ICRA- Riding on ratings

ICRA Limited operates as a credit rating agency in India. The company provides consulting services, including strategy, risk management, regulatory economics, transaction advisory, and process re-engineering services to banks and financial service companies, corporate entities, institutional investors, governments, regulators, and multilateral agencies. It also provides authentic data and value-added products, such as sector/industry-specific studies/publications and mandate-based studies to financial intermediaries, financial institutions, banks, asset managers, and institutional and individual investors, as well as research and publications services, which include industry and sector analysis, customized research, and rating profile services.

Result synopsis

The company’s operating Income for the Q1FY11 shows growth of 29% from the corresponding previous quarter. Total Income shows a decline of 3% and PAT indicated a fall of 18%.

The growth in Rating Services Income is attributable to the increase in income from corporate sector and financial sector ratings. Apart from this, the company was also able to add new issuers/borrowers to its list of rating clients.

Investment rationale

It recently received a license to operate in Indonesia. It will offer services through its 99% Indonesian subsidiary ICRAIndo. It will focus on rating of banks and their loan instruments, corporate bonds and commercial papers and insurance companies (claims paying capability) in Indonesia. It is also looking forward to supply research report and information services to investors through the subscription route. Further, it is exploring the possibility of entering five more Asian countries with its services. ICRA’s entry into the Indonesian market will be ICRA's first formal overseas foray.

Outlook

In the midst of recovering markets and IPO pour out the growth of the rating business is likely to continue. ICRA with its strong management and expanding footprints is likely to reap benefits of this uptrend.

Technically, the current price (Rs.1229) is trading above the 7 DMA as well as 30 DMA. The RSI is above 60 and moving up. The positive MACD indicates a BUY with a short term target of Rs. 1270 and stop loss of  Rs. 1210.