Amey Kulkarni of Candor Investing presented his in-depth investment thesis on CARE Ratings (India: CARERATING) at Asian Investing Summit 2021.

Thesis summary:

CARE Ratings is a debt-free, non-commodity, oligopolistic business at the start of a cyclical upturn, available at a cheap valuation.

Credit rating agencies are market infrastructure entities in India and are tightly regulated by SEBI (Securities & Exchange Board of India). Financial institutions, banks, and debt investors rely on credit rating agencies to make pricing and investment decisions. The credit rating market tends to be oligopolistic in nature; in India, the top five players control the bulk of market share.

CARE Ratings is the second-largest credit rating agency in India, with 18% market share. This ranks behind CRISIL (46% share) but ahead of ICRA (18%), India Ratings (12%), and Brickwork ratings (6%).

Headline issues have affected CARE Ratings, resulting in a below-average P/E ratio of 16x, as compared to CRISIL’s 37x and ICRA’s 34x. Amey believes that the key issues have been adequately addressed and that CARE’s discount valuation is unwarranted.

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About the instructor:

Amey Kulkarni operates a boutique investment advisory that partners with select individuals and family offices in their journey of wealth creation through investments in the Indian equity markets

Amey worked in the corporate sector for a decade with experience spanning across India, Europe and African markets. Amey has also worked closely with the top management of L&T (Chairman’s office) and the MD&CEO office at Jindal Steel & Power handling responsibilities of corporate strategy and business planning.

Having gained unique insights into the internal workings of large diversified businesses from close quarters, Amey now applies the learnings to run an investment fund at Candor Investing.

At Candor Investing, Amey invests in companies that don’t require external capital, have the ability to grow for a long time and are run by honest and hungry management.

Being passionate about sharing the learnings and insights gained out of his investment experience, Amey occasionally takes up visiting faculty assignments at various Indian business schools. He is also a contributing author to the Moneylife Magazine which is renowned for pointing out corporate governance issues and championing investor awareness campaigns.

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