PE players set to take over Care Ratings

Carlyle, Barings bid for Indian banks' 45 per cent stake, open offer to follow

The ownership of rating firm Care Ratings is set to change hands, with private equity players Carlyle and Barings making a bid to take over IDBI and other institutions' 45 per cent stake on Saturday.

The auction for IDBI and other financial institutions' stake in Care Ratings closed on Saturday. Sources say the all-cash offer has been made at a rate of Rs 900-925 a share, thus valuing the company around Rs 2,600 crore. On Friday, Care Ratings shares closed at Rs 858.50 apiece, valuing the company at Rs 2,489 crore. As the acquisition will trigger the takeover code, an open offer for other shareholders will follow. A banking source says the Indian banks are booking profits on their investments as their balance sheets are strained due to heavy provisioning. The government has also asked the banks to arrange for their own funds as it is not keen to spend more to capitalise banks. While IDBI owns 34 per cent stake in the company, Canara Bank owns 15.21 per cent, State Bank of India another 6.4 per cent and IL&FS 5.99 per cent. Many other marquee private equity (PE) players and funds had entered the race but dropped out later, according to a source.

With the takeover of Care Ratings by global private equity players, all the top four rating agencies have now been taken over by foreign entities. Global ratings agency Moody's on Friday said it would make an open offer to raise its stake in local rating firm ICRA from 28.5 per cent to 55 per cent. At a price of Rs 2,000 per ICRA share, the offer is valued at Rs 530 crore. The deal values ICRA at about Rs 2,000 crore. S&P already owns Crisil while Fitch owns Ind Ra.

For the private equity companies, investment in Care Ratings comes at a time when the industry is witnessing a slowdown. Through its three funds, Barings India currently has investments in Mphasis BFL Software, Marico, Muthoot Finance and Mannapuram Finance, and has exited from consumer products maker Jyothi Ltd. Last year, Barings Asia took over Hexaware Software. Similarly, Carlyle has significant investments in Edelweiss and recently made a successful exit from Tirumala Milk Products.

For the December quarter, Care Ratings' revenue was Rs 54 crore, with a net profit of Rs 28 crore, marginally down from the September quarter when its revenue was Rs 65 crore and profit Rs 35 crore. "The company is doing very well and that's why many global companies have evinced interest," a Care Ratings official said, requesting not to be named.