CARE Ratings: Second-Largest Credit Ratings Agency in India

Lalaram Singh of Vibrant Securities presented his in-depth investment thesis on the credit ratings industry in India and CARE Ratings (BSE: 534804, NSE: CARERATING) at Asian Investing Summit 2018.

Thesis summary:

CARE Ratings offers an opportunity to buy a wide-moat business at the lower end of its historical range, with potential for high-teens earnings growth and valuation multiple rerating.

CARE is the second-largest credit rating agency in India, with market share of ~24%. It posted revenue of US$48 million and after-tax profit of US$24 million in 2017. At the recent price of US$19 per share, the company is available at a market cap of US$550 million.

The company is debt-free, with net cash holdings of US$62 million (~11% of market value). The company has generated US$98 million in cumulative cash from operations over the last five years, all of which has been returned to shareholders in the form of dividends. The company requires minimal capex to grow revenue.

CARE recently traded at a dividend yield of 2.3% and an FCF yield of ~4%.

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About the instructor:

Lalaram Singh is the CIO at Vibrant Securities, managing the proprietary book based on long only, value investing principles. Vibrant Securities is a 20+ year old stock broking company based out of Mumbai. At Vibrant, Lalaram is responsible for building the research team from scratch and formulating the investment strategy, idea generation and portfolio management process. Previously, Lalaram was the co-founder of AnalyseWise Investment Advisors, an Independent Equity Research company catering to retail, institutions and brokers. Lalaram was a part of AnalyseWise from Aug-14 to July-16. Prior to co-founding AnalyseWise , Lalaram was a part of 12 member team in Bain Capital at their Mumbai Office where he evaluated investment opportunities across industries ranging from Healthcare, IT, Industrials, & Consumer Goods. Lalaram began his career at J.P. Morgan in July-2012 upon completion of his Bachelors in Mechanical Engineering from Mumbai University. At J.P. Morgan, Lalaram supported the Asia M&A team working on companies across banking, insurance, securities and asset management in India, China and South East Asia.