4QCY2011 Result Update | Credit Rating

February 24, 2012

CRISIL
Performance Highlights
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 4QCY2011 224.6 80.0 35.6 55.8 4QCY2010 %chg (yoy) 177.4 69.4 39.1 50.6 26.6 15.3 (350)bp 10.4 3QCY2011 220.0 83.9 38.1 60.2 %chg (qoq) 2.1 (4.6) (251)bp (7.2)

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 6,560 0.6 1000/571 19,815 1 17,924 5,429 CRSL.BO CRISIL@IN

`936 -

Source: Company, Angel Research

CRISIL registered strong top-line growth in 4QCY2011. The companys net sales grew by 26.6% yoy and 2.1% qoq to `225cr. The company reported a 350bp yoy contraction in its OPM to 35.6%, mainly due to higher employee cost during the quarter. Net profit increased by 10.4% yoy to `56cr. We continue to maintain our Neutral recommendation on the stock.
Top line posts strong growth: For 4QCY2011, the companys top line reported 26.6% yoy growth to `225cr, led by strong growth in its research and credit ratings segments, which witnessed 34.0% and 14.1% yoy growth, respectively. The advisory segment also witnessed strong turnaround during the quarter, reporting strong 10.5% qoq growth. Despite robust growth in the credit ratings and the research segments and strong turnaround in the advisory segment, employee cost as a percentage of sales increased to 40.7% in 4QCY2011 vs. 36.7% in 4QCY2010, resulting in lower margins, which declined by 251bp qoq and 350bp yoy to 35.6%. Net profit improved by 10.4% yoy to `56cr on the back of higher revenue during the quarter; however, NPM declined by 364bp yoy to 24.9% due to margin compression, which was somewhat offset by higher other income during the quarter. Outlook and valuation We expect CRISIL to post a 25% CAGR in its revenue over CY201012 and continue to maintain its leadership position. CRISIL has announced another round of buy back of shares. The company finished purchasing shares directly from the market at an average price of `871/share, aggregating `79cr at the end of December 2011. The company was able to buy back ~1.3% of the total equity. Despite the recent buy back, the stock is available at rich valuation of 27.3x CY2012E earnings, which is at the higher end of its historical range of 16.4-29.9x and five-year median of 22x 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 52.4 16.4 10.7 20.5

Abs. (%) Sensex CRISIL

3m 13.0 6.4

1yr 1.7 61.9

3yr 103.2 312.1

Key financials (Consolidated)

Y/E Dec. (` cr) Net Sales % chg Adj.Net Profit % chg FDEPS (`) EBITDA Margin (%) P/E (x) RoE (%) RoCE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x) CY2009 537 4.4 161 14.4 22.3 37.1 42.1 40.6 46.6 15.6 11.9 32.1 CY2010 631 17.5 160 (0.2) 29.0 34.5 32.3 49.6 47.4 16.8 10.1 29.4 CY2011E 827 31.1 206 28.6 29.5 34.2 31.8 51.1 62.6 15.9 7.6 22.3 CY2012E 982 18.7 241 16.5 34.3 34.3 27.3 50.4 63.9 12.1 6.3 18.3

Sharan Lillaney
022-3935 7800 Ext: 6811 sharanb.lillaney@angelbroking.com

Source: Company, Angel Research Note Net profit adjusted for extraordinary income post tax

Please refer to important disclosures at the end of this report

CRISIL | 4QCY2010 Result Update

Exhibit 1: 4QCY2011 and CY2011 performance

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

4QCY2011 224.6 144.6 80.0 35.6 8.3 71.7 9.1 80.8 24.9 55.8 24.9 46.8 7.9

4QCY2010 177.4 108.0 69.4 39.1 5.6 63.8 1.8 65.6 15.0 50.6 28.5 48.7 7.1

%chg (yoy) 26.6 33.9 15.3 (350)bp 46.9 12.5 397.9 23.2 66.0 10.4 (364)bp (4.0) 10.6

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 (qoq) 2.1 6.2 (4.6) (251)bp 11.9 (6.2) 72.5 (1.2) (7.2) (248)bp (14.8) (7.1)

CY2011 827.2 544.5 282.7 34.2 29.8 252.9 22.6 275.5 69.1 206.4 25.0 183.8 29.5

CY2010 631.1 413.3 217.7 34.5 21.3 196.5 70.4 266.9 58.7 (2.7) 205.5 32.6 135.0 29.0

%chg (yoy) 31.1 31.7 29.9 (32)bp 40.3 28.7 (67.9) 3.2 0.5 (761)bp 36.1 1.8

Revenue up 26.6% yoy on the back of strong research growth in 4QCY2011

For 4QCY2011, CRISIL registered 26.6% yoy growth in its revenue to `225cr on the back of strong growth in the credit ratings and research segments. The credit ratings segment grew by 14.1% yoy to `85cr. The research segments revenue spiked by 34.0% yoy to `116cr, the highest-ever revenue reported in a quarter. Even the advisory segments revenue witnessed growth of 10.5% qoq to `16cr.

CY2011 witnesses strong growth

After reporting a weak performance in CY2009, CRISIL recovered strongly in CY2010 and continued its strong growth trajectory with 31.1% yoy growth in revenue to `827cr. Major segmental growth was witnessed by the credit ratings and research segments. The credit ratings segment grew by 14.8% to `326cr. The research segment grew by 44.7% yoy to `424cr, witnessing the highest growth amongst the three segments. The advisory segments revenue grew by 11.1% yoy to `57cr during the quarter.

February 24, 2012

CRISIL | 4QCY2010 Result Update

Exhibit 2: Strong recovery in CY2011

(` cr) (%)

Exhibit 3: Robust growth continues on a yoy basis

45 40 31.1 35 30 25 20 15 10 (` cr) 250 200 150 100 50 0 4QCY2010 1QCY2011 Net Sales (LHS) 2QCY2011 3QCY2011 4QCY2011 Growth (qoq) Growth (yoy) 177 179 220 225 (%) 45 40 35 30 25 20 15 10 5 0

900 800 700 600 500 400 300 200 100 -

40.7 27.3 4.4

17.5

204

404 CY2007

515 CY2008

537 CY2009

631 CY2010 Growth (yoy)

827 CY2011

5 0

Net Sales (LHS)

Source: Company, Angel Research

Source: Company, Angel Research

OPM declines despite strong growth

For 4QCY2011, the companys OPM came in at 35.6%, down 251bp qoq and 350bp yoy. Despite robust growth in the credit ratings and the research segments and strong turnaround in the advisory segment, employee cost as a percentage of sales increased to 40.7% in 4QCY2011 vs. 36.7% in 4QCY2010, resulting in lower margins.

EBITDA improves, but margin remains flat

For CY2011, EBITDA increased by 29.9% to `283cr due to higher top line for the year. EBITDA margin declined by mere 32bp yoy to 34.2%.

Exhibit 4: OPM flat on a yoy basis

(` cr) (%)

Exhibit 5: Quarterly OPM trend

(%) 45 39.1 34.5 34.2 40 35 30 25 20 15 10 5 0 30 35 32.6 29.7 40 38.1 35.6

300 250 200 150 100 50 117 CY2007 29.0

34.8

37.1

179 CY2008 EBITDA (LHS)

199 CY2009

218 CY2010

283 CY2011

25 4QCY2010 1QCY2011 2QCY2011 3QCY2011 4QCY2011

OPM (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

February 24, 2012

CRISIL | 4QCY2010 Result Update

PAT increases, but margin declines

For 4QCY2011, reported PAT increased by 10.4% yoy to `56cr, largely on the back of higher sales and other income during the quarter. However, the companys PAT margin declined by 364bp yoy to 24.9% mainly due to OPM compression during the quarter.

Adjusted PAT witnesses strong growth in CY2011

In CY2010, the company had a huge component of other income of `70cr vs. only `23cr in CY2011. Adjusted for other income, CRISIL registered strong growth of 36.1% in its adjusted PAT to `184cr. Reported PAT increased merely by 0.5% yoy to `206cr on the back of lower other income. Consequently, reported PAT margin registered a decline of 761bp yoy to 25.0%. However, adjusted PAT margin increased by 82bp yoy to 22.2%.

Exhibit 6: PAT flat on the back of lower other income

(` cr) (%)

Exhibit 7: Quarterly NPM trend

(` cr)
70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 50.6 4QCY2010 46.0 1QCY2011 44.4 2QCY2011 60.2 3QCY2011 NPM (RHS) 55.8 4QCY2011 28.5 25.7 21.8 (%) 27.3 24.9 30 25 20 15 10 5 0

250 200 20.7 150 100 50 84 CY2007 141 CY2008 Net Profit (LHS) 27.3

29.9

32.6 25.0

35 30 25 20 15 10

161 CY2009

205 CY2010

206 CY2011

5 0

NPM (RHS)

Net Profit (LHS)

Source: Company, Angel Research

Source: Company, Angel Research

February 24, 2012

CRISIL | 4QCY2010 Result Update

Outlook and valuation

We expect CRISIL to post a 25% CAGR in its revenue over CY201012 and continue to maintain its leadership position. CRISIL has announced another round of buy back of shares. The company finished purchasing shares directly from the market at an average price of `871/share, aggregating `79cr at the end of December 2011. The company was able to buy back ~1.3% of the total equity. Despite the recent buy back, the stock is available at rich valuation of 27.3x CY2012E earnings, which is at the higher end of its historical range of 16.4-29.9x and five-year median of 22x one-year forward EPS. We continue to maintain our Neutral recommendation on the stock.

February 24, 2012

CRISIL | 4QCY2010 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) % chg Prior period items PAT after MI (reported) Extraordinary Income post tax ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg CY2008 CY2009 515 27.3 335 52 93 191 179 52.8 34.8 14 165 63.0 32.1 22 11.6 187 69.1 187 46 24.8 141 68.0 141 141 68.0 27.3 19.5 19.5 68.0 537 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 CY2010 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 CY2011E 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 29.5 29.5 1.8 CY2012E 982 18.7 645 107 135 402 337 19.1 34.3 32 305 20.6 31.1 20 6.2 325 18.0 325 85 26.0 241 16.5 241 241 16.5 24.5 34.3 34.3 16.5

February 24, 2012

CRISIL | 4QCY2010 Result Update

Balance sheet (Consolidated)

Y/E Dec. (` cr) SOURCES OF FUNDS 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 190 64 126 4 118 261 129 53 2 77 160 101 8 358 184 64 120 64 118 323 158 62 11 92 200 122 10 434 310 85 225 0 26 343 161 51 22 109 214 129 14 394 342 115 227 16 443 258 54 44 88 285 158 13 413 349 147 202 16 625 413 59 46 108 315 311 13 542 7.2 350 358 358 7.2 427 434 434 7.1 387 394 394 7.0 406 413 413 7.0 535 542 542 CY2008 FY2009 CY2010 CY2011E CY2012E

February 24, 2012

CRISIL | 4QCY2010 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 CY2008 187 14 36 22 46 169 0 (21) (12) 22 (11) (59) (12) (71) 87 42 129 FY2009 207 15 16 23 47 169 (54) 1 (9) 23 (40) (85) (16) (101) 28 129 158 CY2010 CY2011E 267 21 (14) 70 59 145 (62) 91 11 70 111 (79) (168) (5) (252) 4 158 161 275 30 71 23 69 284 (32) 10 (3) 23 (2) (79) (90) (17) (186) 96 161 258 CY2012E 325 32 8 20 85 260 (7) (5) 20 8 (112) (112) 155 258 413

February 24, 2012

CRISIL | 4QCY2010 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) Working capital cycle (ex-cash) (days) Solvency ratios (x) Gross debt to equity Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest) 2.7 4.0 1.6 4.2 59 104 (11) 2.9 4.4 1.4 4.0 58 122 (21) 2.6 3.7 1.5 3.5 58 120 (19) 2.5 3.7 2.0 4.8 43 110 (29) 2.8 4.6 2.1 7.8 36 112 (38) 52.2 141.2 44.3 46.6 183.6 40.6 47.4 130.2 49.6 62.6 145.9 51.1 63.9 241.2 50.4 32.1 75.2 4.2 100.9 100.9 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 31.1 74.0 7.8 178.5 178.5 19.5 19.5 21.3 7.0 49.5 22.3 22.3 24.3 10.0 60.0 29.0 29.0 31.9 20.0 55.6 29.5 29.5 33.7 11.0 59.0 34.3 34.3 38.8 13.7 77.3 48.1 48.1 43.9 18.9 0.7 12.7 12.5 35.9 18.0 42.1 42.1 38.5 15.6 1.1 12.2 11.9 32.1 14.8 32.3 32.3 29.3 16.8 2.1 10.4 10.1 29.4 16.2 31.8 31.8 27.8 15.9 1.2 7.9 7.6 22.3 15.2 27.3 27.3 24.1 12.1 1.5 6.7 6.3 18.3 11.4 CY2008 FY2009 CY2010 CY2011E CY2012E

February 24, 2012

CRISIL | 4QCY2010 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%)

February 24, 2012

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