CARE Ratings tumbles after Q3 PAT slides 22% YoY to Rs 15 cr

CARE Ratings fell 5.35% to Rs 577.15 after the company's consolidated net profit fell 21.90% to Rs 14.55 crore on 1.19% decrease in total income to Rs 62.96 crore in Q3 December 2021 over Q3 December 2020.

Profit before tax (PBT) fell 18.20% to Rs 19.77 crore in Q3 December 2021 over Q3 December 2020. Operating profit decreased by 18% to Rs 14.97 crore during the period under review.

On a standalone basis, CARE Ratings total income increased by 1.1% from Rs 54.83 crore in Q3 FY21 to Rs 55.45 crore in Q3 FY22. Total expenses have increased by 5.4% during this period. Operating profit increased by 1.9% from Rs 14.65 crore to Rs 14.93 crore while net profit after tax decreased from Rs 15.81 crore to Rs 14.90 crore. Operating profit margin and net profit margin were 30.7% and 26.9% respectively in Q3 FY22.

The company said that it believes the domestic economic activity has been gaining ground, progressively strengthening from the sharp decline in FY21.

Fund raising by businesses, which has a direct bearing on the company's business, in the quarter gone by presented a mixed picture. While fund raising from the corporate bond markets was subdued, it was strong for commercial paper. Bank credit demand by corporates, although restrained, picked up pace.

Corporate bond issuances during the quarter totalled Rs 1.45 lakh crore which was 19% less than the issuances in the preceding quarter and 15% lower than a year ago (Q3 FY21). Issuances in the first nine months of FY22 at Rs 4.14 lakh crore has been 26% lower than last year (9M FY21).

Commercial paper issuances in the third quarter at Rs 6.48 lakh crore was 4% higher than the second quarter (Rs 6.22 lakh crore) and 49% more than a year ago. The issuances of these short-term securities during the first 9 months of FY22 has seen a 36% increase from the corresponding period of FY21.

Bank credit offtake has seen a notable improvement in recent months. The incremental bank credit growth as of end - December'21 was 6.7% as against the 3.2% growth in the corresponding period of last year. This improvement in credit demand is however driven by the retail segment. At the same time, even as the incremental credit growth to industry and services sector continues to be in contractionary territory, the decline has been less severe. The credit growth to industry and services during Apr-Nov'21 was (-) 0.5% as against the degrowth of 1.4% in the same period of last year.

There has been stability in the overall environment in the credit and debt markets during Q3 with the higher levels of economic activity and mobility, the company said.

"The strengthening of the economy bodes wells for a revival in the investment cycle in the coming future. Moreover, with the government expected to maintain emphasis on public investment led economic growth in the upcoming budget, private investment could eventually crowd in. This in turn holds encouraging potential for the debt and credit markets. That said, we are cautious in our optimistic outlook as we need to be watchful how the pandemic triggered episodic disruptions play out on the recovery' said Ajay Mahajan, MD & CEO of CARE Ratings. He further added, "Even as we bring in new business, we continue to pay due attention to our surveillance assignments. Also, with our subsidiaries business gaining reassuring traction, our resolve and focus on diversification and developing new viable businesses opportunities for the CareEdge Group has strengthened".

CARE Ratings is one of the leading credit rating agencies in India. It covers many rating segments including manufacturing, infrastructure, financial sector including banks, non-financial services, among others. The company has an established track record of rating companies over almost three decades and has had a pivotal role to play in developing bank debt and capital market instruments including CPs, corporate bonds and debentures, and structured credit.

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