Care Ratings will benefit from huge opportunity in credit market

CARE Ratings | Reiterate ‘BUY’ with Target Price of Rs 1,800/- | We are positive on huge long term opportunities for the credit rating sector on the back of development in Indian debt market over FY15-17E. The company’s above average industry growth rate, highest margins, superior efficiency and return profile among the listed peers makes it more attractive investment. We believe CARE is the best pick among listed rating agencies as more than 95% of its revenue comes from domestic ratings. Declining interest rates coupled with better demand is expected to lift corporate capex by H2FY16. We reiterate ‘BUY’ rating on the stock with the same price target of Rs 1,800/- (P/E multiple of 25x for FY17E). IDBI Bank has sold its 10% stake in CARE Ratings for Rs 4.2 bn. It sold 2.9 mn shares at an average price of Rs 1,453/- a share as on March 18, 2015. Life Insurance Corporation of India (LIC) has picked 9.94% stake in Credit Analysis and Research (CARE) for Rs 4.2 bn. It has purchased 2.9 mn shares at a price of Rs 1,453 a share on the Bombay Stock Exchange (BSE). However, there will not be any operational or financial impact on the CARE ratings due to such a deal. (IndiaNivesh)