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Moody’s makes open offer to hike stake in ICRA to over 50% for up to $85M

22 February, 2014

International credit rating agency Moody’s has made a voluntary and conditional open offer to raise its holding in ICRA from 28.5 per cent to up to 55 per cent in what may cost it as much as Rs 530 crore ($85.4 million).

The offer is conditional upon Moody’s picking a minimum number of shares which would give it at least 50 per cent holding in India’s second largest rating agency. This would involve shareholders tendering shares worth at least Rs 430 crore ($69 million).

Citigroup is managing the open offer.

ICRA started as Investment Information and Credit Rating Agency of India Limited (later renamed ICRA Limited) in 1991. Five years later it signed an agreement with Financial Proformas Inc (FPI), now called Moody’s Risk Management Services, to provide credit education, risk management software, credit research and consulting services to commercial banks, financial and investment institutions, financial services companies and mutual funds in India.

In 1998-99 Moody’s Investors Service (Moody’s) picked a stake in ICRA and in 2001 hiked its stake by 9 per cent to become the largest shareholder in ICRA. Three years later it hiked it further to around 29 per cent and held its stake since then.

Over the past four years, ICRA’s revenues increased at a compound annual growth rate (CAGR) of 16.5 per cent from Rs 136 crore in FY09 to Rs 252 crore for the year ended March 31, 2013. Its net profit rose at a CAGR of 11 per cent in the same period to end FY13 at Rs 59.1 crore.

Its bigger rival CRISIL, which generates around two thirds of its revenues from outside India, has grown faster in the same period. CRISIL ended 2013 calendar year with revenues of Rs 1,151 crore with net profit of Rs 297.8 crore.

Last year McGraw Hill Financial Inc, which controls S&P, had acquired additional 15.1 per cent stake in India’s top credit rating agency CRISIL Ltd for Rs 1,290 crore ($214 million) through a voluntary open offer. With this, McGraw Hill Financial has increased its stake in rating agency to 67.8 per cent.

CRISIL and S&P Ratings Services first signed an affiliation agreement in 1996. The relationship was further strengthened in 1997 when McGraw Hill Financial acquired its initial equity stake in CRISIL. In 2005, McGraw Hill Financial became CRISIL’s majority shareholder.

Interestingly, the third largest rating agency in the country CARE is also in the process of attracting a new investor. A group of five institutional shareholders including IDBI, who together hold over 45 per cent in CARE, are proposing to sell around 38.3 per cent in the company to a new foreign investor.

The latest open offer from Moody’s comes in the wake off a string of such moves by MNCs looking to hike stake in Indian public listed arms.

Last year, Unilever Plc, the world’s second largest consumer goods company, increased stake in its local arm Hindustan Unilever (HUL) from 52.48 per cent to 67.28 per cent for $3.2 billion, in the biggest ever open offer in the history of Indian capital markets. The stake was purchased through a voluntary offer by Unilever where it sought to increase its holding to up to 75 per cent in an offer worth $5.4 billion.

In another big open offer, which started early this week, global drug maker GlaxoSmithKline Plc (GSK) is looking to raise its holding in its Indian pharma arm GlaxoSmithKline  Pharmaceuticals Ltd from 50.7 per cent to 75 per cent in what may cost it up to Rs 6,386 crore or a little over $1 billion.


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Moody’s makes open offer to hike stake in ICRA to over 50% for up to $85M

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