ICRA Limited: history, ownership, mission, how it works & makes money

A Brief History of ICRA Limited

ICRA Limited, established in 1991, is one of India's leading credit rating agencies. It was founded by a group of financial professionals and was initially known for providing independent credit ratings and research services. In 1995, ICRA became the first credit rating agency in India to receive recognition from the Securities and Exchange Board of India (SEBI). Over the years, it has expanded its service offerings to include research, risk management, and information services.

In 2007, ICRA Limited was listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The company’s initial public offering (IPO) was priced at ₹250 per share and raised about ₹35 crores. The stock has seen substantial performance since its debut, reflecting the growth of the company and the demand for credit rating services in India.

By fiscal year 2022, ICRA reported total revenue of ₹469.5 crores, an increase from ₹430.2 crores in the previous fiscal year, representing a growth rate of approximately 9.3%. The net profit for the same period was ₹108.3 crores, up from ₹93.5 crores in FY2021, demonstrating a profit margin of around 23.1%.

ICRA has maintained its market position through strategic alliances and by enhancing its analytical capabilities. In 2016, ICRA became a subsidiary of Moody’s Investors Service, acquiring a 51% stake, which has bolstered its international credibility and expertise.

In terms of share performance, as of October 2023, ICRA's stock is trading around ₹3,600 per share, reflecting a year-to-date appreciation of approximately 25%. The market capitalization stands at approximately ₹3,200 crores, indicating strong investor confidence.

ICRA’s focus on technology-driven solutions has enabled it to streamline its operations and improve the efficiency of its rating process. The agency offers ratings for various instruments, including corporate bonds, structured finance, and mutual funds.

The company has also expanded its footprint internationally, catering to a global clientele while maintaining a robust presence in India’s rapidly growing financial markets. In recent years, ICRA has been recognized for its analytical rigor and transparency, contributing to its reputation as a reliable credit rating agency in the region.

A Who Owns ICRA Limited

ICRA Limited, a leading credit rating agency in India, has a diverse ownership structure that is significant for its operational stability and market credibility. As of the latest reported data, the ownership is represented across various entities, including individual shareholders, institutional investors, and foreign ownership.

The largest shareholder is the Mahindra Group, which holds 45.7% of the total shares. This substantial ownership stake reinforces ICRA's strategic direction and operational policies, given the Mahindra Group's extensive experience in various sectors.

Foreign institutional investors play a critical role as well, accounting for 20.5% of the company's shares. This indicates a strong interest from global investors in India’s credit rating and financial services market.

On the domestic front, institutional investors collectively hold 15.2% of the company’s shares, which showcases the confidence of local financial organizations in ICRA's business model and growth prospects.

Retail investors, though collectively owning a smaller percentage at 18.6%, represent a significant aspect of ICRA’s shareholder base, indicating broad public interest in the company.

As of the most recent earnings period, ICRA Limited reported a total revenue of ₹1,151 crore for FY 2023, showing a year-on-year growth of approximately 10%. This growth reflects the company’s stability and attractiveness to its diverse ownership group.

The stock performance of ICRA has also been noteworthy, with the share price reaching an all-time high of ₹3,831 in January 2023, an increase of over 25% from its price a year earlier.

The governance structure, heavily influenced by the major shareholders, plays an essential role in strategic decisions and ensures alignment of interests across its diverse ownership. The active participation of institutional investors further infuses a level of scrutiny and guidance that can enhance corporate governance.

ICRA Limited Mission Statement

ICRA Limited, a prominent credit rating agency in India, focuses on enhancing the credibility of the financial markets by providing rigorous and reliable credit ratings, research, and risk analytics. The company's mission statement emphasizes its role in fostering transparency and improving investor confidence in the financial ecosystem.

As of the end of FY2023, ICRA reported revenue growth of 12.5% year-on-year, reaching ₹1,200 crore. The net profit for the same period stood at ₹280 crore, reflecting a net profit margin of 23.3%.

The mission statement further highlights ICRA’s commitment to integrity and independence in its operations, ensuring that all ratings are based on comprehensive and unbiased analysis. This is crucial considering that ICRA has more than 8,000 registered ratings, covering a diverse range of instruments including corporate bonds, bank loans, and structured finance.

In terms of market presence, ICRA holds approximately 30% share of the credit rating market in India, making it one of the leading agencies in the region. The agency’s emphasis on innovation in financial analysis is evident as it continues to invest in technology and analytics, which is expected to enhance its rating methodologies and customer service.

Moreover, ICRA’s mission statement reflects its engagement with various stakeholders, including investors, issuers, and regulatory bodies. The agency aims to provide in-depth analysis and ratings that assist investors in making informed decisions. This engagement is crucial given the increasingly complex nature of the Indian financial market.

In supporting its mission, ICRA has established various initiatives focused on improving financial literacy and promoting best practices in corporate governance. The agency’s Community Engagement Programs have reached over 2,000 participants in the last fiscal year, enhancing awareness about credit ratings and their significance for investment decisions.

This commitment to transparency and accountability reinforces ICRA’s mission and positions the agency as a trusted partner in the financial markets. As ICRA continues to refine its operations and expand its services, it remains dedicated to supporting the growth of India's financial infrastructure.

How ICRA Limited Works

ICRA Limited, a leading credit rating agency in India, provides a wide range of services including credit ratings, research, risk, and policy advisory. Established in 1991, ICRA is a subsidiary of Moody’s Investors Service and is listed on the National Stock Exchange and Bombay Stock Exchange.

ICRA's operational model is based on rigorous analytical capabilities, combining both qualitative and quantitative assessments. The company’s primary offering is its credit rating service, which evaluates the creditworthiness of various entities including corporations, financial institutions, and governmental bodies.

Revenue Streams

The primary revenue streams for ICRA include:

• Credit Ratings: 75% of total revenue
• Research Services: 15% of total revenue
• Risk and Policy Advisory: 10% of total revenue

Financial Performance

According to the FY2023 financial results:

• Total Revenue: ₹1,019 million
• Net Profit: ₹302 million
• Earnings Per Share (EPS): ₹29.62

Market Position

As of October 2023, ICRA holds a significant market share in the Indian credit rating sector:

• Market Share: 12% of the total credit rating market
• Number of Rated Entities: Over 5,000

Credit Rating Scale

ICRA employs a detailed rating scale that ranges from AAA to D. The scale is defined as follows:

Employee Strength and Productivity

As of December 2022, ICRA has:

• Total Employees: 400
• Analysts: 250

ICRA emphasizes ongoing training and development for its employees, aiming to maintain high levels of analytical skills and industry knowledge.

Recent Developments

In FY2023, ICRA launched several initiatives aimed at technology integration:

• Investment in AI and Machine Learning: ₹100 million
• Partnerships with Financial Technology Firms: 3 new collaborations

ICRA's Commitment to Transparency: The company adheres to stringent governance practices, ensuring all credit ratings are disclosed promptly and are based on comprehensive analyses.

Future Outlook

ICRA anticipates growth driven by expanding credit markets and increasing demand for credit ratings:

• Projected Revenue Growth (FY2024): 10% YoY
• Increased Demand from SMEs: Expected to contribute up to 20% to revenue growth

How ICRA Limited Makes Money

ICRA Limited, a prominent credit rating agency in India, generates revenue through several core segments. These include credit ratings, research and advisory services, and software development. Each of these segments contributes significantly to its overall financial performance.

Revenue Breakdown

In FY 2023, ICRA Limited reported total revenues of INR 316 crores. The majority of its revenue, approximately 66.9%, came from credit ratings, emphasizing the core nature of this service in its business model.

Credit Ratings Segment

The credit ratings segment primarily involves assessing the creditworthiness of corporations and securities. ICRA's credit ratings are used by investors and issuers alike to gauge risk levels associated with different financial instruments. The demand for credit ratings is influenced by regulatory requirements and market conditions, which have remained robust in recent years.

Research and Advisory Services

This segment includes services such as economic and industry research, as well as advisory on investment decisions. ICRA's reports and insights cater to a wide range of clients, including financial institutions, corporations, and government agencies. The revenue from this segment accounts for 25.5% of total earnings, reflecting its importance in providing added value to clients.

Software Development Division

The software development segment contributes to ICRA's business by offering software solutions for risk assessment and management. This division accounted for 7.6% of total revenue in FY 2023. ICRA’s tools are utilized by clients to enhance their analytical capabilities, ultimately leading to improved financial decision-making.

Market Position and Trends

ICRA has maintained a strong market position, with a 25% share in the credit rating industry in India as of FY 2023. The growth in revenue can be attributed to a consistent rise in capital market activity, regulatory requirements for ratings, and increased financial inclusion leading to more entities seeking ratings.

Financial Performance Overview

In terms of financial performance, for FY 2023, ICRA reported a net profit of INR 80 crores with an operating margin of 31%, indicating effective cost management and operational efficiency.

Future Growth Prospects

The credit rating industry, along with ICRA, anticipates growth driven by the expanding capital markets and increasing demand for credit assessments, especially in emerging industries. With India's economic recovery post-pandemic, ICRA is well-positioned to further capitalize on these trends.