ICRA (ICRA) Q4 05/06 earnings summary

Executive summary

• FY06 net profit rose 56% to Rs 126.51m from Rs 80.99m; EPS increased to Rs 14.37 from Rs 9.20. Prior-year comparability is limited by the advisory division demerger effective April 1, 2005.

• Rating work grew, led by financial-sector demand; consulting operations transferred to a separate subsidiary, while analytics and online businesses expanded revenue and reported higher profits before tax.

Financial highlights

• Operating income was Rs 332.13m vs Rs 371.52m; rating fees rose to Rs 302.62m from Rs 256.16m, while advisory fees moved to the subsidiary after the demerger.

• Total income was Rs 386.14m vs Rs 413.25m; profit before depreciation and tax reached Rs 189.13m vs Rs 126.97m, and PBT was Rs 173.90m vs Rs 112.71m.

• PAT was Rs 126.51m vs Rs 80.99m; proposed dividend was Rs 4/share vs Rs 3.50/share, with a 40% dividend rate reported for FY06.

• FY06 revenue and expenditure comparisons exclude the transferred advisory division from current-year figures; the prior-year figures include it.

Outlook and guidance

• Rating activity was expected to benefit from sustained investment and consumption demand, stronger bank credit, higher bank capital needs and Basel II-related ratings requirements.

• Corporate bond issuance was expected to improve from FY06 levels as bank lending costs hardened and banks balanced loan and investment exposures; infrastructure funding could widen rating opportunities.

• Structured-finance issuance was expected to remain subdued in H1 FY07 as issuers assessed RBI guidelines, with bilateral assignments and on-tap securitisation expected to help offset weakness.

• The analytics and online subsidiaries expected further growth in FY07, supported by encouraging early-year trends, new software and financial products, and overseas market development.