CARE Ratings Limited

My Few Cents on CARE

The investment thesis

Positive Points –

• Simple, easy to understand GREAT Business. There are very rare businesses where “YOU PAY TO GET YOURSELF RATED”
• Indian Rating agency – This whole idea of Care came from the recent interview of Guy Spier, who suggested why India shouldn’t have their OWN credit rating agency.

CRISIL is owned by Standard & Poor Global, ICRA is owned by Moody’s & Fitch is also an American Company. So all these big ones are owned by Foreign Promoters. Care is Indian in origin and professionally managed without any promoters.( ? Make in India)

• Ideally all Indian Corporates require 2 ratings for their CP – Commercial Paper. So usually they go for one that is reputed and one that’s cheap.So getting business is not a problem for Care. Long runway is assured.
• Recently SEBI closed Brickworks ratings due to misconducting proper ratings work. So That business ( part of it) may come to CARE.
• Also lots of shuffling has happened after the IL & FS and DHFL rating crisis. Care was fined by SEBI for the same. But looks like the worst is behind us & Care has learnt its lessons. ( just like NPAs in the PSU banks)

Negative points –

• Care’s almost all revenue comes from Ratings and hardly any from research / advisory services.
• Sales have gone down after 2018. Probably due to the IL & FS & DHFL fiasco. They are improving now as per their latest quarterly results. Sales have grown by 14% and net profit is up by 40%.
• Still management has to perform. So the (make in India) NARRATIVE has to be converted in the NUMBERS.
• Hopefully no more CG issues.
• Small fish with established BIG sharks around
• No such promoter.

Technically, it has crossed the Golden crossover at 500 level and is in uptrend.

Have taken initial position at 550.

And if you want to get market-beating returns, you have to find them in the undiscovered and out of favour sectors.

Basically , its like Mohnish Pabrai says – Heads, I Win; Tails, I don’t lose much.

Regards,
dr.vikas