IPO grading biz not a major growth driver: ICRA

ICRA has posted a Q4 net profit of Rs 4.35 crore in FY07. Net sales for the quarter under review stood at Rs 10.49 crore. The consolidated net profit for FY07 stood at Rs 19.99 crore as compared to Rs 14.23 crore on a YoY basis. ICRA’s net sales stood at Rs 70.57 crore in FY07 as against Rs 55.90 crore last year.

Naresh Thakkar , MD, ICRA, said the IPO grading business is not a significant growth driver for the company. He does not think that IPO grading is a significant business opportunity for the company.

ICRA has consolidated its position in the debt market segment, Thakkar added.

Excerpts from CNBC-TV18’s exclusive interview with Naresh Thakkar:

Q: On this base that you have delivered in FY07, can one expect a 30% kind of growth this year?

A: As a policy, we do not talk about future revenue or bottomline guidance. Our business not only remains steady for ratings but for the other new initiatives of ICRA we have been growing well. We believe that the growth drivers for all these businesses continue to look positive.

Q: How much of revenue contribution do you expect from the relatively new IPO grading business because the IPO market seems quite vibrant now and have you started grading already?

A: We have started grading IPOs. In relation to other businesses, we do not think it’s a very significant incremental business opportunity. In a good year, there are about 120 IPOs that happen and there are four rating agencies.So even if one considers a relatively higher market share, still the numbers are not really significant. It’s a new opportunity, but I would not really say that is going to be major growth driver going forward.

Q: What is ICRA’s market share this time around and any sense of the growth that you might see from the debt and ratings side?

A: In terms of market share, there are no published numbers available.

I can only talk about certain numbers that are in the public domain. For instance, some rating agencies do mention their numbers but others don’t.

In terms of the volumes of debt rated, we expect it close to 1,78,000 crore for FY07 as compared to last year’s about 1,38,000 crore. Based on our own internal tracking system which we have got, we believe we would have consolidated our market position during the year.

Q: Your earnings for this financial year is higher than many analysts' estimates, even though you don’t give a specific guidance can you give us a sense of what sort of growth trajectory you set out for yourself as a management?

A: We have internal targets but are not in a position to comment on future numbers.

The rating business is really a derived business because of the debt market. Whenever there is investment demand in the system, or for that matter in the Indian context; when there is an expansion in bank debt, it does give opportunity for the rating businesses to grow.