Thanks for seeking my view. In my opinion, credit rating business in India is primarily depend on credit demand. In direct segment, it is bank loan rating or Debenture/bond rating which are borrowed by the companies. In indirect way, it is influenced by NBFC rating which also indirectly depend on retail credit and unsecured SME demand for credit in Indian market. If one look at FY2000 to FY2010 period, aggregate Scheduled Commercial Bank loan and advance (soured from various RBI Trends and progress annual report), the growth in 2010s was 23% CAGR which declined to 11% CAGR during 2020s.
That could have major impact on Credit rating demand as Bank account for significant portions of Credit demand. Further, in addition to credit, increased demand from SME/small corporates would also be better grwoth driver from Credit rating agencies perspective, as most of large Corporate are strong negotiator and try to cap their maximum fees. So even if bond raised during the years, increased from 1,000 Cr to 5,000 Cr. in a year, credit rating fees would constrained by cap in the agreement.
These two factors could be main factors behind moderate credit rating revenue growth in my view. However, increase capex , rising working capital demand and revival of SME could result in higher credti rating demand growth for next 3-5 years as compared with last 5 years in my opinion. My track record in forecasting can be defined best as pathetic which only 1 of 10 forecast being correct. So please read this para with bucket of salt and do your own anlaysis/due dilgience.
Disclosure: No major investment in credit rating sector, expect AGM pass holding in Crisil. My view may be biased. I am not recommeding any investment action.
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