Higher growth in the earlier period was more due to increasing penetration. Since BASEL II norms were implemented, more and more companies were going for rating gradually, which led to very high growth. Proportion of new business as compared to surveillance business was higher that time. Now, majority of companies, which had to be rated, are already rated. Also, jumping from one rating agency to other has become cumbersome (more for NCD issuers) due to change in SEBI regulations few years ago, which has marginally reduced new business opportunity for all rating agencies.
While credit growth does lead to rating business growth, the same can not be similar, due to pricing cap and fee negotiation with increased quantum of debt. In my view, future growth in rating business will be lower than credit growth. CRISIL was visionary to understand this much earlier and aggressively expanded other business areas. CARE has been trying to do so for many years, but no success so far.

When i closely observe the periods of “zero returns”, they are not flat…there are ups and downs during that time. Only the definition of zero return is starting point of the zero return period and ending point are same. This is applicable to people who put all their capital at one point of time( may be start of zero return period) and withdraw at one point of time ( end point of zero return period). But for a person like me, who will be investing regularly during this zero return period and also withdrawing regulary for expenses, I will have multiple points of entry and exits during zero return periods and hence there wont be relative zero return for me.

Attended the Management meet today, hosted by Kotak Securities. Here are my notes:

• Brandy growing at 13%+
• Industry growing at 4% (last 3 years)
• Yet to see the premiumisation trend play out, especially the brandy category
• Massive deleveraging done
• Bringing premium and new flavoured variants of Brandy
• Came up with their first ad campaign on the Mansion brand
• Focusing on brand and category awareness and creation of market
• Radico and others are in categories which are already well exploited
• TI is a Brandy first company – underpenetrated category
• Expanding to new states and growing fast
• Other categories will come along in 2 year time
• Blue lagoon and Gin have been introduced – entry level products
• Wines is an exciting space but extremely small compared to brandy as a space (not visible in Mumbai, more visible in South, Andhra, Pondicherry – brandy is the largest category there)
• Telangana – 30% market share of Mansion House in the category
• Marketing Spends – Q2 – 1.5% of Revenues spent on Marketing – <0.5% for FY23 Revenues – expected to increase but remain low and not looking to be 8-10% like the peers which are whisky first companies
• Volume Growth projection – early to mid-teens for the next 2 years
• High double-digit growth to sustain for FY24
• On regulations on price hikes – similar to vodka and whisky (just like Radico and United Spirits)
• Mansion House is like a cult brand
• Learnt from old mistakes in terms of over leveraging and capital misallocations
• No major capex lined up apart from regular maintenance capex – Focus is to have an asset light model
• Aiming to be net debt free by FY25
• Major growth shall come from existing products in Southern India as well as new regions and focusing on Need Gaps (categories where there is demand but a good enough product does not exist)
• 25% Tax rate to be the sustainable tax rate going forward from the next year
• Middle East and South East Asia has good level of consumption as well
• Exports are expected to grow fast; Low single digits as of now
• Revenues are expected to grow faster than volumes due to the premiumisation
• Raw Material Prices remain high; not sure about the trend going forward but they expect it to normalise. Guidance on margins have been given assuming the RM prices remain the same. If they fall, it’ll provide incremental benefit to the bottom-line
• Expecting Operating Leverage to play out
• Margins can be 14-14.5% next year and may improve further to reach the old peak of mid to high teens eventually but again it depends on a few factors (ENA prices, Freight Costs, etc.)
• RM Integration: Main plant is in Maharashtra but as of now, Maharashtra contributes a very small portion to our business. Not looking at any distillery or major expansion. More than 80% of ENA is procured as of now – not expected to change significantly

Disc: Invested

Why is the stock price going bonkers? Any ideas @bhavveshh @Souresh_Pal @Venkat_Rakesh