ICRA Q4 margins hit by lower revenue

Local arm of Moody’s Ratings, ICRA has to contain with lower margins due to the lower revenue and higher operating expenses during the fiscal fourth quarter to March 2020.
During the quarter under review, ICRA’s operating income was Rs 52.76 crore, against Rs 57.92 crore in the corresponding quarter of the previous year, a decline of 8.9%.

Both bank loan and debt market segments, the major revenue contributor, remained adversely impacted during the quarter. The other income in the quarter declined marginally on y-o-y basis.
The employees benefit expenses declined in the quarter on y-o-y basis by 24.1% mainly due to true up of variable pay provision for the full year, on account of lower profitability.

Other expenses were higher by 5.1% on y-o-y basis, mainly on account of legal & professional charges and additional audit fees incurred due to ongoing regulatory matters and higher CSR spent. Overall expenses have contracted by 11.7% as compared to the corresponding quarter of the previous year.

The PBT for the quarter was at Rs. 28.60 crore, lower by 2.4% as against Rs. 29.32 crore y-o-y basis and PAT was at Rs. 21.08 crore, higher by 3.9%, due to lower tax rate applicable in the current financial year.
For the financial year ended March 31, 2020, the company’s operating income was Rs 207.78 crore, lower by 9.7% as against previous financial year.
The company reported a PBT of Rs 92.05 crore (29.8% y-o-y decline) and a PAT of Rs 64.98 crore (32.3% y-o-y decline).

The profitability during the year impacted due to degrowth in revenue and higher expenses on account of legal & professional, additional audit fees and higher CSR spent.
ICRA has declared a dividend of Rs 27 per share on a FV of Rs each. The company is largely debt free and has a large cash kitty to the tune of Rs 606 crs and a asset light business model.
Going ahead we expect significant headwinds for FY21 considering the impact of the covid19 pandomic but long term prospects look strong going ahead from FY22 onwards