by Manshu on December 3, 2012


CARE (Credit Analysis and Research) is coming out with its IPO and the issue opens on the 7th December 2012 and closes on the 11th December 2012.

They have fixed a price band of Rs. 700 – Rs. 750, and based on this the issue size is approximately Rs. 500 crores.

CARE is a well known credit rating agency, and the company rates debt instruments that are issued in the Indian markets. Though the company rates IPOs as well, most of its revenues are generated on rating debt instruments, and the business is dependent in on how well the market for new debt issues is doing.

CARE is the second largest credit rating agency in India and was the third credit agency to be set up in India after CRISIL and ICRA.

CARE Financials

It is quite a profitable company and has grown at a scorching pace of 55.6% CAGR in the five year period leading up to 2011. For some reason the prospectus doesn’t have number for 2012 and I couldn’t find these financials elsewhere.

The EBITDA margin is an amazing 77.1% and the PAT margin is equally impressive 51.6%. The company has no debt, and it’s net worth is Rs. 3,024.20 million. That’s about Rs. 106 per share.

Here is the total revenues and profit after taxes for the last 3 years in Rs. Millions. For some reason the prospectus doesn’t have numbers for 2012.





Total Revenues




Profit After Tax




This gives an EPS of Rs. 31.9 for 2011, and at Rs. 700 which is the lower end of the price range, the P/E multiple comes out to be about 22.

The company already has Rs. 106 per share in assets so you can really think of the offer price as Rs. 600 and at that price the P/E multiple comes out to be Rs. 18.8 times.

Its competitors CRISIL has a P/E multiple of about 37 and ICRA has a P/E multiple of about 26 so CARE has certainly priced its IPO quite reasonably.

CARE Capital Structure

CARE isn’t issuing any new shares for this IPO and is offering existing shares for sale. This means that the equity base of the company isn’t increasing the earnings won’t be diluted to the extent of the new shares issued like in the case of other companies (Bharti Infratel in an example) where new shares are issued.

  • Existing outstanding shares: 28,552,812
  • Present offer for sale: 7,199,700
  • Shares after IPO: 28,552,812
This also means that money from this IPO will not go to the company but rather to the companies that are selling their shares in CARE.
The companies that are selling their CARE shares are IDBI Bank, Canara Bank, SBI, IL&FS, Federal Bank, ING Vysya, Tata Investment, IL&FS Trust and Milestone Trusteeship. Of this, IDBI Bank and Canara bank are selling over 2 million shares.


CARE IPO is an IPO of a good profitable company that has shown good growth and is reasonably priced. There’s everything going for the company but as far as IPOs are concerned you can never really say what will happen to the stock price. In fact this IPO reminds a lot of the MOIL IPO which was quite similar in terms of being reasonably priced, debt free, good growth but somehow that stock didn’t do well after its IPO. I think a large part of that is just the timing of IPOs where they are issued when the market is doing well, and of course when the market goes down (which it inevitably will) everything goes down with it, and even good companies fare badly, and that’s why IPOs should be treaded carefully even of good companies.

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