ICRA Ltd (ICRA) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Your passcode has been confirmed. Please wait while you're joined to the conference. The conference is now being recorded.
Moderator: Ladies and gentlemen, you are connected for the conference call of ICRA Limited. Please stay connected, the call will begin shortly. Ladies and gentlemen, you are connected for the conference call of ICRA Limited. Please stay connected, the call will begin shortly.
Moderator: Ladies and gentlemen, good day, and welcome to the half yearly FY '25 conference call hosted by the company, ICRA Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Joining us today from the management side, we have Mr. Ramnath Krishnan, Managing Director and Group CEO, Mr. Venkatesh Viswanathan, Group Chief Financial Officer, Mr. L. Shivakumar, EVP Business Development and Chief Business Officer, ICRA Limited and CEO, ICRA ESG Ratings, Mr. Shailendra M, CEO, ICRA Analytics Limited, to discuss the performance of the company followed by a Q&A session. Before we begin today's conference call, I would like to remind you that some of the statements made in today's conference call may be forward-looking in nature and may involve some risk and uncertainties. ICRA or any of its subsidiaries or the directors, officers or employees of ICRA shall have no liability whatsoever for any loss, however arising from any forward-looking statement or use of the investor presentation or its contents or otherwise arising in connection with this conference call. With that, now I'd like to hand over the call to Mr. Ramnath Krishnan, Managing Director and Group CEO, ICRA Limited to commence
Moderator: Thank you, and over to you, sir.
Ramnath Krishnan (ICRA Ltd): Thank you, moderator, and good evening, everyone. Thank you for attending this call. At the start, I would like to mention that we have decided to adopt a slightly different approach, you know, to this call, as opposed to taking you through the financial performance and the numbers and so on and so forth in detail, which I'm sure all of you would have seen from the investor presentation and from the press release that we issued, you know, last week. We thought we will focus more on our strategic priorities and some of the deliverables that we have been working on and some of the deliverables that we will continue to work on. Just to set the clock back, in January of 2022, management of ICRA presented five strategic priorities, you know, for the group that we have been working on, and we will continue to work on. So, these priorities have not changed. I'll take you through each one of these, you know, individually. The first one relates to our ratings business. Our primary focus here was obviously to continue to grow the top line year after year and to expand our margins. And some of you might recall, in 2020 and 2021, our margins in this business were actually quite, you know, subdued. So, these two were primarily deliverables for us, you know, as you can expect. You know, any strategic plan will have, you know, financial metrics articulated which is, naturally, for our internal consumption and, you know, monitoring. Now, in the last five years, that is between FY '21 and FY '26, the ratings business has generated revenue growth at 12.4%, you know, CAGR. It grew from 187 crores to 336 crores in the 5 years that ended March 2026. The operating margins in the ratings business, which was at 20.8% in FY '21, grew to 37.6% in FY '26. That's an expansion of almost about 17% over a 5-year period. So, this was one of the first, this was the first strategic priority for us. The second strategic priority relates to the non-ratings business, what we now refer to as the risk and analytics business. Here, of course, we had two deliverables. One was to increase the contribution of the risk and analytics business itself, overall, to the group revenues. This was roughly about 1/3 of the group revenues 5 years ago. Now, at the present time or at least as of FY '26 end, this is 50%. So, which is the sort of mix that we, as a management team, you know, would like to have. This was one of the deliverables for us, to rebalance our our revenue portfolio, if you like. Within the risk and analytics business, we also wanted to actually work towards expanding our bank tech and cap tech, you know, verticals from a revenue standpoint and from a contribution standpoint and reduce the predominance of the kno-tech business. Not to suggest that the kno-tech business was ever meant to scale down, but we wanted to increase the contribution of the bank tech and cap tech businesses. So, this, at the present time, is roughly around 60-40 in terms of mix. The kno-tech business contributes about 60% to the risk and analytics business, and 40% is contributed to by the other businesses. Growing revenues, as far as the risk and analytics business again, was a key imperative, and we have grown from 114.6 crores, which is where which is what we were at 5 years before, and we closed FY '26 at 313 crores. The other deliverable for us was to reduce the dominance of our anchor client from a revenue share standpoint. So, that is now at roughly at about 50%-51%, which used to be 80% of our kno-tech business, you know, 5 years ago. From an overall group perspective, our revenues more than doubled in the last 5 years. Group revenues were at 301 crores in FY '21,
Ramnath Krishnan (ICRA Ltd): and is expanded to 346.9 at the end of FY '26. So these two are the two main priorities as far as revenues are concerned. And as you can imagine, there are multiple levers that we have, you know, identified under these priorities, you know, which we keep revisiting based on how the market evolves. But there are financial matrices, which we track consistent with our strategic plan. But all I can say with respect to the last 5 years is that we have delivered with respect to whatever expectations that we had set for ourselves and whatever we had actually discussed and agreed, you know, with the Board. In terms of growth, in terms of expansion in the operating margins, in terms of rebalancing our book from a revenue contribution standpoint and so on and so forth. The third priority that we had set for ourselves was with respect to human resources. I mean there are I won't go through this in detail. I mean there were things that we have to do with respect to our rewards mechanism, our talent management process, succession planning, etc., etc., etc. So when I say rewards, you know, both are fixed compensation, our variable pay and so on and so forth, multiple other things. So there are training and development. So we've been looking at a number of things over the last 5 years. We continue to look at a number of things. So this is an ongoing process. But human capital is an area that receives a lot of our attention as a management team. The fourth pillar was technology. Till about 5 or 6 years ago, ICRA as a group did not have a large or an extremely well-established technology function. So we hired a new CTO from the external market about 5 or 6 years ago to draw out the entire, you know, tech road map, if you like. We have been expanding our spends quite significantly in the technology space with a view to embedding both tech and AI, you know, agents targeted at enhancing client experience, productivity, controls and so on and so forth. So, so this is again an ongoing journey, but we're at a, you know, pretty good place at the present time, and this is something that will keep evolving, you know, as we move forward. Last, but not least, is inorganic growth. This is the fifth pillar that we had identified for ourselves. Just to set some context, and as you know, ratings is a regulated industry regulated business. What we can do is entirely dictated by how the regulatory framework evolves. So we were very clear that we have to expand in the risk analytics space and some of this is being done through organic growth, but we were also very clear that we had to look at inorganic growth opportunities as well. Partly to use some of the liquidity, you know, that we typically sit on, but also to actually give us that fillip in terms of, you know, growth itself. So as you know, you know, there are two acquisitions that the group has made in the last, you know, few years. We started small. That was a deliberate call with D2K Technologies and we made a more significant acquisition more recently. That's actually Fintelix. Now the there is a clearly agreed, you know, framework that we work with when we look at opportunities. There are opportunities that come our way very frequently from various sources. We evaluate them against the framework that we have. So we look at adjacencies, we look at complementarity, we look at scale, we look at profitability both at the present time and what we expect to see going forward. And once we are convinced that the basic parameters set in the framework are actually satisfied, we take that to the board. And then once we get the approval, then we actually get into the other, you know, areas in terms of due diligence and so on and so forth, you know, before we make the final acquisition. And the performance of these organizations that we've acquired naturally, they're all monitored and tracked, you know, periodically by the management team and by the Board with the framework and with respect to also additional investments that we might have to make in certain products and certain platforms and so on and so forth. But this is an area, again, that will continue to receive our attention. So just to summarize, the five pillars are expand our ratings business, expand our risk analytics business, a subset of this, rebalance our
Ramnath Krishnan (ICRA Ltd): to make sure that both the ratings and the risk analytics businesses continue to be significant, you know, players. Human capital being the third pillar, fourth is technology and digital transformation and fifth is inorganic growth. So these pillars continue to remain the same. We expect any of We don't expect any of this to change. But what we expect to change is certainly the approach that we might have to take to deliver on some of these imperatives or some of the levers that we might have to use to deliver on some of these imperatives. might have to be revisited or might have to change depending on how the market evolves. Now, at the present time or at least it has been the case in the last year, a year and a half, our focus has shifted as a management team quite significantly to the risk and analytics business. Now, to take you through details of what our own approach is, what our strategy is with respect to, you know, this business as we move forward, I hand it over to Mr. Shailendra Bibinjappa, CEO of our risk and analytics business. Over to you, Shailendra.
Shailendra Bibinjappa (ICRA Analytics Limited): Thanks, Ram. Hello to everybody. So in in alignment with the the group ICRA strategic pillars and priorities within the the R&A world, we have kind of started putting together our our base. We started We started with ICRA Analytics, where bulk of the work that that we were doing kind of data and analytics work for Moody's, which was our anchor customer. We had built some satellite offerings around asset management companies catering to their investment intelligence and and risk and regulatory compliances. We had some offerings around banking risk and and we offered certain consulting services. With that as the foundation, you know, over the last few years we completed the acquisition of D2K, which brought with it larger capabilities around banking software, software engineering, and agile product development. D2K in itself was a much smaller entity, promoter run. But it kind of gave the base for us to start building out our products. And with Fintelex, which was a larger, more scaled-out risk and regulatory provider, it it brought with it technology, delivery capabilities, and, you know, a mature operating model that we could then integrate and and build our our base for for us to grow and scale the risk and analytics business. With all of with with these two acquisitions complete in the in Q1 of the year, the integration has also been completed. This has been a nine-month intense integration activity that that we have undertaken. And as of end of September, we call that integration from an operational standpoint as complete. And now we are sitting on a base, which will now you know, start growing and expanding. This integrated operating platform now is organized around three you know, three segments that we that we serve and deliver value to. One is what we call as knowledge technology, which is tech enabled data and analytics services that we deliver to global enterprises. The second one is you know, banking technology. These are risk, regulatory and supervisory solutions that we serve the banking and lending universe with. Then the capital markets or capital market technology, which are market data and evaluation, investment intelligence services and solutions that we we cater to the to capital markets.
Shailendra Bibinjappa (ICRA Analytics Limited): our organization to, to cater to all of our customers across the board. There will be some further simplification, and improvements to the model as we go along, one of them being kind of some legal entities simplifications. As we as we make progress around that, we will, you know, inform, the board and the investors accordingly. In terms of how we are kind of progressing, and building on the, on on this foundation that we have laid, how we are combining our capabilities, and preparing for the future and repositioning ourselves as an organization, I just want to quickly talk about that. We do come from very deep domain expertise around financial data analytics, you know, ESG, and, of course, the the credit background gives us that, you know, that depth of institutional knowledge. Along with that, we have built some, you know, very critical data assets. We are looking to enhance that. We are looking to create a more complete data offering. And we look to add a lot more proprietary data, assets on top of that, which will, you know, which will lead to more analytical outcomes that we can deliver, more decision support that we can deliver for our customers. Along with that, we are also significantly investing in technology, in software platforms, as well as AI and agentic capabilities, so that we are future proofing our product portfolio, and reshaping our business models for the future. And a combination of all of these three, we are looking to reposition ourselves as, you know, intelligence as a service provider, to be able to cater to risk requirements of enterprises, you know, investment, and and kind of lending decisions, within the banking, financial services and capital markets. Our, growth opportunities within, R&D, and and some of the key drivers, that we look at, and and how we're looking to expand our capabilities and offerings, I just want to touch upon that. You know, number one, we're looking at how do we, you know, expand our offerings, how do we find adjacencies, how do we create a more complete set of offerings to to kind of elevate ourselves to become an enterprise risk solution provider. You know, moving from from providing point solutions, on the credit value stream, around some investment value stream, we are now beginning to look more holistically and want to become a more comprehensive provider of risk and analytics solutions. Right? This should help us reposition ourselves as a kind of risk intelligence partner for some of the large financial institutions and global enterprises. So that is what we do, you know, how we are trying to you know, redefine what we do. The second one is how we deliver value to our customers. We are while we continue to make more investments around creating software products and data products, we believe the true value that we deliver to our customers will be with a combination of software and and platforms, a combination of data and and proprietary kind of models on top of it, and services and consulting all brought together to essentially deliver you know, business impact and outcomes for our customers. And and this is how we are relooking at at how we deliver that value for our customers. In terms of the the longer term objectives of kind of reshaping our offerings, being prepared for a more AI-centric world, we are looking to redefine our products, reshape our products to to become more AI-enabled, to have more AI-embedded capabilities, to become more AI-centric. And we are identifying select you know, opportunities to kind of make those investments and and build up our technology as well as people capabilities. This, I would say, is one of the most significant long-term strategic objective of ours. Along with that, we are looking to expand internationally. We have identified certain markets and certain opportunities
Shailendra Bibinjappa (ICRA Analytics Limited): very specifically in Europe and some pieces in Europe. Sorry, US and some parts in Europe and the Middle East, we will be looking to make both organic and inorganic opportunities possible for us. So, that's broadly what we are looking to achieve, and this is where we're going to be able to expand and grow. So, I think that's broadly what I wanted to cover. With that, I want to hand it back to the to the moderator.
Moderator: Thank you, sir. We will now begin with a question and answer session. Anyone who wishes to ask a question may press star and then one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to all, you may press star and one to ask a question.
Moderator: A reminder to all the participants, you may press star and one to ask a question. We have the first question from the line of Kunal Thanvi from Banyan Tree Advisors. Please go ahead.
73 more turns of this transcript: log in to Stocksigma to read the full call.