Wednesday, December 26, 2012

CARE Ratings IPO

Credit Analysis and Research or CARE, the second largest credit rating company in India, has come out with an IPO of 72 lakh shares amounting to around Rs 504 crore. The company offers a wide range of rating and grading services across a diverse range of instruments and industries. It also provides general and customized industry research reports. CARE provides credit rating on various companies which basically highlights the opinion of the rating agency on the relative ability and willingness of the issuer of a debt instrument to meet the debt service obligations as and when they arise. Promoters will dilute 25.22 per cent of their holding in the company through the stake sale.

The IPO shall open on 7 December, 2012 and shall close on 11 December, 2012. The company has fixed the issue price band at Rs 700 to Rs 750 per share.

The company intends to achieve the benefits of listing the equity shares on the stock exchanges. The company will not receive any proceeds from the offer and all proceeds will go to the selling shareholders.

The company has recently started operations in Nigeria, Maldives and South America has plans to expand footprints globally and has seen 40 per cent growth in profits and revenue in the last few years. It is the only domestic rating agency with no foreign holding.

The IPO will get listed on BSE and NSE. DSP Merrill Lynch Limited and Edelweiss Financial Services Limited are the lead managers and Karvy Computershare Pvt Ltd is the registrar of the issue.

Recommendation:

SEBI has exempted the company from the grading process as it would have resulted in a rival rating agency gaining access to its books and insider information. We would advise investors to invest in this IPO as it is priced at a discount compared to its peers CRISIL and ICRA on P/E valuation. So, invest in this IPO from a long term perspective but do liquidate in case of good listing gains.

Subscription:

The company has finalized the allocation of 10,79,954 equity shares (15 percent of the total offer of 71,99,700 equity shares) to 12 anchor investors at upper end of price band of Rs 700-750 per share, aggregating to Rs 80.996 crore.

The IPO has got great response from investors. It has got subscribed 40.98 times at the close of the IPO.

At the close of the IPO,
QII segment got subscribed by 45.8 times
NII segment got subscribed by 110.96 times
Retail segment got subscribed by 6.18 times

Allotment:

Click here to check CARE Ratings IPO Allotment Status!

Listing:

CARE Ratings got listed on 26 December, 2012 and turned out good investment for investors as we recommended. The stock opened at Rs 940, touched an intraday high of Rs 985, low of Rs 895, before closing the day at Rs 922.55, a 23% premium over its issue price of Rs 750 per share.


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