3QCY2012 Result Update | Credit Rating

October 18, 2012

CRISIL
Performance Highlights
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 3QCY2012 271.0 91.2 33.7 59.7 3QCY2011 220.0 83.9 38.1 60.2 %chg (yoy) 23.1 8.7 (446) (0.7) 2QCY2012 216.6 59.7 27.6 43.7 %chg (qoq) 25.1 52.8 610 36.7

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Credit Rating

`994 -

6,652 0.6 1262/748 5,423 1 18,792 5,719

CRSL.BO CRISIL@IN

Source: Company, Angel Research

For 3QCY2012, CRISILs net sales grew by 23.1% yoy to `271cr. The company reported a 446bp yoy contraction in its OPM to 33.7%. The net profit declined by 0.7% yoy to `60cr. We continue to remain Neutral on the stock. Top-line posts mediocre growth, EBITDA margin contracts: For 3QCY2012, CRISILs top line reported a 23.1% yoy growth to `271cr. Its rating segment witnessed a 22.6% yoy growth to `103cr, backed by decent growth in the bank loan rating segment. The research segment growth picked up during 3QCY2012, registering a 37.6% yoy growth to `152cr (10.2% yoy in 2QCY2012). The advisory segment performance remained sluggish growing by 3.3% yoy (de-growth of 21.6% yoy in 2QCY2012) to `15cr. Going ahead, Coalition Development Ltd will drive the next leg of growth for CRISIL. For 3QCY2012, the EBITDA declined by 8.7% yoy to `91cr on the back of margin contraction. The EBITDA margin contracted by 446bp yoy to 33.7%, largely due to higher staff cost, which increased to 44.5% of sales in 3QCY2012 from 40.5% of sales in 3QCY2011 and forex loss of `7cr in 3QCY2012 as against profit of `9cr in 3QCY2011. The net profit came in at `60cr, down 0.7% yoy; while margin contracted by 531bp yoy to 22.0%, largely due to increased tax rate. CRISILs tax rate increased to 29.9% of PBT in 3QCY2012 vs 26.0% of PBT in 3QCY2011. The company reported other income of `3cr during the quarter as compared to `5cr reported in 3QCY2012. Outlook and valuation: In June 2012, CRISIL signed an agreement to buy 100% of equity shares of the UK-headquartered Coalition Development along with its subsidiaries, which we expect would drive the next leg of growth for CRISIL. Accounting for Coalition Developments revenue, we expect CRISIL to post a 20.6% CAGR in revenue and 14.5% CAGR in PAT over CY2011-13 and continue to maintain its leadership position. Despite the recent buy back, the stock is available at a rich valuation of 24.4x CY2013E earnings, which is at the higher end of its historical range of 13.4x-26.9x and five-year median of 19.4x one-year forward EPS. We continue to maintain our Neutral recommendation on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 53.0 16.8 10.9 19.3

Abs. (%) Sensex CRISIL

3m 9.4 (9.5)

1yr 12.2 9.7

3yr 8.5 125.6

Key financials (Consolidated)

Y/E Dec. (` cr) Net Sales % chg Net Profit % chg EPS (`) EBITDA Margin (%) P/E (x) RoE (%) RoCE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

CY2010 631 17.5 160 (0.2) 29.0 34.5 32.5 49.6 47.4 16.9 10.2 29.6

CY2011 827 31.1 206 28.6 29.4 34.2 32.0 51.1 62.6 15.9 7.7 22.4

CY2012E 1,005 21.5 229 10.8 32.6 33.3 28.9 49.0 64.3 12.7 6.3 18.9

CY2013E 1,203 19.7 271 18.4 38.6 33.8 24.4 46.6 62.0 10.3 5.2 15.4

Varun Varma
022-3935 7800 Ext: 6847 varun.varma@angelbroking.com

Please refer to important disclosures at the end of this report

CRISIL | 3QCY2012 Result Update

Exhibit 1: 3QCY2012 Performance highlights

Particulars (` cr) Net Sales Total Expenditure EBITDA OPM (%) Depreciation EBIT Interest Other Income PBT Tax Exceptional Items Net Profit NPM (%) Net Profit Adj. for other Income Diluted EPS (`)
Source: Company, Angel Research

3QCY2012 271.0 179.8 91.2 33.7 9.2 82.0 3.2 85.2 25.4 59.7 22.0 56.6 8.5

3QCY2011 220.0 136.2 83.9 38.1 7.4 76.5 5.3 81.8 21.6 60.2 27.3 54.9 8.5

%chg (yoy) 23.1 32.0 8.7 (446) 24.8 7.2 (40.0) 4.2 17.8 (0.7) (531) 3.0 0.5

2QCY2012 216.6 156.9 59.7 27.6 8.0 51.7 9.6 61.3 17.6 43.7 20.2 34.2 6.2

%chg (qoq) 25.1 14.6 52.8 610 15.6 58.6 (67.0) 39.0 36.7 186.2 65.7 36.9

9MCY12 717.3 484.1 233.2 32.5 25.0 208.2 17.5 225.6 65.2 160.4 22.4 142.9 22.9

9MCY11 602.6 399.8 202.8 33.7 21.6 181.2 13.5 194.7 44.1 150.6 25.0 137.1 21.5

%chg (yoy) 19.0 21.1 15.0 (114.6) 15.9 14.9 29.2 15.9 6.5 (263) 4.3 6.5

Revenue growth picks up in 3QCY2012

For 3QCY2012, CRISILs top-line reported a 23.1% yoy growth to `271cr. Its rating segment witnessed a 22.6% yoy growth to `103cr, backed by a decent growth in the bank loan rating segment. The research segment growth picked up during 3QCY2012 (Coalition Development numbers included), registering a 37.6% yoy growth to `152cr (10.2% yoy in 2QCY2012). The advisory segments performance remained sluggish, growing by 3.3% yoy (de-growth of 21.6% yoy in 2QCY2012) to `15cr. Going ahead, Coalition Development will drive the next leg of growth for CRISIL.

Exhibit 2: Growth picks up yoy

(` cr) 300 250 200 150 100 50 0 3QCY2011 4QCY2011 Net Sales (LHS) 1QCY2012 2QCY2012 3QCY2012 Growth (qoq) Growth (yoy) 220 225 230 217 271 (%) 45 40 35 30 25 20 15 10 5 0 (5) (10)

Source: Company, Angel Research

October 18, 2012

CRISIL | 3QCY2012 Result Update

EBITDA margin contracts on back of high staff cost and forex loss
For 3QCY2012, the EBITDA declined by 8.7% yoy to `91cr on the back of margin contraction. The EBITDA margin contracted by 446bp yoy to 33.7%, largely due to higher staff cost, which increased to 44.5% of sales in 3QCY2012 from 40.5% of sales in 3QCY2011 and forex loss of `7cr in 3QCY2012 as against profit of `9cr in 3QCY2011

Exhibit 3: OPM trend

(%) 45

40

38.1 35.6 35.8 33.7

35

30

27.6

25 3QCY2011 4QCY2011 1QCY2012 2QCY2012 3QCY2012

Source: Company, Angel Research

Bottom-line flat yoy on account of higher tax and lower other income
CRISILs net profit came in at `60cr, down 0.7% yoy; while margin contracted by 531bp yoy to 22.0%, largely due to increased tax rate. The tax rate increased to 29.9% of PBT in 3QCY2012 vs 26.0% of PBT in 3QCY2011. The company reported other income of `3cr during the quarter as compared to `5cr reported in 3QCY2012.

Exhibit 4: PAT trend

(` (` cr) 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 60.2 3QCY2011 55.8 4QCY2011 57.0 1QCY2012 43.7 2QCY2012 NPM (RHS) 59.7 3QCY2012 27.3 24.9 24.8 20.2 22.0 (%) 30 25 20 15 10 5 0

Net Profit (LHS)

Source: Company, Angel Research

October 18, 2012

CRISIL | 3QCY2012 Result Update

Outlook and valuation

In June 2012, CRISIL signed an agreement to buy 100% of the equity shares of the UK-headquartered Coalition along with its subsidiaries, which we expect to drive the next leg of growth for CRISIL. Accounting for Coalition Development revenues, we expect CRISIL to post a 20.6% CAGR in revenue and 14.5% CAGR in PAT over CY2011-13 and continue to maintain its leadership position. Despite the recent buy back, the stock is available at rich valuation of 24.4x CY2013E earnings, which is at the higher end of its historical range of 13.4x-26.9x and five-year median of 19.4x one-year forward EPS. We continue to maintain our Neutral recommendation on the stock.

Exhibit 5: P/E band

1,400.0 1,200.0 1,000.0 800.0 600.0 400.0 200.0 Dec-05 Dec-07 Dec-09 Aug-06 Aug-08 Aug-10 Dec-11 Apr-07 Apr-09 Apr-11 Aug-12

Price

10x

15x

20x

25x

30x

Source: Company, Angel Research

Company background: CRISIL is Indias largest credit rating agency, with a market share of around 60%, and is one of the biggest research houses in India. With the recent acquisition of UK-headquartered Coalition Development, robust credit demand and strong infrastructure spend; the company has witnessed a strong growth across all its segments. The company has also recently finished buyback of shares, which is the second time in a span of two year. The buyback was carried out at a price of `871/share aggregating to `80cr.

October 18, 2012

CRISIL | 3QCY2012 Result Update

Profit and loss statement (Consolidated)

Y/E Dec. (` cr) Total operating income % chg Total Expenditure Establishment Expenses Other Expenses Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Adj.Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of associate Less: Minority interest (MI) % chg Prior period items PAT after MI (reported) Extraordinary Income post tax ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg CY2009 CY2010 537 4.4 338 55 75 208 199 11.3 37.1 15 184 11.5 34.3 23 11.1 207 10.9 207 47 22.5 161 14.4 161 161 14.4 29.9 22.3 22.3 14.4 631 17.5 413 71 84 258 218 9.2 34.5 21 196 6.5 31.1 68 25.6 264 27.3 264 59 22.2 205 27.8 205 45 160 (0.2) 25.4 29.0 29.0 30.1 CY2011 827 31.1 544 78 115 352 283 29.9 34.2 30 253 28.7 30.6 23 8.2 275 4.3 275 69 25.1 206 0.5 206 206 28.6 25.0 29.4 29.4 1.6 CY2012E 1,005 21.5 670 105 139 427 335 18.4 33.3 35 300 18.5 29.8 23 7.0 322 16.9 322 93 29.0 229 10.8 229 229 10.8 22.8 32.6 32.6 10.8 CY2013E 1,203 19.7 797 125 166 505 407 21.5 33.8 46 360 20.3 30.0 21 5.5 381 18.4 381 111 29.0 271 18.4 271 271 18.4 22.5 38.6 38.6 18.4

October 18, 2012

CRISIL | 3QCY2012 Result Update

Balance sheet (Consolidated)

Y/E Dec. (` cr) SOURCES OF FUNDS FY2009 CY2010 CY2011 CY2012E CY2013E

Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Investments Current Assets Cash Loans & Advances Other Current Assets Debtors Other Current liabilities Net Current Assets Deferred Tax assets (Net) Total Assets

7.2 427 434 434 184 64 120 64 118 323 158 62 11 92 200 122 10 434

7.1 387 394 394 310 85 225 0 26 343 161 51 22 109 214 129 14 394

7.0 406 413 413 334 108 226 1 16 443 258 54 44 88 285 158 13 413

7.0 512 519 519 466 143 323 0 16 489 273 59 46 110 323 165 15 519

7.0 636 643 643 591 189 402 16 589 344 65 48 132 378 210 15 643

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CRISIL | 3QCY2012 Result Update

Cash flow statement (Consolidated)

Y/E Dec. (` cr) Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations Inc./ (Dec.) in Fixed Assets Inc./ (Dec.) in Investments Inc./ (Dec.) in loans and advances Other income Cash Flow from Investing Issue/(Buy Back) of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2009 CY2010 207 15 16 23 47 169 (54) 1 (9) 23 (40) (85) (16) (101) 28 129 158 267 21 (14) 70 59 145 (62) 91 11 70 111 (79) (168) (5) (252) 4 158 161 CY2011 275 30 71 23 69 284 (25) 10 (3) 23 5 (79) (90) (24) (193) 96 161 258 CY2012E 322 35 13 23 93 255 (131) (5) 23 (114) 0 (123) (2) (125) 16 258 273 CY2013E 381 46 31 21 111 327 (125) (6) 21 (110) (147) (147) 70 273 344

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CRISIL | 3QCY2012 Result Update

Key ratios
Y/E Dec. Valuation Ratio (x) P/E (on FDEPS) P/E (on basic, reported EPS) P/CEPS P/BV Dividend yield (%) Market cap. / Sales EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Asset Turnover (Net Block) Asset Turnover (Total Assets) Operating Income / Invested Capital Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Gross debt to equity Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest) 2.9 4.4 1.4 4.0 58 122 (21) 2.6 3.7 1.5 3.5 58 120 (19) 2.6 3.7 2.0 4.8 43 110 (29) 2.5 3.7 2.2 5.4 36 110 (38) 2.3 3.3 2.1 4.7 37 106 (37) 46.6 183.6 40.6 47.4 130.2 49.6 62.6 146.1 51.1 64.3 162.2 49.0 62.0 140.4 46.6 34.3 77.5 4.0 106.4 106.4 31.1 77.8 3.5 83.6 83.6 30.6 74.9 4.8 109.3 109.3 29.8 71.0 5.4 115.0 115.0 30.0 71.0 4.7 99.7 99.7 22.3 22.3 24.3 10.0 60.0 29.0 29.0 31.9 20.0 55.6 29.4 29.4 33.7 11.0 59.0 32.6 32.6 37.6 15.0 74.0 38.6 38.6 45.2 18.0 91.6 42.3 42.3 38.7 15.7 1.1 12.3 12.0 32.3 14.8 32.5 32.5 29.4 16.9 2.1 10.5 10.2 29.6 16.3 32.0 32.0 27.9 15.9 1.2 8.0 7.7 22.4 15.3 28.9 28.9 25.0 12.7 1.6 6.6 6.3 18.9 12.2 24.4 24.4 20.8 10.3 1.9 5.5 5.2 15.4 9.7 FY2009 CY2010 CY2011 CY2012E CY2013E

October 18, 2012

CRISIL | 3QCY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

CRISIL No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

October 18, 2012