Your Directors are pleased to present the Thirtieth (30th) Annual Report of your
Company along with the Audited Financial Statements for the year ended March 31, 2023.
Charting New Paths to Success
FY23 was the year of chartering new paths of success and implementing lessons learnt
during the past few years. Though the growing geopolitical uncertainties and surging
inflation posed challenges, your Company did well to navigate through those and emerged
stronger than ever. The rebranding exercise in FY22 has given us a renewed sense of
purpose and direction and we are focused on leveraging our strengths to achieve our goals.
We are also exploring new avenues for growth and expansion while staying true to our core
values of integrity, innovation and excellence. Our Company is committed to further
cementing its position as one of the leading credit rating agencies and knowledge hubs in
the country.
Economic Backdrop-FY23
The year started against a backdrop of heightened geopolitical uncertainties, supply
chain disruptions, rising commodity prices, high consumer price inflation and tightening
of financial conditions globally. Even amid these challenges, economic activities in India
picked up aided by post-pandemic pent-up demand, though the recovery was uneven. Urban
demand witnessed a healthy rebound whereas, rural demand struggled to pick up with high
inflation levels adversely impacting purchasing power. The manufacturing sector was
impacted due to high input prices and their limited ability to pass through the costs to
the final consumer. The Services sector emerged as a bright spot, helping the economy to
clock a GDP growth of about 7.2% in FY23. The low base also helped to prop up growth
numbers in Q1 and Q2.
Inflation was the major concerning factor throughout the year. The CPI inflation in
FY23 averaged at 6.7%, core inflation also remained sticky above the 6% level. The
inflation at the wholesale level remained in double-digits in the first half before
witnessing a significant easing in H2 FY23 aided by the easing of global commodity prices.
However, the same trend was not seen at the retail level due to high food and services
inflation.
To tame inflationary expectations and bring it closer to the target level, RBI raised
the policy repo rate by 250 bps in consecutive six MPC meetings. The Central Bank also
absorbed the surplus liquidity from the banking system. In line with these tightening
measures, the yield on benchmark 10-year government security rose by 50 bps during FY23.
In tandem with the pick-up in economic activity and support from the low base, credit
offtake from banks improved with outstanding bank credit witnessing a growth of 15%
(y-o-y) in FY23, up from 9.6% in the previous year. Retail loans were one of the major
contributors to the overall bank credit growth and saw a growth of 20.6% (y-o-y) in FY23
due to growth in housing, vehicle and other personal loans.
The credit to industries grew 5.7% (y-o-y) in FY23, as against 7.5% a year ago. Credit
to large enterprises, which accounted for nearly 75% of total industrial disbursement,
grew at a subdued pace of 3% (y-o-y) as against 2% in the previous year. Services sector
credit growth accelerated to 19.8% in FY23 compared with 8.7% a year ago, owing to robust
credit offtake in trade and the NBFC sector.
The corporate bond issuances (private placement) touched a record high in FY23 after a
lacklustre FY22.
It rose to Rs 8.5 lakh crore clocking a growth of nearly 33.5% (y-o-y). The higher bond
issuances during the year were driven by financial institutions to meet the growing credit
demand amid tight liquidity conditions.
Commercial paper issuances in FY23 dropped sharply to Rs 13.7 lakh crore from Rs 20.2
lakh crore in FY22.
The slowdown was primarily because of the sharp rise in short-term rates amid liquidity
tightening.
To summarise, the year ended with modest improvement in economic output, amid
persistent inflationary concerns. The impact of protracted geopolitical tensions and
slowing global demand were felt in India's exports, manufacturing output and corporate's
financials. Despite a significant easing in global commodity prices in the second half of
the fiscal, the manufacturing sector remained in a tight spot. The Central Bank has been
prudent in its war against inflation but the impact of the cumulative 250 bps repo hike on
inflation will be visible more clearly in the FY24 numbers.
Looking Ahead-FY24
In the midst of prevailing global uncertainties, India has emerged as a bright spot.
The economy is relatively well placed among its peers due to the resilient domestic
economic activity and healthy financial markets.
While we expect growth to moderate as a consequence of slowing external demand, it is
likely to remain around 6% in FY24. Some moderation in urban demand could be seen as the
post-pandemic spurt in consumption cools. However, an expected healthy rebound in rural
demand will keep the momentum going. Robust Rabi production this year could brighten the
prospect of the agriculture sector and rural demand. However, we remain cautious about the
risk of any weather-related disruptions in the agriculture sector.
A strong capex growth budgeted by the Centre for FY24 will be supportive of investment
demand and growth. The private sector has been slow with the investments so far. However,
with rising capacity utilization levels and the private sector showing growing intent to
invest, we could see a pick-up in the private capex cycle this year. The RBI's decision to
pause rate hike in the April'23 meeting after a year of continuous rate hikes also bodes
well for private investment. With overall economic growth moderating, we expect the bank
credit growth to moderate to around 12% in FY24
(from 15% growth in FY23).
With global growth slowing, merchandise exports will remain weak in FY24. However,
strong growth in services export should help cushion the impact of falling merchandise
exports. Moreover, imports have also been falling, resulting in the narrowing of the trade
deficit. We expect CAD to GDP ratio to moderate to 1.6% in FY24 from an estimated 2.1% in
FY23. Comfortable forex reserves and moderation in CAD will reduce India's external sector
vulnerability. Likely tapering of rate hikes globally and expectation of pause in major
economies such as the US will also be supportive of the Indian rupee.
The CPI inflation has likely peaked in India and is expected to moderate in the coming
months supported by a high base of last year, lagged impact of past rate hikes, lower WPI
inflation prints and a healthy Rabi harvest. We expect the CPI inflation to average 5.1%
in FY24, lower than the average of 6.7% in FY23. However, the progress of monsoon and oil
price dynamics will be the key watch-outs.
Overall, the risks are balanced for the Indian economy.
We need to be cautious of the global headwinds going forward. Our outlook for the
economy hinges on the strength in domestic demand, stable commodity prices and favourable
weather conditions. Any unwelcome surprises on these fronts could pose downside risks and
will warrant a targeted policy intervention.
Way Forward
Keeping the above in mind and to make the organization increasingly future-ready, your
Company's management is focused on the following measures:
1. Continuous strengthening of the rating operations;
2. Focused, transparent and effective communication with stakeholders;
3. Increased use of technology in core as well as other functions;
4. Talent attraction and retention with well thought
HR interventions;
5. Training in technical and soft skills and
6. Developing future leadership by empowering them in new positions.
With the above clarity, the management has kept its eyes firmly on bringing the Company
back on the growth path. The results are expected to be seen going forward, with the
beginning already made successfully in FY23.
Financial Performance
Your Company's Financial Performance for the year ended March 31, 2023, is summarized
below:
Summary of Financial Performance (Standalone)
(Rs in crore)
Particulars |
For the year ended March 31, 2023 |
For the year ended March 31, 2022 |
Income from Operations |
248.84 |
219.27 |
Other Income |
37.10 |
28.36 |
Total Income |
285.94 |
247.63 |
Total Expenditure |
147.80 |
140.65 |
Profit Before Tax (PBT) |
138.14 |
106.98 |
Provision for Tax |
34.34 |
22.51 |
Profit After Tax (PAT) |
103.80 |
84.47 |
Other comprehensive income/ (loss) |
(0.87) |
7.81 |
Total comprehensive income for the period |
102.93 |
92.28 |
Appropriations |
|
|
Interim Dividend |
29.68 |
20.62 |
Final Dividend |
29.65 |
17.68 |
Total (Dividend Outflow) |
59.33 |
38.30 |
Transferred to General Reserve |
- |
- |
The total income for the financial year of FY23 was Rs 285.94 crore, a 15% increase
from FY22, while the other income stood at Rs 37.10 crore, a 31% increase from the
previous year. Revenue from operations increased to Rs 248.84 crore in FY23. The ratings
income rose by 13% in FY23.
Your Company's total expenditure in the financial year was Rs 147.80 crore, 5% higher
than the previous year, due to the impairment of non-current assets by Rs 5.72 crore and
an increase in travelling and conveyance cost of Rs 2.03 crore. Salary expenses at Rs
104.03 crore in FY23 were 3% less than the previous year. At Rs 103.80 crore, FY23 net
profit increased as compared to the previous year aided by an increase in total income.
Returns to Shareholders a) Dividend
During the year, your Company paid an interim dividend of Rs 10/- per equity share
amounting to a pay-out of Rs 29.68 crore. The Board has recommended a final dividend of Rs
7/-per equity share and a special dividend of Rs 8/- per equity share amounting to a
pay-out of Rs 44.55 crore for FY2022-23, for approval of Members at the ensuing
Annual General Meeting.
The dividend recommended is in accordance with the Company's Dividend Distribution
Policy and would be paid in compliance with the applicable rules and regulations. The
Dividend Distribution
Policy is available on the website of the Company at
https://www.careratings.com/Uploads/newsfiles/ FinancialReports/1679558992_21032023065712_
Dividend_Distribution_Policy.pdf
b) Buy-back of Equity Shares
The Board of Directors at their meeting held on July 20, 2022, approved a proposal for
buy-back of up to 23,68,000 fully paid-up equity shares of the face value of Rs 10/- each
(representing 7.99% of the total issued, subscribed and paid-up equity share capital of
the Company as on March 31, 2022).
This was to be done by way of a tender offer at a price of Rs 515/- per equity share,
payable in cash for an aggregate amount not exceeding
Rs 1,21,95,20,000/- ("Buy-back") which was 19.30% and 19.39% of the aggregate
of the fully paid-up equity share capital and free reserves (including securities premium)
as per the latest audited standalone and consolidated financial statements of the Company
for the financial year ended March 31, 2022, respectively, in accordance with the
Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018, as
amended and the Companies Act, 2013 and the rules made thereunder. The Buy-back was
approved by the Members of the Company by means of a special resolution through a postal
ballot on September 2, 2022. Consequent to the approval of the Buy-back by the Members of
the Company, a Letter of Offer was sent to eligible Members holding shares as on
Record Date i.e. September 14, 2022. The Company bought back 4,199 Equity Shares out of
the shares that were tendered by the eligible shareholders and extinguished the
Equity Shares on December 19, 2022.
Transfer to Reserves
On account of having Employee Stock Options Plans ("ESOPs") lapsed of the
employee who had resigned, Rs 0.34 crore has been transferred to the General Reserve of
the Company during the said period. The Company has created a Capital Redemption Reserve
amounting to Rs 0.42 lakh pursuant to the extinguishment of shares as a result of the
Buy-back of Equity Shares done during the year.
Organisational Developments
Pursuant to the resignation of Mr. Ajay Mahajan as the Managing Director & CEO
("MD & CEO"), Mr. Mehul Pandya, Executive Director Business Development, was
appointed as the Interim CEO with effect from June 01, 2022.
Further, with effect from July 29, 2022, Mr. Mehul
Pandya was appointed as an Additional Director designated as MD & CEO of the
Company for a term of five years and his appointment was approved by the shareholders of
the Company at the Annual General Meeting of the Company held on September 26, 2022.
A new CEO was appointed for our subsidiary CARE Advisory Research and Training Limited.
At the senior management level, your Company has over the years hired professionals
from the industry with a long and established track record in their respective fields.
With these new appointments, the management team is all set to usher the Group into a new
era of high growth.
The agenda that has been carried out by the management in the year can be clubbed under
four headings: 1) Business Operations; 2) Group Approach; 3) Outreach and 4) Human
Resources.
Business Operations: Strengthening Coverage
Completing 30 years of service to the Indian financial markets in 2023, CareEdge has
made a notable contribution to increasing transparency and providing credit assessments to
help lenders/investors make better decisions. In this journey, your Company has completed
over 91,059 rating assignments of large, medium and small companies including banks and
financial services companies/ institutions covering a total debt size of Rs 180 lakh
crores.
Your Company is the leading domestic credit rating agency in India with expertise in
rating different instruments/ facilities across varied sectors. Your
Company continues to maintain its leadership position in rating the Financial and
Infrastructure sector. As on March 31, 2023, we have active ratings on approximately 4,500
companies. After muted growth at an industry level in the past two years, the rating
industry saw good traction in FY23, backed by good growth in bank credit. Bank credit to
large industries grew by 3% and services grew by 19.8%, while corporate bond issuances
(private placement) recorded a growth of 33.5% on a Y-o-Y basis.
Your Company positioned itself well to grab this opportunity when it presented itself.
As a result, we added many new companies to our rated portfolio, registering a good jump
over the last year. The Bank Loan Ratings segment saw an increase of 30% in debt rated
whereas the corporate bonds segment saw an increase of 11%.
The growth was well spread out in all the key sectors, including corporate and
infrastructure, banking and financial services space as well as mid-corporates. The rated
debt in each of the segments grew by 8%, 26% and 13%, respectively.
Further, your Company outperformed in niche segments like securitization, partly due to
growth in the overall market and partly due to increasing our market share. The
securitization market grew by 68% in FY23 after a muted growth in the past two years. We
saw a significant increase in the securitization transactions for both Pass Through
Certificate (PTC) and and Direct Assignment (DA) and with new originators entering the
market. Your company has an impeccable track record on securitization ratings and was able
to garner a higher market share in the current year while adding substantially more new
originators to the portfolio.
The superior business performance posted by your company in FY23 was mainly
attributable to the
"Quality-led Growth" strategy pursued by the company.
Focused efforts were taken during the year to deepen our relationship with our existing
clients with targeted efforts to onboard clients from high-growth sectors. Dovetailed with
these were our outreach efforts towards communicating our superior rating performance and
deep credit insights into various sectors to end users of our ratings like banks, mutual
funds, Private Equity players, etc. These efforts along with our well-thought-out rating
criteria/methodologies, have led to even stronger acceptability of our ratings which is
very critical from a long-term perspective. The regulatory environment is ever-changing
with a strong emphasis on processes and timely outcomes.
Businesses are also becoming more complex and the cycles are also becoming shorter and
more volatile. This is slowly but steadily resulting in the movement towards established
rating agencies having strong analytical capabilities and being supported by robust
processes. With three decades of presence in the credit markets, CARE Ratings is well
poised to take benefit from the same.
The shift in your Company`s strategy was also well-timed to capitalise on the
improvement in the operating environment. Deleveraged balance sheets of corporates, strong
balance sheets of banks, steady improvement in capacity utilisation, government's push on
infrastructure creation, schemes such as PLI etc will continue to drive credit growth in
the coming years notwithstanding temporary aberrations induced by external factors. The
Company with its "Quality-led Growth" strategy is well poised to capture the
long-term growth potential of India and capture an even-bigger share in the market.
Technology: Eye on the Future
In FY23, your Company set up Disaster Recovery Site and executed Disaster Recovery (DR)
for business-critical applications to provide business continuity in-event of any
shut-down unexpectedly due to unforeseen circumstances, such as natural events, or
security issues. This involved shutting down Core applications from the Production/Live
Environment from Data Centre (DC) and routing all the Business Applications from Disaster
Recovery (DR). In addition, your Company completed a total upgrade in the
Hyperconverged computer infrastructure.
Your Company improved our security posture with reference to web app security, your
Company implemented Web Application Firewall (WAF) which filters, monitors and blocks any
malicious HTTP/S traffic travelling to the web application and prevents any unauthorized
data from leaving the app. To ensure the integrity of authorized users and devices from
gaining access to a corporate or private network before they connect to the network and
minimize risk and the possible spread of malware, your Company implemented Network Access
Control (NAC). NAC systems allow setting finely calibrated access policies when
implemented correctly and track each user's movement around networks.
In FY24, your Company would carry forward its strategy on security by implementing
Privileged Access
Management (PAM) for cyber threats by controlling, monitoring and securing privileged
access to critical resources. In addition, a complete DR run would be done wherein
business-critical applications for a week would be run from the DR site.
Usage of Technology in Ratings
Ratings is a regulated business and most of the processes are standardised across the
rating agencies by regulators. However, we believe with the data and technology available
today, ratings operations can become more efficient. We have started to use Machine
Learning (ML) and Natural Language Processing (NLP) to read financial and operational data
from publicly available corporate company filings. The data accuracy based on ML results
has significantly improved but as it depends on a lot of variables, the models are being
continuously revised. Once machines are properly trained on varied datasets, the lower-end
data entry work could be automated to a certain extent and would help improve our
efficiency and overall turnaround time. Your Company has also built a new website for the
Group, rich with content and a user-friendly interface and in accordance with our new
brand vision of integrating all group offerings and synergies. We had adopted the latest
technology platforms for enhancing the user experience on our new website. The subsidiary
company's websites are being worked upon and will be rolled out soon. In addition,
business applications supporting the ratings analyst team had made significant
enhancements for ratings letters, press releases and evaluation forms which would reduce
the analyst operational time.
In FY24, your Company has initiated a platform modernization program with the intent to
use cutting-edge technology and upgrade core business applications used by the ratings and
business development team.
Group Approach
Building further on the continued efforts of the past few years, your Company has seen
growth on multiple fronts in FY23 and this has been made possible by the combined efforts
of CareEdge as a Group. Whether it is the rating business, advisory, risk solutions or our
services outside India, your Company has positioned itself as one of the leading brands in
the market. We have paid special attention to bringing in the right talent for the Group
to further improve our services as a whole and cement our image as a knowledge hub.
Outreach
In accordance with our efforts to improve the visibility and credibility of your
Company, we scaled up our outreach activities at all possible touchpoints in FY23.
Be it our research reports or speaker sessions, your Company saw traction increase in
all departments.
Highly regarded and attended by senior industry leaders, your Company conducted as many
as 21 webinars and took part in 36 speaker sessions and 76 Knowledge Sharing Forums.
Some of the notable events of FY23 included:
After a pandemic-induced gap of over two years, CareEdge hosted its flagship event
"Conversations" in Pune. The occasion was graced by multiple industry leaders
and experts.
CareEdge was a Process Partner' at CNBCTV18's Business Leaders 40 under
40 Awards. The awards honoured the outstanding performances of 40 young achievers who
demonstrated excellence and portrayed an abiding commitment to the world of Chartered
Accountancy. As a process partner, CareEdge Ratings assisted in the planning process to
design award rules and regulations, evaluate parameters and framework and conduct a
comprehensive process review.
CareEdge was a Knowledge Partner at Assocham's 14th Capital Market
Summit: The Reset of Globalization Capital Formation@2047 for New India, February 22.
Mehul Pandya, MD & CEO, CARE Ratings Limited, delivered the keynote address at the
inaugural session and unveiled a knowledge paper along with other dignitaries. Revati
Kasture, Executive Director, was a part of the panel discussion at the event.
Mehul Pandya, MD & CEO, CARE Ratings Limited, delivered the keynote address on
Board's Strategy in Making CSR Inclusive' and International Trends in CSR' at
the 17th International Conference on Corporate Social Responsibility hosted by
the Institute of Directors. CareEdge worked on
vetting the ranking methodology for the MSME Banking Excellence Awards, which was
organised by the Chamber of Indian Micro, Small and Medium Enterprises.
CareEdge associated with ASSOCHAM as the Knowledge Partner for their conference
titled Odisha Minerals & Metals Industry: Exploring Opportunities & Addressing
Concerns.
Mehul Pandya, MD & CEO of CARE Ratings Limited, was among the jury members for the
2022 edition of India's Best CEOs awards organised by Business Today. Mehul Pandya, MD
& CEO, CARE Ratings Limited, spoke on ESG adoption at the ESG Infra Mint Conclave.
Sachin Gupta, Chief Rating Officer, spoke on Indian Infrastructure - Coming of Age at
Edelweiss Annual Investor.
CareEdge associated as Knowledge Partner' at Assocham's Conference on
Indian Mineral Reforms-Step towards Atmanirbhar Bharat'. CareEdge won the bronze
award at the National CSR Summit & Awards Amrit Mahotsav Series organised by Vision
India Forum.
Rajani Sinha, Chief Economist, participated in a panel discussion on Changing
Geopolitical Dynamics: An opportunity for EU-India Cooperation' at the 30th
Annual General Meeting of The Council of EU Chambers of Commerce in India.
Nehal Shah, Senior Director & Head of Compliance at CARE Ratings Limited, was
invited as the Chief Guest at the Centre for Corporate Governance, Research & Training
of the Institute of Company Secretaries of India (CCGRT - ICSI) to inaugurate the
Management Skills Orientation Program for fresh graduated Company
Secretaries.
Rajashree Murkute, Senior Director, CARE Ratings Limited was invited as a speaker at
SEBI's outreach programme on Municipal Bonds.
Human Resources: People Power
With a view to ensuring CareEdge is one of the best places to work, your Company has
been focusing on enhancing the quality of work life via multiple engagement and training
programmes throughout the year. Continuing with the aim to deliver efficient and quality
services, your Company has paid special attention to retaining talent and roping in fresh
hands.
As of March 2023, there were 517 full-time employees compared with 491 last year, with
voluntary attrition at
28% for FY23.
The focus on retention of our workforce is built on approaches such as employee
engagement, training interventions, Rewards & Recognition programmes and employee
connect communication through multiple platforms. Your Company conducted 60 training
programmes under the supervision of subject matter experts in the current year, covering
employees.
Some of the key initiatives of FY23 include:
a) During the year, your Company introduced the CareEdge Leadership Assimilation
Program (CLAP) a globally renowned HR intervention for leaders and people managers who
have taken on a new role of enhanced responsibility and/or where there is a deemed need to
foster greater alignment/assimilation of a team with its leader. The unique aspect of this
program is that it drastically shortens the process of team formation and bonding (forming
- storming norming performing) and team alignment is achieved within a couple of months,
which may otherwise take several months to achieve system for teams to share anonymous
feedback to leaders about their managerial style.
b) Another thoroughly cheered initiative this year was that of our Managing Director
& CEO, Mehul Pandya meeting with all employees who belong to the A1-A3 grade in a
planned and systematic manner, seeking their feedback. Ever since the start of this, many
of the suggestions received during the meetings have been acted upon.
c) Your Company has adopted a talent management and succession planning framework,
which is built on the world-famous "Performance vs Potential Matrix" model,
leading to the creation of a 9-Box Grid. It assesses employees on performance and
potential. d) Your Company introduced a long-term incentive plan across the functions.
Strengthening the Subsidiaries:
As on March 31, 2023, the Company has 4 subsidiaries i.e., CARE Ratings (Africa)
Private Limited, CARE Ratings Nepal Limited, CARE Advisory Research and Training Limited
and CARE Risk Solutions Private Limited.
CARE Ratings (Africa) Private Limited
CARE Ratings (Africa) Private Limited ("CRAF") has been licensed by the
Financial Services Commission of Mauritius from May 7, 2015. It is the first Credit Rating
Agency to be so recognized. It is also recognized by the Bank of Mauritius as an External
Credit Assessment Institution (ECAI) on May 9, 2016. In February 2019, CRAF received the
approval of the Capital Markets Authority of Kenya to operate as a Credit Rating Agency in
Kenya under the Capital Markets Act and the Regulations and Guidelines issued thereunder.
CRAF's revenue grew by 27% in FY23 on account of an increase in the total volume of debt
rated with contributions coming from both new assignments and surveillance exercises.
CRAF is now planning to expand its presence in other geographies of Africa, principally
in the countries falling under the Southern African Development
Community (SADC). The focus of the company is to leverage upon the experience of the
CareEdge group in the Indian & Mauritius markets and utilise the same for popularising
the concept of credit rating in the capital market ecosystem of Africa through training,
advisory and strong technology-enabled analysis.
CARE Ratings Nepal Limited
CARE Ratings Nepal Limited ("CRNL"), incorporated in Kathmandu, Nepal, is a
subsidiary of your Company and offers a wide range of rating services, which includes the
rating of debt instruments primarily bank borrowings, issuer rating, fund management
quality rating etc. CRNL is an authorised credit rating agency licensed by the Securities
Board of Nepal w.e.f. November 16, 2017. CRNL uses the technical expertise of its parent
company and has also developed its capabilities in various sectors which comprise banking
and insurance, manufacturing, trading, construction, power etc. CRNL's total revenue grew
by 15% in FY23. The growth in business was supported by CRNL's efforts to improve
awareness about credit rating among various stakeholders by organizing various training
sessions and seminars coupled with better execution of initial cases.
Being a credit rating agency, CRNL's business depends on the overall size of the
rateable universe, which is directly impacted by the regulatory framework, financial
market and economic growth in Nepal. The outlook, remains impacted by the slow pace of
economic recovery, owing in part to the muted government spending so far this fiscal.
Demand across various sectors is declining and amid tightened regulatory supervision,
growth in lendable funds of
Banks and Financial Institutions (BFI) remains meagre.
The growth trend in inward remittance provides some relief to the economy. Furthermore,
a more stable government could go a long way towards improving the pace of economic growth
going forward. However, with increasing competition coupled with the low credit appetite
of BFIs, business growth in the near term is likely to see some moderation in growth.
CARE Advisory Research and Training Limited
CARE Advisory Research and Training Limited ("CART") is a wholly-owned
subsidiary of your Company which was incorporated on September 6, 2016 and is in the
business of Advisory, ESG and Research. CART offers
(i) advisory and consultancy services in the areas of risk advisory, policy advisory,
business improvement plans, TEV studies, enterprise valuations, business and financial
restructuring, markets & industry studies, financial modelling, diagnostic studies,
feasibility studies, design of credit appraisal systems;
(ii) ESG services ranging from ESG Assessments and grading to ESG strategy and
comprehensive advisory offerings (iii) Industry Research including Industry Research
Outlook and Industry Risk Scores on over 80 Sectors and Customised Industry Research; (iv)
Grading Services like MFI Grading, NGO Grading and AIF
Grading to name a few.
Continuing its journey to position itself as a knowledge and quality research-driven
institution, CART took steps to build an Advisory, ESG and Research Business in FY22. In
the last year, CART has scaled up its offerings in ESG with services relating to ESG
Assessments and ESG Strategy, Roadmap and Reporting. CART has also developed India's first
tech-enabled, on-demand, comprehensive data platform that brings together company,
industry and ESG insights. This platform currently provides ESG scores for over 900 listed
entities. CART has also been empanelled with the Association of Mutual Funds in India
(AMFI) as an ESG Rating provider for AMCs. CART has been offering services in the field of
infrastructure project evaluation and independent viability and feasibility studies and
corporate advisory
(business plan preparation, financial improvement plan, financial appraisal). This
division has undertaken bespoke assignments, especially with Multilateral Organisations
like World Bank and ADB. The Research Division of CART services a variety of business
needs of its domestic and multinational clients with credible and customised research and
analysis on various facets of the economy and industries in addition to providing
Industry Research Outlook and Industry Risk Scores on over 80 Sectors. The Grading
services being offered by the company have also exhibited good growth across offerings in
MFI Grading, AIF Grading and NGO Grading. In FY23, total revenue increased to Rs 8.02
crore from Rs 7.41 crore in FY22.
CARE Risk Solutions Private Limited
CARE Risk Solutions Private Limited ("CRSPL"), a wholly owned subsidiary of
your Company, with over 15 years of global experience in providing cutting-edge risk and
compliance solutions for banks and financial institutions. CRSPL has undertaken a digital
transformation journey to primarily position itself as a leading risk and compliance
product company.
CRSPL started reengineering its products in risk and compliance in FY22, reinventing
its product strategy with the latest technology and suited to the RBI-prescribed
regulatory framework. CRSPL is on a mission to enhance the complete range of risk
offerings, including the new version of Credit Risk, ALM, FTP and risk modelling that are
in the advanced stage of development and ready for GTM in FY24. It is planning to launch
new-age digital products under its data and analytics division like the intelligent data
platform. For the last three years, CRSPL has regularly featured amongst Risktech100
companies across the globe (Chartis Research).
CRSPL has acquired 20+ new customers across offering around risk products, consulting,
BI & Analytics services, Liferay implementation and MLD valuations. CRSPL has also
formed strategic alliances with global tech MNCs like IBM, Oracle, Liferay and Feedzai for
their Risk product stack across data & analytics, enterprise portals and fraud
management. It is launching a new offering for the CFO community on Enterprise budgeting,
planning and performance management, treasury and analytics. It is planning joint GTM
around these offerings with respective OEM Partners. To increase its market reach, CRSPL
has entered strategic partnerships with 3i Infotech, IDBI Intech and Saraswat Infotech,
etc.
In FY23, total revenue was Rs 9.89 crore.
Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act,
2013 ("the Act")
The details of loans, guarantees and investments covered under Section 186 of the Act
read with Companies (Meetings of Board and its Powers) Rules, 2014 are given in the notes
to the Financial Statements forming part of this Report.
Particulars of Contracts or Arrangements with Related Parties
All transactions entered into during the Financial Year
2022-23 with Related Parties as defined under Section 188 of the Act and Regulation 23
of the Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015 ("SEBI Listing Regulations") were in the
ordinary course of business and on an arm's length basis. During the year, the Company had
not entered into any contract/ arrangement/transaction referred to in Section 188 of the
Act with related parties which could be considered material. Accordingly, the disclosure
of Related Party Transactions as required under Section 134(3) of the Act in Form AOC-2 is
not applicable.
Details of transactions with related parties as required under IND AS-24 set out in
Notes to Accounts-Note No. 36 of the Standalone Financial Statements forming part of this
Report.
As required under Regulation 23 (1) of the SEBI Listing Regulations, the Company has
formulated a Policy on the Materiality of and dealing with Related Party
Transactions which is available on the website of the Company at
https://www.careratings.com/Uploads/ newsfiles/FinancialReports/1679040518_Policy%20
on%20Materiality%20of%20and%20dealing%20 with%20Related%20Party%20Transactions.pdf
Details of application made or any proceeding pending under the Insolvency and
Bankruptcy
Code, 2016 (31 of 2016) during the year along with their status as at the end of the
financial year
There are no applications made or any proceedings pending against the Company under the
Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the financial year.
Details of the difference between the amount of the valuation done at the time of
one-time settlement and the valuation done while taking a loan from the banks or financial
institutions along with the reasons thereof
There are no instances of one-time settlements during the financial year.
Directors and Key Managerial Personnel
During the year under review, Mr. Ajay Mahajan (DIN:05108777) resigned as MD & CEO
of the Company with effect from May 31, 2022. Pursuant to the resignation of Mr. Ajay
Mahajan as MD & CEO, Mr. Mehul Pandya (DIN:07610232) was appointed as an Interim Chief
Executive Officer of the Company with effect from June 1, 2022. Subsequently, Mr. Mehul
Pandya was appointed as MD & CEO of the Company with effect from July 29, 2022.
Further, the term of office of Mr. Najib Shah (DIN:08120210), Ms. Sonal Desai
(DIN:08095343) and Dr. M. Mathisekaran (DIN:03584338), Non-Executive Independent Directors
concluded at the 29th Annual General Meeting. They were subsequently appointed
as a Non-Executive Independent Directors for a second term from the conclusion of the 29th
Annual General Meeting upto the conclusion of the 32nd Annual General
Meeting of the Company to be held for the financial year 2024-25, who shall not be
liable to retire by rotation.
Mr. Ananth Narayan Gopalakrishnan (DIN:05250681) resigned as a Non-Executive
Independent Director of the Company with effect from September 5, 2022, pursuant to his
appointment as a Whole-time Member of the Securities and Exchange Board of India. Ms.
Subhangi Soman (DIN:09476059) resigned as a Non-Executive Non-Independent Director of the
Company with effect from November 24, 2022, due to pre-occupation and other engagements.
Mr. Gurumoorthy Mahalingam (DIN:09660723) was appointed as an Additional Director in
the category of
Non-Executive Independent Director of the Company with effect from November 21, 2022.
Further, his appointment was approved by the Members of the
Company through a postal ballot on January 21, 2023. Mr. V. Chandrasekaran
(DIN:03126243) was re-designated as a Non-Executive Independent Director of the
Company from Non-Executive Non-Independent Director of the Company with effect from
December 7, 2022, pursuant to shareholders approval through postal ballot.
Mr. Sobhag Mal Jain (DIN:08770020) was appointed as Additional Director in the category
of Non-Executive Non-Independent with effect from January 28, 2023. Further, his
appointment was approved by the Members as Non-Executive Non-Independent Director of the
Company through a postal ballot on April 15, 2023. In accordance with the Articles of
Association of the Company and provisions of Section 152(6)(e) of the Act, Mr. Mehul
Pandya will retire by rotation at the ensuing Annual General Meeting of the Company and
being eligible, offers himself for re-appointment.
Declaration by Independent Directors
The Independent Directors of the Company have submitted their declaration of
independence as required under Regulation 25 (8) of the SEBI Listing Regulations and
Section 149(7) of the Act confirming that they meet the criteria of independence under
Section 149(6) of the Act and Regulation 16 (1)(b) of SEBI Listing Regulations.
The Board is of the opinion that the Independent Directors fulfil the conditions
specified in these Regulations and are independent of the management.
There has been no change in the circumstances affecting their status as Independent
Directors of the Company. Further, the Independent Directors of the Company possess
requisite qualifications, experience and expertise in the field of finance, strategy,
auditing, tax, risk advisory and financial services and they hold the highest standards of
integrity.
Number of Meetings of the Board of Directors
The Board of Directors met 10 (Ten) times during the Financial Year ended 2022-23 on
April 11, 2022, April 26, 2022, May 28, 2022, July 20, 2022, July 29, 2022, August 17,
2022, November 8, 2022, December 7, 2022, January 28, 2023 and March 16, 2023. The
particulars of meetings held and attended by each Director are detailed in the Corporate
Governance Report, which forms part of this Report. The intervening gap between two
consecutive Board Meetings did not exceed 120 days.
Vigil Mechanism Whistle Blower
The Company has established a vigil mechanism for Directors and Employees in compliance
with the provisions of Section 177(10) of the Act and Regulation 22 of the SEBI Listing
Regulations to report their genuine concerns and to provide for adequate safeguards
against victimisation of persons who may use this mechanism. During the year, your Company
affirms that no employee of the Company was denied access to the Audit Committee. The said
policy is also available on the website of the Company at https://www.careratings.
com/Uploads/newsfiles/FinancialReports/1679040341_ Whistle%20Blower%20Policy.pdf
Policy on Directors' Appointment and Remuneration
The Policy of the Company on Directors' appointment and remuneration including criteria
for determining qualifications, positive attributes, independence of a Director and other
matters provided under sub-section (3) of section 178, is appended as
Annexure - I to this Report and is also available on the website of the Company at
https://www.careratings.com/Uploads/newsfiles/
FinancialReports/1679040649_NOMINATION%20&%20 REMUNERATION%20POLICY.pdf
Annual Evaluation of Performance of the Board
Pursuant to the provisions of the Act and SEBI Listing Regulations, an annual
performance evaluation of the Board and its Committees and other individual
Directors is required to be undertaken to assess the performance of the Board and its
Committees with the aim to improve effectiveness.
The Board Evaluation Cycle for FY2022-23 was completed by the Company internally which
included the Evaluation of the Board as a whole, Board Committees and other individual
Directors of the Company. The Board's functioning is evaluated after taking inputs from
the Directors on various aspects, including inter alia degree of fulfilment of key
responsibilities, board structure and composition, establishment and delineation of
responsibilities to various committees, the effectiveness of board processes, information
and functioning.
The Committees of the Board were evaluated after taking inputs from the Committee
members based on criteria such as degree of fulfilment of key responsibilities, adequacy
of committee composition and effectiveness of meetings.
The Board reviewed the performance of the individual Directors on aspects such as
attendance and contribution at Board/ Committee Meetings and guidance/ support to the
management outside Board/ Committee Meetings.
Further, a separate meeting of Independent Directors was held by the Independent
Directors on March 28, 2023, where they reviewed the performance of the Board and the
quality, quantity and timeliness of the flow of information between the Company,
Management and the Board was assessed.
Committees of the Board
As on March 31, 2023, the Board has the following committees: i. Audit Committee; ii.
Nomination and Remuneration Committee; iii. Stakeholders Relationship Committee; iv.
Corporate Social Responsibility and Sustainability Committee; v. Risk Management
Committee; vi. Rating Sub-Committee; vii. Strategy and Investment Committee and viii.
Technology Committee During the period under review, the Board constituted its Techonology
Committee in order to have more focus on critical IT projects and implementation.
A detailed note on the composition of the Board and its committees is provided in the
Corporate Governance Report.
Adequacy of Internal Financial Control with Reference to Financial Statements
The Company has an Internal Financial Control System commensurate with the size, scale
and complexity of its operations.
The Company has adopted accounting policies which are in line with the Indian
Accounting Standards notified under Section 133 and other applicable provisions, if any,
of the Act read together with the Companies (Indian Accounting Standards) Rules, 2015.
The Company, in preparing its financial statements, makes judgments and estimates based
on sound policies and uses external agencies to verify/ validate them as and when
appropriate. The basis of such judgments and estimates is also approved by the Statutory
Auditors and Audit Committee.
The Internal Auditor evaluates the efficacy and adequacy of internal control systems,
accounting procedures and policies adopted by the Company for the efficient conduct of its
business, adherence to the Company's policies, safeguarding of the Company's assets,
prevention and detection of fraud and errors and timely preparation of reliable financial
information, etc. Based on the report of the internal audit function, process owners
undertake corrective action in their respective areas and thereby strengthen the controls.
Significant audit observations and corrective actions thereon are presented to the Audit
Committee of the Board.
Statutory Auditor and Report by Statutory Auditors
M/s. BSR & Co. LLP (Firm Registration No. 101248W/ W-100022) were appointed as the
Statutory Auditors of the Company for a period of five years up to the conclusion of the
33rd Annual General Meeting of the Company.
The Notes on the financial statement referred to in the Auditor's Report are
self-explanatory and do not call for any further comments. The Auditor's Report does not
contain any qualification, reservation, adverse remark or disclaimer.
The disclosure relating to fees paid to Statutory
Auditors is provided in Corporate Governance Report annexed to this Report.
Instances of Fraud, if Any Reported by the Auditors
During the year under review, there have been no instances of fraud reported by the
Auditors under
Section 143(12) of the Act and rules framed thereunder either to the Company or to the
Central Government.
Secretarial Audit Report
The Board of Directors of your Company has appointed A. K. Jain & Co., Company
Secretaries, Mumbai, to conduct the Secretarial Audit of the Company for FY2022-23. The
Secretarial Audit Report is appended to this Report as Annexure - II.
There are no qualifications, reservations or adverse remarks or disclaimers made by A.
K. Jain & Co., Company
Secretaries in their secretarial audit report.
Maintenance of Cost Records and Cost Audit
Maintenance of cost records and requirement of cost audit as prescribed under the
provisions of Section
148(1) of the Act is not applicable for the business activities carried out by the
Company.
Particulars regarding Conservation of Energy, Technology Absorption and Foreign
Exchange earnings and outgo Conservation of Energy and Technology Absorption
Your Company has taken necessary steps and initiative in respect of the conservation of
energy to a possible extent to conserve the resources as required under Section 134(3)(m)
of the Act and rules framed thereunder. As your Company is not engaged in any
manufacturing activity, the particulars of technology absorption as required under the
section are not applicable and hence are not provided.
Foreign Exchange Earnings and Outgo
During the year under review, the Company has earned a foreign exchange equivalent of
Rs 95.53 lakh and has spent Rs 10 lakh on foreign exchange.
Material Changes and Commitments Affecting the Financial Position of the Company
There have been no material changes and commitments affecting the financial position of
the Company which have occurred between March 31, 2023 and the date of this report other
than those disclosed in this Report.
Significant and Material Orders passed by the
Regulators or Courts Tribunals
There are no significant material orders passed by the Regulators/ Courts which would
impact the going concern status of your Company and its future operations.
Management Discussion and Analysis Report
The Management's Discussion and Analysis Report for the year under review, as
stipulated under Regulation 34(2)(e) of the SEBI Listing Regulations with the Stock
Exchanges, is annexed as
Annexure - III to this Report.
Particulars of Employees
Disclosures with respect to the remuneration of
Directors and employees as required under Section 197 of the Act and Rule 5(1) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been
appended as
Annexure - IV to this Report. The information required pursuant to Section 197 of
the Act read with Rule 5(2) & (3) of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014 in respect of employees of your Company is available for
inspection by the Members. Any
Member interested in obtaining such information may address their email to
investor.relations@careedge.in
Business Responsibility and Sustainability Report
A Business Responsibility and Sustainability Report as per Regulation 34(2) of the SEBI
Listing Regulations, detailing the various initiatives taken by the Company on the
environmental, social and governance front is provided as
Annexure V and forms an integral part of this Report.
Performance and Financial Position of Subsidiary, Associate and Joint Venture
Company and their Contribution to the Overall
Performance of the Company
As required under Section 129 of the Act and Regulation 33 of the SEBI Listing
Regulations, the Consolidated
Financial Statements have been prepared by the
Company in accordance with the applicable Accounting Standards and form part of the
Annual Report. Statement on the highlights of the performance of the subsidiary companies
and their contribution to the overall performance of the Company are given in Form AOC-1
has been appended as Annexure- VI to this Report. Pursuant to provisions of Section
136 of the Act, the financial statements of the subsidiaries, as required, are available
on the Company's website and can be accessed at
https://www.careratings.com/financial-performance The Company has formulated a Policy for
determining Material Subsidiaries. The Policy is available on the Company's website and
can be accessed at https://www.careratings.com/Uploads/
newsfiles/FinancialReports/1679040466_Policy%20
for%20determining%20material%20subsidiaries.pdf
Corporate Governance
The Company is committed to maintaining the highest standards of Corporate Governance
and adhering to the Corporate Governance requirements as set out by the Securities and
Exchange Board of India. The Report on Corporate Governance as per Regulation 34 (3) read
with Schedule V of the SEBI Listing Regulations forms part of the Annual Report. The
Certificate from the Auditors of the Company confirming compliance with the conditions of
Corporate Governance as stipulated under Schedule V (E) of the SEBI Listing Regulations, a
Certificate by the Managing Director affirming the compliance of Code of Conduct and a
Certificate of Non-disqualification of Directors provided by the Practicing Company
Secretary form part of the Corporate Governance Report which has been appended as
Annexure-VII.
Annual Return
Pursuant to the provisions of Section 92(3) of the Act read with the Companies
(Management and Administration) Rules, 2014 and Section 134(3)(a) of the said Act, the
Annual Return containing details as on March 31, 2023 is available on the Company's
website on: https://www. careratings.com/annual-reports
Share Capital
There was no change in Authorised Share
Capital during the Financial Year that ended on March 31, 2023. The Authorised
Share Capital of the Company is Rs 35,00,00,000/- (3,50,00,000 Equity Shares of face value
of Rs 10/- each). During the Financial Year ended March 31, 2023, the Company has allotted
58,264 equity shares on account of the exercise of Stock Options under the Employee Stock
Option Scheme, 2020, the details of which are given below:
Sr. no. |
Date of Allotment |
No. of Equity Shares allotted |
1 |
July 5, 2022 |
2,333 |
2 |
January 3, 2023 |
36,000 |
3 |
March 30, 2023 |
19,931 |
Further during the financial year, pursuant to the shareholders' resolution passed on
September 2, 2022, the Company bought back 4,199 equity shares of the Company as per
the provision of the Securities and Exchange Board of India (Buy-back of Securities)
Regulations, 2018.
In view of this, the paid-up share capital as on March 31, 2023, was Rs
29,70,06,120 which consisted of 2,97,00,612 equity shares of Rs 10/- each.
Employees Stock Option Schemes
As required in terms of the Securities and Exchange Board of India (Share Based
Employee Benefits and Sweat Equity) Regulations, 2021, the disclosure relating to CARE
Ratings Limited ESOP Schemes is available on the Company's website at:
https://www.careratings. com/annual-reports
Details relating to Deposits covered under Chapter V of the Act
Your Company has not accepted or renewed any deposits within the purview of Chapter V
of the Act during the year under review.
Update on Certain Matters:
The following are the update on certain matters:
A. SEBI initially imposed a penalty of Rs 25 lakh and subsequently enhanced it to Rs 1
crore in respect of an adjudication proceeding initiated by it in relation to the credit
ratings assigned to one of the Company's customers and the customer's subsidiaries under
Section 15HB of SEBI Act, 1992. An appeal has been filed before the SAT. The case is
pending as on date.
B. In the suit filed by 63 Moons Technologies Ltd., the Hon'ble Madras High Court
passed an Order dated February 1, 2023, directing the Company amongst other respondents to
deposit 10% of the total value of the suit claim in Madras High Court, as a means of
furnishing security, failing which the interim order dated June 24, 2020 of injunction
restraining the Company from dealing with any of its assets will continue till the suit is
disposed of. The Company has filed appeals against the said order before the Division
Bench of Madras High Court.
Change in the Nature of Business
During the Financial Year 2022-23, there was no change in the nature of business of the
Company.
Disclosures under the Sexual Harassment of Women at Workplace (Prevention, Prohibition
& Redressal) Act, 2013
Your Company has always believed in providing a safe and harassment-free workplace for
every individual working on the Company's premises through various interventions and
practices. The Company always endeavours to create and provide an environment that is free
from discrimination and harassment including sexual harassment.
Your Company has a policy on the Prevention of Sexual
Harassment at the Workplace. The policy aims at the prevention of harassment of
employees and lays down the guidelines for the identification, reporting and prevention of
undesired behaviour. An Internal
Complaints Committee ("ICC") has been set up as per the provisions of the
Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
in order to investigate any complaints/ issues related to sexual harassment. ICC is
responsible for the redressal of complaints related to sexual harassment and follows the
guidelines provided in the Policy.
During the year ended March 31, 2023, the ICC did not receive any complaint pertaining
to sexual harassment.
Business Risk Management
The Board of Directors of the Company has constituted a Risk Management Committee
consisting of members of the Board of the Company to frame, implement and monitor the risk
management plan for the Company. The composition of the Committee is in compliance with
Regulation 21 of the SEBI Listing Regulations and the detailed composition is provided in
the
Corporate Governance Report. The Company has a Risk Management framework to identify
and evaluate internal and external risks faced by your Company. The risk management
framework defines risk identification and its management across the enterprise at various
levels including documentation and reporting. The framework helps in identifying risk
trends, exposure and potential impact analysis on a Company's business in order to
minimize the adverse impact of any type of risk on the business objectives.
Corporate Social Responsibility: Growing
Together
As a part of CARE Ratings' initiatives under Corporate Social Responsibility
("CSR") in FY2022-23, your Company released payments amounting to Rs 1.92 crores
(P.Y.: Rs 2.37 crores) in areas of healthcare, education, community development,
mid-day meals, nutritional food to Anganwadi children.
The Board has constituted a Corporate Social Responsibility and Sustainability (CSR)
Committee in accordance with Section 135 of the Act. The CSR Policy has been devised based
on the recommendations made by the CSR Committee. The brief outline of the CSR policy of
the Company and the initiatives undertaken by the Company on CSR activities during the
year under review are set out in
Annexure VIII of this Report in the format prescribed in the Companies
(Corporate Social Responsibility Policy) Rules, 2014. The CSR policy is available on the
website of the Company at https://www.careratings.com/Uploads/newsfiles/
FinancialReports/1679039991_Corporate%20Social%20 Responsibility%20(CSR)%20Policy.pdf
Material Non-Listed Indian Subsidiary
There was no material (non-listed) Indian subsidiary of your Company as on March 31,
2023.
Directors' Responsibility Statement
As required under Section 134 (5) of the Act, the Board of Directors, to the best of
their knowledge and ability confirm that:
1. In the preparation of the annual accounts for the financial year ended March 31,
2023, the applicable accounting standards have been followed along with proper explanation
relating to material departures;
2. They have selected such accounting policies and applied them consistently and made
judgments and estimates that are reasonable and prudent so as to give a true and fair view
of the state of affairs of the Company at the end of the financial year and of the profit
and loss of the Company for the said year;
3. They have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Act for safeguarding the
assets of the Company and for preventing and detecting fraud and other irregularities;
4. They have prepared the annual accounts for the financial year ended March 31, 2023,
on a going concern basis;
5. They have laid down internal financial controls to be followed by the Company and
that such internal financial controls are adequate and have been operating effectively;
6. They have devised proper systems to ensure compliance with provisions of all
applicable laws and that such systems were adequate and operating effectively.
Compliance with the Secretarial Standards 1 & 2 issued by the Institute of Company
Secretaries of India ("ICSI")
The Company has complied with the applicable Secretarial Standards 1 & 2 issued by
ICSI related to the Board and General Meetings.
Acknowledgements
The Directors are thankful to the Members for their confidence and continued support.
The Board places on record its appreciation of the contribution of its employees to the
Company's operations and the trust reposed in it by market intermediaries, issuers and
investors. The Board also appreciates the support provided by the Reserve Bank of India,
the Securities Exchange Board of India and the Company's Bankers.
On behalf of the Board of Directors of CARE Ratings Limited
Sd/- |
Sd/- |
Najib Shah |
Mehul Pandya |
Chairman |
Managing Director & CEO |
DIN: 08120210 |
DIN: 07610232 |
Place: Mumbai |
|
Date: May 11, 2023 |
|
|