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Crisil acquires 8.9 percent stake in rival CARE Ratings as a strategic long-term investment

Shares of CARE Ratings surged in early trade, following the news

Published: Jun 29, 2017

The financial markets generate a lot of number on a per second basis. There are people who have made it a profession to convert this information into trends, buy-sell signals, charts and pivot tables. Over the last 18 years of financial journalism, I have realised that every number has a story to tell. And these numbers as a trend normally never lie. I am forever looking for these trends.

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Ashu Suyash, MD and CEO, Crisil

Credit ratings agency Crisil, on Thursday, said it has purchased 26,22,430 equity shares, representing an 8.9 percent stake, in CARE Ratings from Canara Bank. The investment has been made pursuant to a bid process conducted by Canara Bank, subsequent to their request for quotation issued on June 19.

Care Ratings saw its stock move up by 9.35 percent to Rs 1,562 on BSE, in early trade on Thursday. Over the last one year, shares of CARE Ratings have surged 45 percent while Crisil is down 5 percent.

Crisil, in its press release, has stated that the investment in the equity of CARE has no special rights and is in compliance with applicable rules and regulations. “This stake purchase is an investment in the excellent long-term prospects of the credit ratings sector in the country. The prospects for the sector are driven by the significant demand for capital investments and infrastructure financing in India over the long term, much of which should benefit the sector,” said Ashu Suyash, managing director and CEO, Crisil.

Fund managers are bullish on the Indian economy and had always looked at the ratings business as a fast growing one. CARE Ratings has been a popular stock amongst investors and many mutual funds hold around 18.27 percent of the company. They say they don’t think the ratings sector is going through a consolidation phase or that one company will dominate the entire sector, which is why Crisil is trying to buy a stake in its competitor.

“It’s a sale by [Canara] bank to meet its own capital needs. This has nothing to do with a merger or consolidation. This is just a strategic investment and we don’t really need to look deeper,” said a fund manager with a leading mutual fund.

Franklin Templeton Mutual Fund is one of the larger funds that hold 4.88 percent of CARE Ratings.

Interestingly, among corporates, Tata Steel owns 1.2 percent of the company.

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