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.

{ 22 comments… read them below or add one }

Rakesh December 3, 2012 at 10:28 pm

I think this issue is being offered thru Offer for Sale route (OFS) – can you please give little further details regarding the procedure to apply for shares will be same like normal IPO or something different. It seems icicidirect will offer it thru their separate section “”OFS”and not in IPO section.


Shiv Kukreja December 3, 2012 at 11:30 pm

Hi Rakesh… CARE Offer for Sale (OFS) is different than the Offer for Sale of Hindustan Copper and ONGC. It is called Offer for Sale because no “new shares” are being issued here and only the promoters are selling their stake in the IPO. Rest everything is like an IPO. Hindustan Copper, ONGC & Blue Dart OFS were done in a single day without any marketing or public offers. But CARE OFS will be spread over a period of 3 days with everything else like an IPO.


Manshu December 3, 2012 at 11:50 pm

Thanks for the response Shiv – I didn’t realize this is what it is – I felt it is some new thing I missed while reading the prospectus.


TCB December 19, 2012 at 7:50 am

Dear Shiv,
Can you please give details about the procedure for Offer For Sale (OFS) of Hindustan Copper, ONGC, NMDC etc. ? As you correctly said, this OFS is different from CARE Offer For Sale.
I would like to know details like how to apply, how & when to pay, how & when is allotment done, what is the meaning of terminologies like indicative price, during the offer from where can we monitor the quantity and price of bids received etc.


Shiv Kukreja December 19, 2012 at 1:18 pm

Dear TCB… Sure, I’ll do that in a day or two.


KD December 29, 2012 at 3:41 pm

Thanks Sir.
It really a very good information you provided. Till now I had some other views on this. Thanks again.

I have few queries for OFS, request you to please provide answers,

1) The amount for which any individual bids that money shall be deposited in advance to my broker or to give this money to broker a day after ?? Is it same as our normal purchase of shares considering T + 1.

2) OFS price is being announced in advance or on the same day ? As it gives an idea to justify their price whether to bid or not?

3) How broker will be able to bid for shares under OFS ? Is there any option available in their software ?

Request you to provide the detailed answers and any link of screen short of that if possible.




Shiv Kukreja December 29, 2012 at 6:55 pm

Hi KD,

1) Investors are required to deposit 100% of the order value in advance to bid for shares in OFS. Also, it is quite similar to your normal purchase. I would say it is a mix of FPO and normal purchase.

2) In most of the cases, the floor price/minimum price is announced one day prior to the OFS.

3) The broker will be able to bid for it in a similar way like a dealer does it for your normal purchase.


Amit Khandelia December 4, 2012 at 12:10 am

What about the PE comparison with ICRA hitting 20% upper circuit and CRISIL also surging 12%.

Plus any discount for retail counter ? I dont think so .


Manshu December 4, 2012 at 5:00 pm

There is no discount for retail. It’s a bit strange that these two companies hit went up like that and I’m not sure what the reason was for their rise and it may not be very meaningful to look at just one day’s movements and make inferences from that.


Amit Khandelia December 6, 2012 at 9:23 am

I just read the minimum IPO allotment rule in ET today which says that allotment has to happen for the applicants who are bidding for minimum lots first and then for higher lots unlike before when maximum lots applicants were given preference.

In such a scenario, in a small size issue whether one applies for one or more lot its not going to make any difference.

Very good step by SEBI, I would say !

Since CARE size is small and nobody is likely to get more than one lot considering good response, even grey market premium is quoting for 1 lot.

Correct me if I am wrong


Sharath December 11, 2012 at 1:04 pm

To widen the shareholder base in public issues, SEBI plans to ensure that every retail participant gets a minimum bid lot irrespective of his application size. This is subject to availability of shares.

The last line – This is subject to availability of shares – is contentious.


Sanjay December 13, 2012 at 12:10 am

In Tuesday’s ET, it says:

“The response from qualified institutional buyers was overwhelming as their reserved portion subscribed 45.8 times while non-institutional and retail investors’ portion received subscription of 110.96 times and 6.18 percent.”

Are they saying the retail portion received only 6.18% subscription? Does this mean all retail investors will get full allotment per their subscription?


Shiv Kukreja December 13, 2012 at 12:38 am

Hi Sanjay… It is an incorrect statement, actually it should be 6.18 times.


Shiv Kukreja December 21, 2012 at 11:16 am

CARE IPO allotment has been done. Retail investors have been allotted 20 shares only in the ratio of 101:256, irrespective of their application size. Tentative listing date – Dec. 26th. You can check the allotment status from this link –


Manshu December 21, 2012 at 5:47 pm

Thanks Shiv.


Ashok December 22, 2012 at 11:37 am

20 shares for whatever application size seems unfair :-(.

And because of money being locked in CARE IPO I couldn’t apply for the Bharti Infratel IPO also :-(.


Shiv Kukreja December 22, 2012 at 12:10 pm

I totally agree Mr. Ashok. It has become a lottery system now for popular IPOs and leaves you completely uncertain of your allotment. I applied for it in four family members’ names but got allotment for only a single application and that too only 20 shares. Very disappointing. I think it is an incorrect method being adopted by SEBI for IPO allotment.


Hiral Shah December 23, 2012 at 4:18 pm

hi Ashok, in the hindsight I feel you are lucky that you could not apply for the Bharthi infratel ipo. Look at the retail subscription levels in bharthi, much lower than care and pc jewellers ipo. the issue was expensive considering its growth prospects. the fact that the management has fixed the issue price near the lower end of the band validates their confidence on the post listing performance. i agree with the Stock Musings author on his recommendation on the bharti infratel ipo.


Ashok December 25, 2012 at 10:08 pm

@Hiral Shah,

Yes, probably it is for the good :-).


harineem December 25, 2012 at 9:50 pm

I didn’t get even one share. Minimum 20 didnt seem to be applied to all.


Shiv Kukreja December 25, 2012 at 10:23 pm

The allotment has been done in the ratio of 101:256 i.e. out of 256 applicants, only 101 applicants got the allotment.


Shiv Kukreja December 25, 2012 at 1:02 am

CARE shares to list on the exchanges w.e.f. December 26th.


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