2QCY2011 Result Update | Credit Rating

July 21, 2011

CRISIL
Performance Highlights
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QCY2011 2QCY2010 203.8 60.6 29.7 44.4 151.2 46.9 31.0 33.3 %chg (yoy) 1QCY2011 34.8 29.3 (127) 33.4 178.8 58.3 32.6 46.0 %chg (qoq) 14.0 3.9 (290) (3.3)

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 5,602 0.3 8,400 /5,391 1,033 10 18,436 5,542 CRSL.BO CRISIL@IN

`7,890 -

Source: Company, Angel Research

CRISIL registered strong top-line growth in 2QCY2011. The companys net sales grew by 34.8% yoy to `204cr. The company reported a 127bp yoy contraction in OPM to 29.7%. Net profit increased by 33.4% yoy to `44cr (`37cr). Top line posts strong growth, margin dips yoy: For 2QCY2011, CRISILs top line reported 34.8% yoy growth to `204cr (`151cr), led by strong growth in its research segment, which witnessed 54.4% growth because of addition of Pipals revenue for the full quarter and strong growth in Irevna and CRISIL Research. The rating business also picked up during the quarter, registering strong 19.2% yoy and 17.1 qoq growth. The advisory segment also witnessed an increase in its revenue, registering 20.2% yoy and 46.6% qoq growth. The companys EBITDA margin declined by 127bp yoy, largely due to higher employee cost, which increased to 45.6% of sales from 43.0% of sales. Net profit came in at `44cr, up 33.4% yoy. However, adjusting for other income, net profit increased by 31.7% as the company had sold property worth `3.32cr in 2QCY2011. Outlook and valuation: We expect CRISIL to post a 21% CAGR in revenue over CY201012 and continue to maintain its leadership position. CRISIL benefits from its asset-light business model, which is high on intellectual assets (employee costto-sales is around 40%). Further, the company is debt free and has 40% plus RoE. Additionally, CRISIL enjoys strong parentage (Standard and Poor's). Currently, the stock is available at 22.9x CY2012E earnings, which is at the higher end of its historical range of 16.429.9x one-year forward EPS. With the recent run-up in the stock price, we change our recommendation to Neutral.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 52.4 18.4 11.6 17.6

Abs. (%) Sensex CRISIL

3m (5.9) 20.3

1yr 2.6 34.7

3yr 33.1 137.0

Key financials (Consolidated)

Y/E December (` cr) Net sales % chg Net profit % chg FDEPS (`) EBITDA margin (%) P/E (x) RoE (%) RoCE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

CY2009 537 4.4 161 14.4 223 37.1 35.5 40.6 46.6 13.1 10.1 27.3

CY2010 631 17.5 160 (0.2) 290 34.5 27.3 49.6 47.4 14.2 8.6 25.0

CY2011E 766 21.3 201 25.0 283 34.8 27.9 46.4 55.3 11.9 7.0 20.2

CY2012E 926 20.9 244 21.7 344 35.0 22.9 47.8 58.1 10.2 5.7 16.3

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

Please refer to important disclosures at the end of this report

CRISIL | 2QCY2011 Result Update

Exhibit 1: 2QCY2011 Performance highlights

Particulars (` cr) Net Sales Total Expenditure EBITDA OPM (%) Depreciation EBIT Interest Other Income PBT Tax Minority Interest Net Profit NPM (%) Net Profit Adj. for other Income Diluted EPS (`)
Source: Company, Angel Research

2QCY2011 2QCY2010 203.8 143.2 60.6 29.7 7.4 53.2 5.6 58.8 14.4 44.4 21.8 38.8 62.6 151.2 104.3 46.9 31.0 5.0 41.8 3.9 45.7 8.7 3.6 33.3 22.0 29.5 46.1

%chg (yoy) 1QCY2011 34.8 37.3 29.3 (126.8)bp 47.5 27.1 46.3 28.7 33.4 (22.1)bp 31.7 35.8 178.8 120.4 58.3 32.6 6.8 51.5 2.6 54.2 8.2 46.0 25.7 43.4 64.8

%chg (qoq) 14.0 18.9 3.9 (289.8)bp 9.5 3.1 114.8 8.6 (3.3) (391.2)bp (10.5) (3.3)

CY2010 631.1 413.3 217.7 34.5 21.3 196.5 67.7 264.1 58.7 205.5 32.6 137.8 277.0

CY2009 537.3 338.0 199.3 37.1 14.9 184.5 23.0 207.5 46.7 160.8 29.9 137.8 222.5

%chg (yoy) 17.5 22.3 9.2 (259.4)bp 43.1 6.5 194.2 27.3 27.8 263bp 0.0 24.5

Revenue up 34.8% yoy on the back of strong research growth

For 2QCY2011, CRISIL registered 34.8% yoy growth in revenue to `204cr on the back of strong 54.4% yoy growth in the research segment to `103cr (`67cr). Growth in the research segment was majorly because of consolidation of Pipals revenue and due to strong revenue growth of Irevna and CRISIL Research. 2QCY2011 witnessed an improvement in the rating segment, which registered strong 19.2% yoy and 17.1% qoq growth to `85cr. The advisory segments revenue reported a 20.2% yoy and 46.6% qoq growth to `16cr during the quarter.

Exhibit 2: Strong yoy growth in revenue continues

(` cr) 250 200 150 100 50 0 2QCY2010 3QCY2010 Net Sales (LHS) 4QCY2010 1QCY2011 2QCY2011 Growth (qoq) Growth (yoy) 159 177 179 (%) 40 35 204 151 30 25 20 15 10 5 0

Source: Company, Angel Research

July 21, 2011

CRISIL | 2QCY2011 Result Update

EBITDA improves, but margin dips

For 2QCY2011, EBITDA improved by 29.3% yoy to `61cr on the back of higher revenue. However, OPM dipped yoy to 29.7% (31.0%) due to higher employee cost, which increased to 45.6% of sales in 2QCY2011 compared to 43.0% of sales in 2QCY2010.

Exhibit 3: OPM declining qoq

(%) 45 39.1 35.3 35 31.0 30 32.6 29.7

40

25 2QCY2010 3QCY2010 4QCY2010 1QCY2011 2QCY2011

Source: Company, Angel Research

PAT witnesses strong 33.4% growth, but margin remains flat

For 2QCY2010, PAT increased by 33.4% yoy to `44cr on the back of higher revenue. Adjusted for other income, the company actually managed 31.7% yoy growth in PAT. Despite a dip in OPM, PAT margin dipped only by 22bp yoy to 21.8% (22.0%). PAT margin was aided by higher other income during the quarter, which increased by 46.3% yoy to `5.6cr. During the quarter, the company sold property worth `3.3cr.

Exhibit 4: PAT margin slightly down due to OPM contraction

(` cr) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 33.3 2QCY2010 75.4 3QCY2010 50.6 4QCY2010 46.0 1QCY2011 NPM (RHS) 44.4 2QCY2011 22.0 28.5 47.4 (%) 50 45 40 35 30 25 20 15 10 5 0

25.7

21.8

Net Profit (LHS)

Source: Company, Angel Research

July 21, 2011

CRISIL | 2QCY2011 Result Update

Outlook and valuation

We expect CRISIL to post a 21% CAGR in revenue over CY201012 and continue to maintain its leadership position. CRISIL benefits from its asset-light business model, which is high on intellectual assets (employee cost-to-sales is around 40%). Further, the company is debt free and has 40% plus RoE. Additionally, CRISIL enjoys strong parentage (Standard and Poor's). Currently, the stock is available at 22.9x CY2012E earnings, which is at the higher end of its historical range of 16.429.9x one-year forward EPS. With the recent run-up in the stock price, we change our recommendation to Neutral.

July 21, 2011

CRISIL | 2QCY2011 Result Update

Profit and loss statement (Consolidated)

Y/E December (` cr) Net Sales % 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) Add: Share of earnings of associate Less: Minority interest (MI) % 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 CY2010 CY2011E CY2012E 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 27.3 194.6 194.6 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 29.9 222.5 222.5 14.4 631 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) 25.4 289.5 289.5 30.1 766 21.3 499 86 103 310 266 22.4 34.8 27 239 21.8 31.3 20 7.5 259 (2.0) 259 58 22.5 201 (2.4) 201 201 25.0 26.2 282.7 282.7 (2.4) 926 20.9 602 101 127 374 324 21.6 35.0 28 296 23.8 32.0 27 8.4 323 24.9 323 79 24.5 244 21.7 244 244 21.7 26.4 343.9 343.9 21.7

July 21, 2011

CRISIL | 2QCY2011 Result Update

Balance sheet (Consolidated)

Y/E December (` cr) SOURCES OF FUNDS Equity Share 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 14 394 320 112 208 20 449 229 56 23 141 220 229 14 471 326 140 186 20 589 332 62 24 170 260 329 14 550 7.2 350 358 358 7.2 427 434 434 7.1 387 394 394 7.1 464 471 471 7.1 542 550 550 CY2008 FY2009 CY2010 CY2011E CY2012E

July 21, 2011

CRISIL | 2QCY2011 Result Update

Cash flow statement (Consolidated)

Y/E December (` 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 FY2009 CY2010 CY2011E CY2012E 187 14 36 22 46 169 0 (21) (12) 22 (11) (59) (12) (71) 87 42 129 207 15 16 23 47 169 (54) 1 (9) 23 (40) (85) (16) (101) 28 129 158 267 21 (14) 70 59 145 (62) 91 11 70 111 (79) (168) (3) (250) 6 158 163 259 27 (27) 20 58 182 (10) 6 (5) 20 11 (124) (124) 68 161 229 323 28 9 27 79 254 (6) (6) 27 15 (166) (166) 103 229 332

July 21, 2011

CRISIL | 2QCY2011 Result Update

Key ratios
Y/E December 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) 2.4 3.5 1.8 3.6 59 103 (8) 2.9 4.7 1.8 4.4 61 95 (1) 52.2 141.2 44.3 46.6 183.6 40.6 47.4 130.2 49.6 55.3 111.7 46.4 58.1 141.5 47.8 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 31.3 77.5 3.6 86.6 86.6 32.0 75.5 4.4 106.8 106.8 194.6 194.6 213.4 70.0 494.8 222.5 222.5 243.1 100.0 600.4 289.5 289.5 319.5 199.6 555.8 282.7 282.7 320.9 150.0 663.6 343.9 343.9 383.1 200.0 774.3 40.5 40.5 37.0 15.9 0.9 10.9 10.6 30.5 15.3 35.5 35.5 32.5 13.1 1.3 10.4 10.1 27.3 12.5 27.3 27.3 24.7 14.2 2.5 8.9 8.6 25.0 13.8 27.9 27.9 24.6 11.9 1.9 7.3 7.0 20.2 11.4 22.9 22.9 20.6 10.2 2.5 6.0 5.7 16.3 9.6 CY2008 FY2009 CY2010 CY2011E CY2012E

July 21, 2011

CRISIL | 2QCY2011 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%)

July 21, 2011