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Crisil in restructuring phase

Apr 30, 2001

Crisil has reported an impressive 29% growth in topline on the back of increased rating business in the current year. Crisil has rated companies in industries such as media and airlines in FY01, which were hitherto not rated in India. The company's profits however, declined by 25%.

(Rs m)FY00FY01Change
Income from Operations 340 440 29.4%
Other Income 29 17 -41.2%
Expenditure 180 296 64.3%
Operating Profit (EBDIT) 159 144 -10.0%
Operating Profit Margin (%)46.9%32.6% 
Interest 0 -  
Depreciation 29 54 83.1%
Profit before Tax159107-32.8%
Other Adjustments3427-18.7%
Tax 63 37 -41.0%
Profit after Tax/(Loss) 129 97 -25.1%
Net profit margin (%)38.0%22.0% 
No. of Shares (eoy) (m) 6.2 6.2  
Diluted Earnings per share 20.8 15.6  
P/E (at current price)  7  
Price/Book value  1.1  

Crisil's operating profits took a severe hit due to higher staff cost and professional expenses, which rose by 52% and 282% respectively. Professional fees was higher on the back of rise in payment of outsourcing charges to Rs 28 m from Rs 2 m in FY00. These factors led to a sharp decline in its operating margins to 32.6% from 46.9% in the previous year. Also, depreciation cost was higher by 83% due to acquisition of brand 'Infac' and purchase of new office premises.

Other adjustments is on account of profits on sale of fixed assets, property rights and investments. Excluding these items the profits of the company drop by 27%.

At the current market price of Rs 115 Crisil is trading at PER of 7 times its FY01 earnings and a Price/Book value ratio of 1x. Crisil's topline growth was satisfactory considering the widespread difficulties in the economy and industry. However, due to higher operating expenses the company's net took a hit. As a result the re-rating of the stock is highly linked to its ability to show an improvement in operating margins and generate the returns on the amount invested (acquisition of Infac) by it in the current year.

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