Target: ₹7,500
CMP: ₹7,197.15
Rating industry’s revenue growth can sustain above 10-12 per cent over the coming years aided by ongoing infrastructure investments, pick-up in private sector capex cycle, sustained growth of NBFCs/HFCs, widened participation (including more issuers) in bond markets with country’s inclusion in global indices and incremental funding shift and refinancing through bond markets (much better yielding than BLR) with easing of rate/liquidity conditions.
After witnessing moderate growth in ratings revenue during Q1 FY25 (9 per cent y-o-y v/s 12/14 per cent y-o-y in FY24/23), ICRA could see an improvement in ensuing quarters underpinned by its strong position in bond ratings, infrastructure ratings and financial sector ratings including structure finance.
We estimate 14-15 per cent revenue CAGR for ICRA over FY24-27 assuming sustained growth in credit ratings, moderate scale-up of ESG Ratings and some growth recovery in Knowledge Services. PAT growth/RoE expansion would likely be much faster from FY26 with resumption of margin improvement.
Our estimates do not factor any new revenue opportunities that company could be exploring and inorganic growth through compatible acquisitions. ICRA is trading at 29x P/E on FY27 earnings. We increase 12m PT to ₹7,500 by rolling over valuation to FY27.