Elara Cap bets on ratings agencies post govt focus on SME ratings

Equities

Betting positively on most credit rating agencies, albeit one, Elara Capital had multiple initiation of coverage on several stocks.

The broking firm believes that agencies such as CRISIL, ICRA and CARE are likely to benefit from the government’s focus on SME rating. The companies are said to dominate revenue share of around 82 percent.

The triggers for this sector are likely to be bank loan rating, corporate bonds, and structured finance, among others.

Moneycontrol lists out multiple stocks that the company has a rating on.

CRISIL | Rating: Accumulate | Target: Rs 2,083 | Upside: 16 percent

The broking firm said that its diversified business supports higher than industry growth. It also expects revenue CAGR of 12 percent over CY16-19 and it sees CRISIL to sustain superior return on capital employed of 49 percent over CY16-19.

CARE Ratings | Rating: Accumulate | Target: Rs 1,712 | Upside: 14 percent

Elara believes that the company is a pure play on macro revival and expects revenue CAGR of 11 percent over FY17-20. With the absence of promoter, CARE is a key acquisition target, thereby improving the pricing power of the industry. Elara believes that the trigger for the stock could be scale up in non-rating business and possibility of buyback.

ICRA | Rating: Sell | Target: Rs 3,526 | Downside: 10 percent

The brokerage house believes ICRA is best placed in terms of bond market and sees revenue CAGR of 8 percent over FY17-20. Having said that, subdued non-rating business is an overhang. It also pointed out that premium valuations are not justified with lower profitability.

At 14:37 hrs CRISIL was quoting at Rs 1,799.30, down Rs 7.75, or 0.43 percent, on the BSE. while CARE was quoting at Rs 1,526.20, up Rs 7.70, or 0.51 percent. ICRA, on the other hand was quoting at Rs 3,969.45, up Rs 26.80, or 0.68 percent.