ET Now In an interview with ET Now Naresh Thakkar, MD & Group CEO, ICRA has put forward on how subdued bank corporate credit has impacted the business.
ET Now: What led to the muted revenue growth especially across your ratings revenue?
Naresh Thakkar: Yes there have been couple of items on the one-off expenses but before that maybe I could give you the flavour of how our business has done. Certainly, it has been flatter for the rating business. Year on year, for the complete year, we have grown at a moderate rate but on this quarter basis, certainly the performance has bit slowish and really speaking if you look at the way the debt market issuances happened, certainly it has impacted the rating business. Similarly, as we all know the bank corporate credit growth has been pretty subdued across sectors so it has also impacted the business. Other businesses, outsourcing business has done well and it has also seen expansion of margins. Talking about the one-off expenses, certainly it has impacted the operating margins as well.
ET Now: What about the revenue in consulting as well as professional IT services because that has contracted and if you can tell us what exactly led to contraction in revenue here?
Naresh Thakkar: As far as IT is concerned, we are making some strategic shift. We are withdrawing out of non-strategic segments. As a result in the short term, certainly growths get impacted as well as there is an impact on profitability when you withdraw from certain segments which were profitable.
But we think it is a step in the right direction and over time it should yield some positive results for us. As far as consulting business is concerned, overall deal flow has slowed down for the entire industry and we have also been impacted and also the execution cycle seems to be getting a bit longer and because of these two factors primarily and the fact that because of weaker deal flow, the pricing pressures are also a bit intense in the consulting business. So combination of these factors has impacted the consulting business.
ET Now: Let us also talk a little bit about when you see the ratings revenue growth picking up and what is the overall growth strategy for the company?
Naresh Thakkar: First of all, even in this quarter we expanded our market coverage, so we are quite happy about that. However, since the overall debt issuances as I described declined in the last quarter, certainly our overall business got impacted. Going forward, we would think that in the near term, still there are headwinds and we are not seeing a significant pickup or momentum in the debt issuance.
However, going forward relatively longer term basis, we think there should be, with the benign outlook for interest rates, some pickup in the economic activity, some revival of the refinancing first and then followed by some pickup in the investment cycle, we could see more opportunities to grow. In the meantime, we are focussing on building our franchise, maintaining our rating quality, controlling our cost and being fully prepared when the overall business picks up.
ET Now: Now last year Moody’s hike stake in ICRA to about 50%. Any possibility to further hike in stake and if so, when and by how much?
Naresh Thakkar: First of all, we do not speak about shareholders. We can only talk about our own business. We are mangers. I think this is a question you should be asking the shareholders.
ET Now: What led to the muted revenue growth especially across your ratings revenue?
Naresh Thakkar: Yes there have been couple of items on the one-off expenses but before that maybe I could give you the flavour of how our business has done. Certainly, it has been flatter for the rating business. Year on year, for the complete year, we have grown at a moderate rate but on this quarter basis, certainly the performance has bit slowish and really speaking if you look at the way the debt market issuances happened, certainly it has impacted the rating business. Similarly, as we all know the bank corporate credit growth has been pretty subdued across sectors so it has also impacted the business. Other businesses, outsourcing business has done well and it has also seen expansion of margins. Talking about the one-off expenses, certainly it has impacted the operating margins as well.
ET Now: What about the revenue in consulting as well as professional IT services because that has contracted and if you can tell us what exactly led to contraction in revenue here?
Naresh Thakkar: As far as IT is concerned, we are making some strategic shift. We are withdrawing out of non-strategic segments. As a result in the short term, certainly growths get impacted as well as there is an impact on profitability when you withdraw from certain segments which were profitable.
But we think it is a step in the right direction and over time it should yield some positive results for us. As far as consulting business is concerned, overall deal flow has slowed down for the entire industry and we have also been impacted and also the execution cycle seems to be getting a bit longer and because of these two factors primarily and the fact that because of weaker deal flow, the pricing pressures are also a bit intense in the consulting business. So combination of these factors has impacted the consulting business.
ET Now: Let us also talk a little bit about when you see the ratings revenue growth picking up and what is the overall growth strategy for the company?
Naresh Thakkar: First of all, even in this quarter we expanded our market coverage, so we are quite happy about that. However, since the overall debt issuances as I described declined in the last quarter, certainly our overall business got impacted. Going forward, we would think that in the near term, still there are headwinds and we are not seeing a significant pickup or momentum in the debt issuance.
However, going forward relatively longer term basis, we think there should be, with the benign outlook for interest rates, some pickup in the economic activity, some revival of the refinancing first and then followed by some pickup in the investment cycle, we could see more opportunities to grow. In the meantime, we are focussing on building our franchise, maintaining our rating quality, controlling our cost and being fully prepared when the overall business picks up.
ET Now: Now last year Moody’s hike stake in ICRA to about 50%. Any possibility to further hike in stake and if so, when and by how much?
Naresh Thakkar: First of all, we do not speak about shareholders. We can only talk about our own business. We are mangers. I think this is a question you should be asking the shareholders.
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