We are evaluating the inorganic route: ICRA

How do you see demand for ratings a business now that there is a slew of IPOs hitting the market and even corporate debt as a matter is picking up?

Certainly the level of investment activity, funding activity has picked up. From the debt market perspective the early indications are very positive and as you rightly said there are number of IPOs, some of the large IPOs which are lined up.

So all in all from the demand perspective we would see a good pick up in the rating opportunities.

Do you think that the lower size of these mandates now would be affecting absolute realisations for you?

No realisation is obviously a different aspect which is not only a function of the demand but also the supply side which is the competition and so on.

At the same time I think when overall the business volumes goes up for the industry realisations also always have a positive impact. So to that extent I think we could expect over time a pick up in the realisations as well.

The ratings business historically has been a major growth driver for your earnings. Do you see this share in rating services growing or being maintained at this mark (65%) and which segments will drive growth for ICRA?

Rating definitely has been the largest contributor for us but over the years we have also diversified into other activities and as business environment is opening up. As there is much better investment visibility in the system we should expect positive growth in our consulting business.

We are also very hopeful on the outsourcing activity which we do for Modi’s currently but we also have plans to tap into other clients in the financial sector space internationally. So there again other possibilities are looking better and similarly in the IT business we have a small IT company over there. So we are looking at better business opportunities going forward.

So if other activities, which have a smaller base, also pick up as the business improves for them then possibly over time not in the short term but over time we would expect greater contribution also coming from our other businesses.

You have S&P that’s got a stake of 51.5% in CRISIL. Is there any scope in equity participation coming in from Modi’s?

No, that’s something a call which obviously their own treasury department or the management has to take they as you know currently they are largest shareholders and we have very good working and also very good strategic kind of a relationship with them.

But I cannot really answer the question relating to what they have plans for increasing the equity stake. We are a listed company. So to that extent, there are no regulatory barriers for them so its really a call which they have to take.

What about the non-ratings business, how do you proposed to grow that segment? Are you looking at the inorganic route actively to expand scale there?

Yes, inorganic is also would be something which we would be evaluating. But we are fundamentally rating agency as a group so to that extent we tend to be very conservative in terms of identifying the targets and also seek value before we really take on any such decisions.

All our acquisitions in the past have been very small. We have certain value systems and we would like to retain them and to that extent acquisitions tend to be not a very active activity for us.

But yes, we will be open to ideas but in the meantime the organic growth opportunities as I mentioned as the business environment is picking up - particularly in the consulting space - we would. Last year and a half has been very very stagnant for the consulting business while the demand has slowed down. There is considerable extra capacity in the system and as demand is picking up we would see better absorption of capacity and that should also provide us opportunities.