Q4 and 2019-20 Results The Board of Directors of CARE Ratings - - PDF document

~~Ratings

Professional Risk Opinion To, The General Manager The Corporate Relation Department Bombay Stock Exchange limited Phiroza JeejeebhoyTowers 14'" Floor, Dalal Street Mumbai 400 001 Scrip Code: 534804 Dear S1r/Madam, Date: June 18, 2020 SE/2020-21/015 The National Stock Exchange India ltd. Listing Department Exchange Plaza Sandra Kurla Complex Sandra {East) Mumbai 400 051 Scrip Code: CARERATING SUB; PRESS RELEASE AND INVESTOR PRESENTATION FOR QUARTER & YEAR ENDED MARCH 31, 2020 Please find enclosed herewith the Press Release and Investor Presentation of the Company of CARE Ratings Limited as per the requirement

• f

Regulation 30 and Para A of Part A of Schedule Ill of the SEBI {Usting Obligation and Disclosure Requirements) Regulations, 2015. Further, The Company has organized a conference call with the Investors/ Analysts on Friday, June 19, 2020, at 1130 a.m., post declaration of its Audited Standalone and Consolidated Financial Results for the quarter and year ended March 31, 2020. We are pleased to invite you to our company's investors' call on our Q4FY20 and FY20 financial results. The call will be initiated with a management overview on the earnings perfonmance followed by an interactive Question & Answer session. For registration click lhttps://register.gotoweblnar.com/reglster/7183076886540618512) Kindly take the above on record. Thanking you, Yours faithfully, For CARE Ratings Umlted

~-

Navin Kumar Jain Company Secretary & Complian Encl: As above.

CARE Ratings Ltd.

4" Floor. Godraj Coliseum, Somaiya Hospital Road, OH Eastern Express Highway, S.ion (E), Mumbai. 400 022.

Te.l.:-t91 ·22· 6754 3456 • Fa,.:--t91· 22· 6754 3457 • www.c,11..re r.atlngs.co m • CIN•l67190MH1993PlC071691

Registered Office: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai - 400 022.

CIN: L67190MH1993PLC071691

18th June 2020

Q4 and 2019-20 Results

The Board of Directors of CARE Ratings approved the financial results for the fourth quarter and year ended 31st March 2020 in the Board meeting held on Thursday the 18th of June 2020. Consolidated results For the year, consolidated total income was Rs 275.11 crore as against Rs 349.36 crore in 2018-19. Profit after tax (PAT) moderated from Rs138.07 crore in 2018-19 to Rs 83.48 crore in 2019-20. Standalone results CARE Ratings standalone income from operations declined from Rs 297.36 crore in FY19 to Rs 219.10 crore in FY20. Other income increased from Rs 29.83 crore to Rs 31.34 crore. Total expenditure increased from Rs 129.15 crore to Rs 150.19 crore during this period with staff costs going up by Rs 8.77 crore on account of the salary revision undertaken during the year. PAT declined from Rs 134.99 crore to Rs 80.50 crore for the year with the margin correspondingly declining to 32% from 41%. Business during the year was impacted by weak economic fundamentals with GDP growth slowing down to 4.2% during the year. This was also reflected in low growth in bank credit to the manufacturing and services sectors. A drop in gross fixed capital formation from 29% in 2018-19 to 26.9% in 2019-20 and decline in capacity utilization in manufacturing as per RBI data from 76.1% in Q4-FY19 to 68.6% in Q3-FY20 affected overall long-term lending. Also, the demand for institutional credit was low and the discretion shown by banks in lending impacted the flow of funds. This was notwithstanding the lowering of the repo rate by the RBI by 185 bps and infusion of liquidity through various measures. Hence the overall quantum of debt rated by your company was lower at Rs 12.73 lakh crore as against Rs 19.90 lakh crore in 2018-19. The shutdown announced in the last week of the year end also impacted business plans of several companies which in turn had a bearing on overall fund-raising plans of companies. For the fourth quarter, total income declined by 29% from Rs 81.49 crore to Rs 57.67 crore, while PAT came down from Rs 34.64 crore to Rs 13.95 crore. The Board of Directors have recommended 25% dividend of Rs. 2.50/- per share (of Rs. 10/- face value) which will take the total declared for the year to Rs 19.50/share.

Ruuniir

~@Ratings

"The shutdown in the first few months of the new year in various forms has impacted overall economic activity and with a negative growth in GDP being projected for FY21 we do see several challenges in growing the business as the overall borrowing through the bond market and banking system will be

• constrained. The government and RBI have announced various measures to alleviate the situation and

while we do expect them to take shape during the course of the year, conditions will continue to be uncertain in the coming months. Needless to say we will be working on diversifying our business aggressively to protect and enhance shareholder value over the long term," said Ajay Mahajan, MD & CEO, CARE Ratings For further information contact: MD&CEO

Investors Presentation Q4 and FY20

CARE Ratings Limited Investor Presentation – FY20

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Investors Presentation Q4 and FY20

SAFE HARBOR STATEMENT

THIS PRESENTATION AND THE ACCOMPANYING SLIDES (THE “PRESENTATION”), WHICH HAVE BEEN PREPARED BY CREDIT ANALYSIS & RESEARCH LIMITED (THE “COMPANY”), HAVE BEEN PREPARED SOLELY FOR INFORMATION PURPOSES AND DO NOT CONSTITUTE ANY OFFER, RECOMMENDATION OR INVITATION TO PURCHASE OR SUBSCRIBE FOR ANY SECURITIES, AND SHALL NOT FORM THE BASIS OR BE RELIED ON IN CONNECTION WITH ANY CONTRACT OR BINDING COMMITMENT WHATSOEVER. NO OFFERING OF SECURITIES OF THE COMPANY WILL BE MADE EXCEPT BY MEANS OF A STATUTORY OFFERING DOCUMENT CONTAINING DETAILED INFORMATION ABOUT THE COMPANY. THIS PRESENTATION HAS BEEN PREPARED BY THE COMPANY BASED ON INFORMATION AND DATA WHICH THE COMPANY CONSIDERS RELIABLE, BUT THE COMPANY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WHATSOEVER, AND NO RELIANCE SHALL BE PLACED ON, THE TRUTH, ACCURACY, COMPLETENESS, FAIRNESS AND REASONABLENESS OF THE CONTENTS OF THIS

• PRESENTATION. THIS PRESENTATION MAY NOT BE ALL INCLUSIVE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU MAY

CONSIDER MATERIAL. ANY LIABILITY IN RESPECT OF THE CONTENTS OF, OR ANY OMISSION FROM, THIS PRESENTATION IS EXPRESSLY EXCLUDED. CERTAIN MATTERS DISCUSSED IN THIS PRESENTATION MAY CONTAIN STATEMENTS REGARDING THE COMPANY’S MARKET OPPORTUNITY AND BUSINESS PROSPECTS THAT ARE INDIVIDUALLY AND COLLECTIVELY FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT. THESE RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, THE PERFORMANCE OF THE INDIAN ECONOMY AND OF THE ECONOMIES OF VARIOUS INTERNATIONAL MARKETS, THE PERFORMANCE OF THE RATING INDUSTRY IN INDIA AND WORLD-WIDE, COMPETITION, THE COMPANY’S ABILITY TO SUCCESSFULLY IMPLEMENT ITS STRATEGY, THE COMPANY’S FUTURE LEVELS OF GROWTH AND EXPANSION, TECHNOLOGICAL IMPLEMENTATION, CHANGES AND ADVANCEMENTS, CHANGES IN REVENUE, INCOME OR CASH FLOWS, THE COMPANY’S MARKET PREFERENCES AND ITS EXPOSURE TO MARKET RISKS, AS WELL AS OTHER RISKS. THE COMPANY’S ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY AND ADVERSELY FROM RESULTS EXPRESSED IN OR IMPLIED BY THIS PRESENTATION. THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESENTATION. ANY FORWARD-LOOKING STATEMENTS AND PROJECTIONS MADE BY THIRD PARTIES INCLUDED IN THIS PRESENTATION ARE NOT ADOPTED BY THE COMPANY AND THE COMPANY IS NOT RESPONSIBLE FOR SUCH THIRD PARTY STATEMENTS AND PROJECTIONS.

ch3~Ratings

Professional Risk Opinion

Investors Presentation Q4 and FY20

Contents

Highlights Financial & Business Performance MCR/CDQI Economic Backdrop

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Professional Risk Opinion

Investors Presentation Q4 and FY20

CARE Ratings Group

CARE Ratings Limited

CARE Risk Solutions Private Limited, 100% CARE Advisory Research and Training Limited, 100% CARE Ratings (Africa) Private Limited, 78% CARE Ratings (Nepal) Limited, 51%

~~Ratings

Professional Risk Opinion

Investors Presentation Q4 and FY20

Diversified Business Mix

Ratings

• Manufacturing & Services sector
• Financial sector
• Infrastructure
• Small & Medium Enterprises
• Structured Finance
• Sub Sovereign ratings
• Alternate Inv. Fund, Infra. Dev. Fund

Information Analysis & Grading

• Industry & Customized Research reports
• CARE Industry Risk Metrics (CIRM) reports
• Grading services
• Training
• Valuations

International expansion

• Setup a rating agency in Mauritius and
• Nepal. Exploring neighboring countries,

Africa

CARE Risk solutions Private Ltd.

• Risk Solutions for
• Basel II, Credit risks, Operational risks, Fund

Transfer Pricing, Asset Liability Mgmt., Value at risk, Capital Adequacy Ratio, IFRS

CARE Advisory Research & Training Ltd.

• Advisory Services
• Training Services
• Customized Research

~~Ratings

Professional Risk Opinion

Investors Presentation Q4 and FY20

Contents

Highlights Financial & Business Performance MCR/CDQI Economic Backdrop

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Financial Performance

Particulars FY20 FY19 FY20 FY19

Total Revenue 250.44 327.19

• 23%

275.11 349.36

• 21%

Total Expenses 150.19 129.15 16% 171.02 147.63 16% Profit Before Tax 100.25 198.04

• 49%

104.09 201.73

• 48%

Provision for Tax 19.75 63.06

• 69%

20.61 63.66

• 68%

Profit After Tax 80.50 134.99

• 40%

83.48 138.07

• 40%

Profit Before Tax margin (%) 40% 61% 38% 58% Net Profit margin (%) 32% 41% 30% 40% Basic EPS (Rs. per share) 27 46 28 47

• Rs. in Crores

Standalone % Change Consolidated % Change

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Financial Performance: FY20 (Rs Cr)- Standalone

400.00 300.00 200.00 100.00 160.00 150.00 140.00 130.00 120.00 110.00

Total Revenue

327.19 FY19

Total Expenditure

129.15 FY19

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Professional Risk Opinion

250.44 FY20 150.19 FY20 300.00 200.00 100.00

150.00 100.00 50.00

PBT

198.04 FY19

PAT

134.99

FY19 100.25 F.Y20

80.50

FY20

Investors Presentation Q4 and FY20

Financial Performance: FY20 - Standalone

FY20 PBT margin & PAT margin fell due to lower income (due to lower borrowing by the NBFC sector & muted Capex of the corporate sector) coupled with higher operating expenses due to increase in employee cost & other expenses

80 60

40 20

50

40

30

20 10

PBT Margin (%) 61

FY19

PAT Margin (%) 41

FY19

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Professional Risk Opinion

40

FY20

32

FY20

Investors Presentation Q4 and FY20

Business Performance (New clients): FY20

10,000

No of Instruments Rated

9,380

25.00

Volume of Debt Rated (Rs lk er)

9,000 8,088

19.91

8,000

20.00

7,000 6,000

15.00

5,000 4,000

10.00

3,000

8.13

2,000

5.00

1,000

3.27

110 74 338 290

Short & Long term Bank Loan

• thers

Total Medium term Ratings

0.00 Bank Loan Ratings Total Short & Medium Long term term

I FY19 I FY20

• FY19 • FY20

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Business Performance (New clients): Q4 FY20

9.00

8 .00

7.00 6.00 5.00 4.00 3.00 2.00 1.00

0 .00

Volume of Debt Rated (Rs lk er)

Short & Medium term Long term

Q4 FY19

• Q4 FY2 0

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Professional Risk Opinion

8.45

3,500 3,000 2,500 2,000 1,500 1,000 500

No of Instruments Rated

26 23 117 83 Short & Medium

Long term Bank L

• an

Ratings Others

term

I Q4 FY19 I Q4

FY20

3,002

Total

Investors Presentation Q4 and FY20

Contents

Highlights Financial & Business Performance MCR/CDQI Economic Backdrop

~~Ratings

Professional Risk Opinion

Investors Presentation Q4 and FY20

Rating Movement

The weakness in the domestic economy has been emphasized by the sharp moderation in the credit quality of Indian companies in 2019-20. Indian corporates have been pressured by the slowdown in the domestic economy and tight financing conditions in the domestic economy. The credit quality of the rated entities as measured by CARE Rating’s ‘modified credit ratio’ (MCR) declined to a 7 year low in 2019-20. 13

1.00 0.81 1.03 1.17 1.12 1.07 1.09 1.04 0.96 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Modified Credit Ratio (MCR)

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Professional Risk Opinion

Investors Presentation Q4 and FY20

CARE Ratings Debt Quality Index (CDQI)

14

CDQI declined by 0.54 points in the month of September’19 triggered by further downgrades in NBFC and HFC segment due to the continuing liquidity stress in the segments making it difficult for entities to raise finance in a timely manner as also delaying monetization plans. There was a marginal improvement seen in Jan’20 and the CDQI again declined marginally by 0.13 points in February ’20 from a month ago to 87.89. The index has seen a notable increase in the previous 2 months i.e March’20 and April’20 on account of enhancements in rated debt of high rated

• companies. In April’20, the index rose by 0.80 points.

88.81 89.61 86 88 90 92 94 96 98 100 102 Mar'12 May'12 July'12 Sept'12 Nov'12 Jan'13 Mar'13 May'13 July'13 Sept'13 Nov'13 Jan'14 Mar'14 May'14 July'14 Sept'14 Nov'14 Jan'15 Mar'15 May'15 Jul'15 Sept'15 Nov'15 Jan'16 Mar'16 May'16 July'16 Sept'16 Nov'16 Jan'17 Mar'17 May'17 July'17 Sep'17 Nov'17 Jan'18 Mar'18 May'18 July'18 Sep'18 Nov'18 Jan'19 Mar'19 May'19 July'19 Sep'19 Nov'19 Jan'20 Mar'20

CDQI Index

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Contents

Highlights Financial & Business Performance MCR/CDQI Economic Backdrop

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Economic Growth and Industrial Output

16

Source: MOSPI Source: MOSPI

3.8

• 0.7
• 1.0

0.0 1.0 2.0 3.0 4.0 5.0 FY19 FY20 %

IIP

8.0 8.2 7.2 6.1 4.2 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 FY16 FY17 FY18 FY19 FY20 %

GDP growth (%)

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Inflation and Exchange Rate

17

Source: MOSPI Source: RBI

3.2 7.6 5.9 3.2 1.1 3.5 1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 %

Inflation

CPI (%) WPI (%) 69.43 71.49 74.35 66 67 68 69 70 71 72 73 74 75

Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

Rs/$

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Bank Credit

Source: RBI Source: RBI

13.3 6.1 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 FY19 FY20 %

Growth in Bank credit

7.9 6.9 17.8 16.4 4.2 0.7 7.4 15.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 Agriculture Industry Services Retail %

Growth in Credit

FY19 FY20

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Non-Performing Assets

7.5 9.3 11.2 9.3 9.3 4 5 6 7 8 9 10 11 12 Mar-16 Mar-17 Mar-18 Mar-19 Sep-19 %

GNPA Ratio

Note: Gross NPAs as a percentage of gross advances Source: RBI

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Corporate Bond Issuances

20

Source: SEBI

• Majority of the corporate bond issuances

are raised by the financial sector (~65% share)

• Banks/term lending (35%), financial

services/investment (18%), housing finance (13%)

• Infrastructure sector accounted for nearly

20% of the total corporate bond issuances

• Roads and highways (8% share), power

generation and supply (6%) and real estate (5%) are the dominant industries within infrastructure

36,679 6,10,318 6,46,997 14,984 6,74,703 6,89,687

• 1,00,000

2,00,000 3,00,000 4,00,000 5,00,000 6,00,000 7,00,000 8,00,000

Public Issue Private Placement Total

• Rs. Cr.

Corporate Debt Raised

FY19 FY20

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Commercial Paper

21

Source: RBI

• Within the total CP issuances, financial

services/investment had highest share of 21% followed by

• il

exploration/drilling/refineries (16%) and term lending (12%)

• Some of the other sectors pertained to
• Housing Finance (9%)
• Telecom (9% share)
• Power

generation and supply (8% share)

• Textiles (4%)
• Fertilizer (4%)
• Iron and steel (3%)

4.83 25.96 3.45 21.97 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Oustanding CPs Issuances

• Rs. Lkah crore

CP Issuances (Rs lakh cr)

FY19 FY20

■ ■

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Interest Rate and GSec yields

22

4.40 4.00 8.74 8.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00

Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 %

Repo Rate (%) & MCLR(%)

Repo Rate (%) MCLR (1 year median)

7.37 6.25 6.00 6.20 6.40 6.60 6.80 7.00 7.20 7.40 7.60 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 %

G Sec Yield (%)

G Sec Yield (%) Source: RBI Source: FIMMDA

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Investors Presentation Q4 and FY20

Government measures in FY20

Corporate tax rate cut to 22% Withdrawal of Surcharge on FPIs Eased FDI norms in coal, contract mfg Export promotion measures Capital infusion in PSUs Thrust to MSMEs Real estate AIF of Rs. 25,000 cr Eased BS VI norms Liquidity support to HFCs Merger of PSBs Infra boost - NIP VRR for FPIs Extension in MSMEs’ NPA recognition ECB norms liberalized Withdrawal of Angel Tax for Start-ups External Benchmarks for SCBs interest rate

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Professional Risk Opinion

Investors Presentation Q4 and FY20

Thank You

24

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Professional Risk Opinion