenue growth largely coming from surveillance fee and new rating
revenues from mid corporates in Q1 of 2024.
The company continued
focus on client engagement initiatives and strengthened leadership position.
Global Analytical Center
saw robust surveillance work delegation from S&P global rating services.
Overall the rating
segment grew by about 8.4% in Q1 of 2024.
Market Intelligence & Analytics
(MI&A)
The drivers for MI&A
business are loan growth, financialization of savings and capital formation.
The company is working very
closely with banks across the entire loan life cycle by from opportunity
identification to origination, credit assessment and risk monitoring
Research insights and
data directly feed into the bank''s internal workflow systems and the upskilling
solutions provided by Crisil One Academy (training vertical) help ramp up call
teams and improve efficiency and efficacy.
Banks are also looking
at digitization and automation as a way to drive growth and operational
efficiency leading to demand for Crisil’s integrated credit platform that
connects data and automates the entire credit life cycle.
Similarly financialization
of savings has led to a higher demand for innovative products from the investor
community. This has sparked demand for services around indices valuations,
benchmarking, risk management etc to be delivered via a digital platform.
The company expects
capital investments to fire on both cylinders over the next few years that both
infrastructure and industrial investments are set to increase.
The company is seeing
industrial sectors pick up pace with investments flowing towards both
conventional and the emerging sectors. In parallel infrastructure capex is maintaining
its growth momentum.
On the infrastructure
side, the company continues to build on a strong franchise working with all the
key stakeholders - the implementing agencies, infrastructure companies, tenderers,
investors etc.
Within the industrial capex,
healthy corporate balance sheets and decadal high utilization rates across most
sectors are driving capital investments.
The policy interventions
such as the PLI scheme is helping bring in large scale investments in emerging
sectors such as electronics, semiconductors, solar PV modules, EVs etc.
The company expects
about 1.82 lakh crore of PLI incentives to be paid across 14 sectors to
generate revenue of close to Rs 30 lakh crore and capital spending of Rs 3.2
lakh crore.
Emerging sectors are
expected to account for about a fifth of the total industrial investments over
the next four years.
The company is building
data and analytics capabilities in emerging sectors to be able to help both
corporates as well as financial institutions make the right investment
decisions in these growth areas.
Global Benchmarking Analytics (GBA) business
The revenue pools of the
global banks have largely stagnated over the past year. The regulatory
environment and broader inflationary trends have put pressure on banks
profitability.
This has in turn
increased the banks focus on controlling discretionary spending with that
background the company have still managed to generate strong progress in the
global benchmarking and analytics division
The company anticipates
a modest recovery in this area into 2024.
The company has increased
penetration with the global banks. It has seen success in expanding offerings
into tier 2 and commercial banks globally.
The company has seen a
strong performance in 2023 laying a foundation for a continued growth.
Global Research & Risk Solutions (GR&RS) business
Global macroeconomic
solution situation remained complex in 2023. World growth was higher than
expected, but inflation was above target for many central banks
The operating
environment was characterized by the failure of a few regional banks in the US and
the consolidation of large European banks.
The GR&RS business
witnessed robust performance in 2023 despite these headwinds.
The business saw
increased customer engagement in areas such as regulatory compliance, stress
testing initiatives and lending solutions.
Traditional sale side
research faced cost cutting pressures, while the buy side witnessed strong
traction.
There was sustained
demand for ESG integration and monitoring services. The company has applied for
the ESG license and its awaiting feedback from SEBI.
Overall, the business
added 29 new logos in 2023.
While the company saw
the impact of curtailed discretionary spending in Q1 of 2024, to maximize
revenue in the current year and to build a broader revenue base for the future the
company have amplified focus on getting into new buying centers in existing
accounts.
The company continued to
see the momentum of new logo additions including adding a large asset manager
into client portfolio
The company continues to
focus on expanding reach to tier 2 and tier three institutions through partnership
channels.
The company is using GenAI
traditional AI and machine learning techniques to develop new offerings as well
as to create efficiencies in the delivery of core services.
Risks
The effect of higher Interest
rates resulted in growth slowdown in major economies with the notable exception
of US and India
As the company head into
2024, major central banks across the world appear on the verge of loosening their
monetary policies by varying degrees.
Geopolitical headwinds are
becoming stronger due to ongoing war between Israel and Hamas which has also
led to red sea crisis affecting one of the biggest transport corridors in the
world. Escalating conflict between Iran and Israel has further heightened the
regional tensions. Continued war in Europe is also adding to the uncertainty.
Additionally this year
has another geopolitical risk, in the form of elections in more than 60
countries including India and US. The outcome of these elections has potential
to impact global business sentiments.
In such an uncertain
economic environment, the company is witnessing some of client turning more cautious
and prolonging their decision making cycles.
The cyber risk continues
to remain very high as threat actors are becoming more sophisticated.
Substantial portion of earning are denominated
in foreign currencies and fluctuation in the exchange rates tend to affect the
company.
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