Message from Chairman
The Indian economy traversed some interesting times in FY17. It was largely expectedthat the consumer demand revival would take place during the harvest cum festival seasonstarting in October. Growth for the year according to the CSO is expected to be 7.1% thisyear which is still impressive compared to other countries but lower than 8.0% in FY16.This was also accompanied by lower investment in the country with gross capital formationbeing lower at 27.1% compared with 29.3% in FY16. This was notwithstanding the fact thatthe government kept up with the promise of capital expenditure which was Rs 2.79 lakhcrore as per revised estimates for FY17 compared with Rs 2.47 lakh crore in FY16.
With lower level of economic activity in FY17 there was more moderate growth in bankcredit to manufacturing and services (the relevant sectors for a rating agency) which grewby 5.8% compared with 2.2% last year. Total debt issuances were higher this year. Privateplacements were Rs 6.41 lakh crore compared with Rs 4.58 lakh crore last year. Publicissuances were lower at Rs 0.295 lakh crore as against Rs 0.338 lakh crore during the sameperiod in previous year. However the financial sector continued to dominate the corporatedebt market and there was limited fund-raising by non-financial companies.
I am happy to inform you that even though external conditions were not too congenial interms of heightened activity in the credit and debt markets your company has performedquite satisfactorily with growth of 5.9% in income from operations and 9% in operatingprofits. Net profit growth was 28.7% in FY17. More importantly from the point of view ofbuilding a strong base for future growth we have increased our active clients from 12373to 15098 during the year. We do believe that having such a strong client base helps tobuild business when the economy is on a high trajectory path with some buoyancy in thedebt market as well as bank credit.
In terms of volumes of business there was an increase in the volume of fresh debtrated in the corporate debt segment from Rs 4.23 lakh crore to Rs 5.98 lkh crore whilebank loan ratings increased from Rs 5.45 lakh crore to Rs 5.93 lakh crore. By juxtaposingthese numbers with the changes in the corresponding figures for the aggregate markets onecan be satisfied with the performance.
We are cognizant of the reality that credit rating business will be linked largely towhat happens in the economy and while client acquisition across competition has been acontinuous process the corresponding changes in the business numbers would not becommensurate. This is why we have been working on diversification and here I am happy toannounce the launch of our new outfit CARE Advisory Research and Training Ltd. which willwork in three areas and supplement the rating business. We do believe that there is a lotof potential in these fields and would like to leverage the same.
On the global front your company continues to work tirelessly in the Mauritius marketwith the subsidiary CARE Rating Africa progressing well. We have also entered into anagreement with Vishal group of Nepal to set up a credit rating agency and have receivedthe certificate of incorporation for our new subsidiary CARE Ratings Nepal. We believethat this will help also in the development of the financial markets in this territory.
We are sanguine about the future and assuming a normal monsoon should be able tocontinue to move along the path of higher growth. The initiatives taken by the governmentand RBI to boost the corporate bond market in terms of both the large exposuresnotification as well as credit enhancements will move borrowers gradually away from thebanking system which is facing challenges from the NPA problem.
We would continue to remain focused on enhancing shareholder value and will be lookingat various other opportunities in other related areas as well as geographies. As yourcompany has done reasonably well when economic conditions were tough easing of theeconomic shackles in the coming year should help to generate the requisite momentum.