Dec 31, 2022
The Directors are pleased to present to you the 36th Annual Report of CRISIL Limited, along with the audited financial statements, for the year ended December 31, 2022.
A summary of the Companyâs financial performance in 2022:
(B crore) |
||||
Particulars |
Consolidated |
Standalone |
||
2022 |
2021 |
2022 |
2021 (restated*) |
|
Total income |
2,891.19 |
2,377.71 |
1,716.95 |
1,544.33 |
Profit before interest, depreciation, exceptional items and taxes |
852.11 |
687.53 |
515.32 |
592.67 |
Finance cost |
6.40 |
8.93 |
5.61 |
7.62 |
Deducting depreciation of |
103.31 |
105.98 |
67.85 |
69.69 |
Exceptional Item |
- |
45.82 |
- |
45.82 |
Profit before tax |
742.40 |
618.44 |
441.86 |
561.18 |
Deducting taxes of |
178.01 |
152.63 |
71.35 |
78.47 |
Profit after tax |
564.39 |
465.81 |
370.51 |
482.71 |
Other comprehensive income |
(43.22) |
32.03 |
(22.31) |
30.75 |
Total other comprehensive income |
521.17 |
497.84 |
348.20 |
513.46 |
Appropriations |
||||
Final dividend |
168.07*** |
160.52** |
168.07*** |
160.52** |
Interim dividend |
182.62 |
174.74 |
182.62 |
174.74 |
*** Final dividend for 2022: B 23 per equity share of B 1 each
** Final dividend for 2021 (including special dividend of B 7): B 22 per equity share of B 1 each
* As per Ind AS 103 ''Business Combinationâ, the standalone financial information with respect to the prior period has been restated as business combination had occurred at the beginning of the preceding period.
The financial statements for year ended December 31, 2022 have been prepared in accordance with the Indian Accounting Standards (Ind AS), notified under Companies (Indian Accounting Standards) Rules, 2015, read with Section 133 of Companies Act, 2013, (the Act) and other relevant provisions of the Act.
There are no material departures from the prescribed norms stipulated by the accounting standards in preparation of the annual accounts. Accounting policies have been consistently applied, except where a newly issued accounting standard, if initially adopted, or a revision to an existing accounting standard, required a change in the accounting policy hitherto in use. The management evaluates all recently issued or revised accounting standards on an ongoing basis.
The Company discloses consolidated and standalone financial results on a quarterly basis, which are subject to limited review, and publishes consolidated and standalone audited financial results annually.
a) Consolidated operations
Revenue from the Companyâs consolidated operations for 2022 was B 2,891.19 crore, 21.6% higher than B 2,377.71 crore in the previous financial year. Overall expenses were B 2,148.79 crore as against B 1,805.09 crore in the previous financial year. Profit before tax was B 742.40 crore as against B 618.44 crore in the previous financial year. Profit after tax was B 564.39 crore as against B 465.81 crore in the previous financial year.
Sharp movement in the US dollar versus the rupee and the British pound supported profitability in the year ended December 31,2022, which includes Rs 30.1 crore from revaluation of the subsidiary loan.
b) Standalone operations
Revenue from the Companyâs standalone operations for 2022 was B 1,716.95 crore compared with B 1,544.33 crore in the previous financial year. Overall expenses were B 1,275.09 crore as against B 1,028.97 crore in the previous financial year. Profit before tax was B 441.86 crore as against B 561.18 crore in the previous financial year. Profit after tax was B 370.51 crore as against B 482.71 crore in the previous financial year.
A detailed analysis of the performance, consolidated as well as standalone, is included in the Management Discussion and Analysis Report, which forms part of the Annual Report.
The Directors recommend for approval of the members at the Annual General Meeting to be held on April 18, 2023, payment of final dividend of B 23 per equity share of face value of B 1 each for the financial year under review. During the year, the Company paid three interim dividends â first interim dividend of B 7, second interim dividend of B 8 and third interim dividend of B 10 per equity share. Hence, total dividend will be B 48 per share in 2022 vis-a-vis B 46 per share in the previous financial year.
During the financial year, the Company issued and allotted 195,598 equity shares to eligible employees on exercise of options granted under the employee stock option plan of the Company. Hence, at the end of the year, CRISILâs issued, subscribed and paid-up capital was 73,064,044 equity shares of B 1 each.
The trend in share capital during the year was: |
||
Particulars |
No. of shares |
Cumulative outstanding |
allotted |
capital (no. of shares with |
|
face value of D 1 each) |
||
Capital at the beginning of the year, i.e., January 1,2022 |
- |
72,868,446 |
Allotment of shares to employees on February 15, 2022 |
94,565 |
72,963,011 |
Allotment of shares to employees on April 21,2022 |
59,438 |
73,022,449 |
Allotment of shares to employees on July 21,2022 |
22,208 |
73,044,657 |
Allotment of shares to employees on October 21,2022 |
19,387 |
73,064,044 |
Capital at the end of the year, i.e., as at December 31,2022 |
- |
73,064,044 |
The Company has identified two business segments, in line with the Indian Accounting Standard on Operating Segment (Ind AS-108), comprising: (i) Ratings services, and (ii) Research, Analytics and Solutions. The audited financial results of these segments are provided as part of the financial statements.
⢠Announced 1,200 new bank loan ratings (BLRs), a 20% growth on-year
⢠Maintained leadership position in the corporate bond market, backed by preference for quality ratings among investors and issuers alike
⢠Sharp focus on analytical rigour, ensuring best-in-class quality of ratings
⢠Started disclosing the impact of environmental, social, and governance (ESG) factors on credit risk in rating rationales for large corporates
⢠Held several marquee events and published high quality opinion pieces that were well covered by media and appreciated by stakeholders
The rating industry witnessed higher growth in 2022 compared with the previous two years, especially backed by the BLR segment.
Wholesale bank credit saw healthy growth, driven by the micro, small and medium enterprises (MSME) and services segments, with credit offtake by large corporates also seen picking up from the second half of the year, supporting BLR growth.
Bank credit demand arose majorly because of rising working capital requirements, amid high input costs. The new and enhanced BLR quantum saw an on-year increase of over 23% in 2022 across credit rating agencies, while the number of companies with new BLR increased by over 9% across the industry.
The securitisation segment also witnessed healthy growth with rated quantum across industry seeing healthy jump, riding on economic recovery and steady collections.
The bond ratings segment, however, saw relatively modest growth during 2022. Corporate bond issuance was muted for most part of the year amid hardening interest rates, as large issuers preferred bank loans over bonds. Bond issuances, though, rebounded in the last quarter of 2022 after three sluggish quarters. Overall, 2022 saw a 13% on-year growth in the quantum of rated bonds.
In this milieu, CRISIL Ratings achieved revenue growth of 13% on-year for 2022.
Amid an evolving macro environment, we maintained our market-leading position in the corporate bond and BLR market, benefiting from the strong preference of investors and issuers alike for the best-in-class quality of our ratings as well as our active engagement with senior managements of investors and issuers.
Our wide geographical reach across the country continued to support strong origination of rating mandates. We published more than 1,200 new BLR during 2022.
On the analytical front, we have taken up various initiatives to closely monitor the impact on credit profiles of India Inc from emerging macroeconomic risks such as the extended geopolitical strife between Russia and Ukraine, input price shocks, and rising interest rates.
We continued to strengthen our early warning mechanism with the introduction of Corporate Credit Health Framework. We proactively identified vulnerable sectors and issuers to
can now offer tailored solutions to our clients by using all or a combination of capabilities across research, consulting, risk solutions, data and analytics, and training.
Research
Highlights
⢠Launched 38 new fixed income indices in 2022 to cater to the new benchmarking requirements of mutual funds, and another 21 for passive mutual fund launches
⢠Launched CRISIL AIF benchmarks for sub-categories
⢠Won large mandates - Association of Mutual Funds in India, Employeesâ State Insurance Corporation, World Gold Council, National Pension System Trust
⢠Quantix, our data and analytics platform, developed new capabilities for non-financial data
⢠Enhanced the features in Alphatrax, our wealth tracking solution, in an effort to consistently improve and enrich customer experience
Release of updated CRISIL AIF benchmarks, including subcategories, has gained traction and acceptance among market participants. Traction for index-linked funds and AIF benchmarks continued throughout the year â with 16 live products and assets of 8,500 crore on CRISIL indices.
Our flagship Industry Research business continued its dominant position by adding depth to core sector coverage. A spike in momentum has been seen for SME Solutions offerings, credit research, and database-linked products.
Consulting
Highlights
⢠Increased share of business from international markets
⢠Successfully built a strong order book with several large mandate wins across sectors
⢠Maintained strong senior-level connect with policy makers, multilaterals and investors
We recorded strong traction in 2022, especially in urban infrastructure and transport sectors. We supported governments, multilateral institutions and investors in sectors such as roads, renewables and urban infrastructure, helping them finalise frameworks and roadmaps or achieve financial closures.
The business was able to garner significant wallet share in international geographies and maintained its leadership position with multilateral and bilateral agencies.
In the domestic market, we saw significant interest for our sustainability-related solutions.
Risk Solutions, Data & Analytics Highlights
⢠Consolidated our flagship position in credit assessment platform offerings through successful implementation of a new-age risk assessment model, ICON, in India, which is gaining traction
prioritise review of ratings that were vulnerable to external risks. These initiatives have helped us maintain the high quality of our ratings despite the external shocks.
In 2022, we started factoring ESG risk in our credit rating analysis for listed corporates that publish their ESG data. We also started disclosing these ESG factors in the rating rationales of such rated entities, covering over 100 companies during 2022.
On the regulatory front, the Securities and Exchange Board of India (SEBI) announced a series of enhanced disclosures by credit rating agencies in the interest of investors. SEBI and the RBI also brought in standardisation of scales of fixed deposit ratings, corporate credit ratings and of watch descriptors, besides standardisation of industry classification. Further, the regulators introduced changes to the guidelines relating to credit enhancement (CE) ratings.
SEBI also introduced certain requirements relating to firewall between credit rating agencies and their affiliates.
On the innovation front, we rated the first transaction in the Indian financial sector with co-lent loan receivables as the underlying asset.
We continue to drive thought leadership in the industry by regularly hosting web conferences on topical matters and engaging with industry associations through panel discussions and speaking assignments, or as knowledge partners at conferences. Our opinion pieces received extensive coverage in premier print and digital media.
We successfully hosted a seminar on the non-banking financial company (NBFC) sector titled âNBFCs: Gearing up for growthâ under our âFin Insightsâ umbrella. We presented our insights on topical themes such as overall NBFC sector outlook, developments in housing finance, vehicle finance trends and landscape for digital lending. The event included presentations by CRISIL Ratingsâ experts as well as panel discussions involving several industry leaders on perspectives. The seminar was well attended and received positive feedback on its content and execution.
Other remarkable franchise activities that were well-received during the year included webinars on renewable energy, infrastructure investment trusts and real estate investment trusts, banking, road, cement, steel, natural gas, speciality chemicals, power and real estate.
GAC continued to drive surveillance support across S&P Ratingsâ analytical practices and partnered on data and technology transformation programmes.
Market Intelligence & Analytics (MI&A)
This year, we embarked upon consolidating our Research, Advisory, BIRS and other allied businesses under the CRISIL MI&A umbrella in a bid to leverage our diverse capabilities and present a unified offering to our customers.
The recent amalgamation of our two subsidiaries â CRISIL Risk and Infrastructure Solutions Ltd and Pragmatix Services Pvt Ltd â with CRISIL Ltd with effect from September 1, 2022, has further simplified our go-to-market strategy.
The consolidation lends us much-needed synergy to offer various solutions to our team members and clients alike. We
⢠Increased traction in regulatory solutions, especially in the asset classification and provisioning solution
⢠Solution integrated with data gaining good traction on credit monitoring and automation
⢠Continued focus on international markets with new client additions in the Middle East
The banking environment witnessed increased regulatory focus on digitalisation and automation, especially asset classification. With successful implementation of our regulatory solutions, we are well-positioned to assist institutions in this.
Our successful risk offerings â ICON and EWS - continue to help institutions automate credit processing and monitoring. The business had significant wins in both credit and regulatory spaces, with a good combination of foreign banks and new-age lending institutions. In the overseas markets, we had good wins in both regulatory and credit spaces in new geographies in the Middle East, with continued momentum and success in business analytics and digital enablement solutions.
Our SME Solutions business posted strong recovery during the year with the addition of high-value mandates from corporates. The business saw continued momentum in CREST, MFI, social sector, and B-school grading mandates.
International business CRISIL GR&RS Highlights
⢠26 new logos added across verticals
⢠Won prestigious RiskTech100® award in model validation category
⢠Risk business closed several large deals from marquee clients
⢠Sustainability continued to gain traction
⢠Buy-side research segment accelerated growth with new logos and new areas
The division won several requests for proposal (RFPs) and added 26 new logos across verticals.
The risk business closed several large deals from marquee clients, thus setting a strong foundation for multi-year opportunities. Notable wins include a transformation project from a global bank for regulatory engagements.
Another key win is a project that will enable a global bank to address data inconsistency, incompleteness and inaccuracy.
The business also entered a new engagement with a European bank for assessing the creditworthiness of counterparties across corporate and financial institutions.
Sustainability-oriented solutions continued to gain traction. Regulators have advised banks that climate scenario models, frameworks and results should be subject to challenge and regular review by internal and/or external experts and independent functions. This will drive growth for our sustainability offerings.
GR&RS bagged a climate risk modelling project from an
existing client. GR&RS also won a mandate from the fixed-income team of a leading asset management firm to provide bespoke ESG research service. As part of the process, the team will conduct a comprehensive, bespoke assessment across potential investment opportunities to verify the credentials and avoid the risk of greenwashing.
On the back of strong relationships, newer workstreams emerged from existing sell-side research clients. The buy-side research segment saw growth accelerate, with new logos, and established a strong foothold in new areas.
Reflecting the diversity of our offerings, other wins were in the fields of credit risk assessment, financial crime compliance, client onboarding, operational risk, model development, model validation, data management and analytics.
⢠Onboarded two new clients for Client Intelligence and strengthened pipeline for 2023
⢠Continued to integrate our distribution and relationship manager coverage across global banking clients to improve service quality
⢠Combined Coalition and Greenwich data sets in corporate and investment banking (CIB) to generate new insights for clients
⢠Rolled out Q2 Client Intelligence platform with positive feedback from CIB clients
⢠Extended outreach by presenting views to 100 executive committees at banks and meeting with heads of global markets, investment banking, and transaction banking divisions across large banks
⢠Referenced in over 250 articles across more than 50 global publications and in over 60 investor relations presentations made by leading global banks
In sync with our expansion initiatives, we have broadened our capabilities and reach to serve more regional client bases across the globe. With a focus on strengthening relationship management and deepening analytical expertise, GBA now services over 300 clients across the financial services space.
We have completed the design of the foundational components of our future digital platform, and are now in the process of implementing the components. There is sharper focus on data governance, security and standardisation to provide a solid base to improve scalability and robustness across all data and analytics processes, leading to enhanced client value and experience.
The business retained the coveted SSAE16 SOC2 Type II certification, which is a testimony of the stringent controls and measures deployed for data and IP protection.
The association with S&P Global helps blend local and global perspectives in shaping CRISILâs strategy and governance systems. Representatives from S&P Global
bring value to the CRISIL Board through global insights on governance, risk and controls and experience in leading large businesses. CRISIL also gains opportunities to leverage the S&P Global brand through referrals and partnerships in the international market. Regular interface between the two management teams leads to knowledge sharing and cross-fertilisation of ideas. At the same time, commercial opportunities are pursued on an armâs length basis following review and recommendations by the CRISIL Audit Committee comprising mainly Independent Directors. S&Pâs largest collaboration with CRISIL has been in the financial services support to S&P Global Ratings and other teams that started almost two decades ago. It has been attested to by a majority vote from CRISILâs minority (non-promoter) shareholders in 2014.
⢠CRISIL conducted a series of outreach activities with clients during the India visit of Paul Gruenwald, Global Chief Economist, S&P Global Ratings. These included:
- Economistsâ roundtable in Mumbai, attended by leading Indian economists
- Client event in Mumbai for MI&A clients, attended by C-suite professionals
- Client event in Delhi for Ratingsâ clients, attended by C-level leaders from issuers
⢠S&P Global Sustainablel and CRISIL conducted two episodes of ESG Knowledge Series:
- BRSR and the Future of Reporting in India: S&P scorecards are hosted and automated on the ICON platform, an automated credit risk assessment solution.
- A Green Turn towards Financing in India CRISIL GR&RS
⢠CRISIL GR&RS hosted a webinar titled, âESG in Fixed Income: Navigating the Next Phase of Sustainabilityâ, where global experts shared their insights on how to manage ESG integration hurdles in the corporate credit and municipal bond markets.
⢠Ongoing collaborations include a referral agreement between S&P Global, a joint go-to-market strategy, and development of risk and sustainability solutions. Support Trucost and S&P Global Sustainable1 for ESG assessments.
Ongoing collaboration includes:
⢠A referral agreement with Market Intelligence, which represents several data and analytics products targeting community banks in the US
⢠Collaboration on product development on asset owner data sets
CRISIL is committed to building an enabling environment that values the contributions of its employees and provides them opportunities to grow.
CRISIL has been unwavering in its commitment to the diversity, equity, and inclusion (DE&I) agenda and practises thoroughness and rigour through added structure and incorporated a wider dimension to this space. To give impetus to this agenda, CRISILâs MD & CEO constituted a DE&I Task Force in 2022.
Other key initiatives during the year included workshops on building cultural awareness given our global workforce; continuous investment in women leadership, and development through the Womenâs Leadership Development programme, speed mentoring sessions and other leadership programmes and structured to attract and retain candidates from the LGBTIQA community. We also celebrated Pride Day @CRISIL.
DE&I was also a key theme during our learning month in November and also a part of a mandatory course, which covered our policies and practices related to DE&I, equal opportunity, health and safety, and good labour practices.
People continue to be our biggest differentiator. We invest extensively in their training and professional development to equip them with the necessary skills, domain expertise, and latest technology in line with our business strategy.
Various interventions across target groups were launched through the year. At the leadership level, some of our marquee development programmes for future leaders included LEAD, which was aimed at developing future leaders at CXO and CXO-1 levels; and Manager of the Future, which was aimed at developing managerial effectiveness and empowering employees to lead teams effectively in a hybrid work environment.
LinkedIn Learning and online courses continued to equip employees with learning resources, and build technical, behavioural and creative skills. In line with our focus on learning through business-specific programmes for skill upgradation, we organised âLearning Dayâ, which included speaker sessions on topics pertinent to learning agility, leadership teams in a hybrid environment, and execution agility.
Being a people-centric organisation, we place great impetus on managing and developing talent. Identification of high-potential (HiPo) employees through 9-box mapping, which is weaved in with our performance management, is leveraged across the organisation for leadership positions.
The senior leadership team, along with the HR-Talent COE, invests considerable time in the succession planning exercise for identifying potential successors for CXO, CXO-1 and CXO-2 positions, to build a robust succession pipeline, thereby enhancing the opportunities for career development, high potential (HiPo) retention and a better build-to-buy ratio.
The output of the talent and succession exercise forms a validated input for evolving development initiatives for leaders. Special focus is put on grooming these successors for higher levels / diversified roles and to enable their growth at CRISIL.
Members of the Companyâs Board of Directors are eminent persons of proven competence and integrity. Besides global experience, strong financial acumen, strategic astuteness and leadership qualities, they have a significant degree of commitment to the Company. They devote adequate time to meetings and preparation. In terms of requirement of Listing Regulations, 2015, the Board has identified core skills, expertise and competencies of the Directors in the context of the Companyâs business for effective functioning and how the current Board of Directors is fulfilling the required skills and competencies. This is detailed at length in the Corporate Governance Report.
The Board meets at regular intervals to discuss and decide on the Company/business policy and strategy, apart from other Board businesses. The Board exhibits strong operational oversight with regular business presentations at meetings. An annual planner of topics to be discussed at the Board meeting is pre-approved by the Directors. The Board/committee meetings are pre-scheduled and an annual calendar of the meetings is circulated to the Directors well in advance to help them plan their schedules and ensure meaningful participation. Only in the case of special and urgent business, should the need arise, is the Boardâs approval taken by passing resolutions through circulation, as permitted by the law, which are confirmed in the subsequent Board meeting. The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board meetings and annual general meetings.
The agenda for the Board and committee meetings includes detailed notes on the items to be discussed to enable the Directors to take informed decisions. The Company follows a two-day schedule for its quarterly committee and Board meetings, which offers greater discussion time for Board matters.
In 2022, the Board met six times â on February 15, March 22, April 21, July 21, October 21 and December 13. The maximum interval between two meetings did not exceed 120 days.
The Companyâs Nomination and Remuneration Policy formulated under Section 178(3) of the Companies Act, 2013, covers roles, responsibilities, criteria and procedures towards key aspects of Board governance, including the size and composition of the Board, criteria for directorship, terms and removal, succession planning, evaluation framework, and ongoing training and education of Board members. The policy lays down detailed guidelines for remuneration of the Board, Managing Director and employees, and covers fixed and variable components and long-term reward options, including employee stock option schemes. It includes the scope and terms of reference of the Nomination and Remuneration Committee. The policy is available at: https:// www.crisil.com/en/home/investors/corporate-governance. html. During the year, modifications were made to the policy to clarify and update its objectives.
Ms Elizabeth Mann, Non-Executive Director, resigned as Director with effect from July 22, 2022, on account of her resignation from S&P Global Inc. Your Directors place on record their sincere appreciation for the strong support, advice and guidance provided by Ms Mann to the Company and its management during her tenure, which was immensely valuable to drive the growth and performance of the Company.
Mr Yann Le Pallec was appointed as Additional Director (Non-Executive) with effect from October 3, 2022. Mr Le Pallec is Executive Managing Director and Head of Global Ratings Services for S&P Global Ratings, where he oversees a group of 2,200 analysts and support staff in 28 countries who cover more than one million outstanding ratings on entities and securities across a wide range of sectors, including governments, corporations, financial institutions and structured finance. Mr Le Pallecâs detailed profile can be accessed here: https://www.crisil.com/en/home/about-us/our-people/board-of-directors.html. The members of the Company, by way of a resolution passed through postal ballot dated December 5, 2022, approved the appointment of Mr Yann Le Pallec as a Non-Executive Director, liable to retire by rotation.
During the year, Mr Girish Paranjpe was due for retirement from his first term as Independent Director on October 16, 2022. The Board at its meeting held on July 21,2022, approved the reappointment of Mr Paranjpe as an Independent Director for a second term. The members of the Company, by way of a Special Resolution passed through postal ballot dated October 14, 2022, approved the reappointment of Mr Paranjpe for a second term, i.e. until October 16, 2027.
In accordance with the Articles of Association of the Company and provisions of the Companies Act 2013, Mr John Berisford will retire by rotation at the ensuing Annual General Meeting of the Company. Mr Berisford, who is eligible for reappointment, has conveyed that he does not intend to seek reappointment and will retire on completion of his current term at the ensuing Annual General Meeting.
Your Directors place on record their sincere appreciation for Mr Berisfordâs astute stewardship, constructive input and thoughtful guidance, as Chairman of the Board, and for helping set the strategy of the Company and chart its roadmap for the future.
Our definition of âindependenceâ of Directors is derived from Regulation 16(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and Section 149(6) of the Companies Act, 2013. Based on the confirmation/ disclosures received from the Directors and on evaluation of the independence of directors during the Board evaluation process and assessing veracity of disclosures, the following Non-Executive Directors are Independent:
a) Ms Vinita Bali
b) Mr Girish Paranjpe
c) Ms Shyamala Gopinath
d) Mr Amar Raj Bindra
In the opinion of the Board, the Independent Directors fulfil the conditions specified under the Companies Act, 2013, the Rules made thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. They are independent of the management and are persons of high integrity, expertise and experience. Further, in terms of Section 150 of the Companies Act, 2013, read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, Independent Directors of the Company have confirmed that they have registered themselves with the databank maintained by the Indian Institute of Corporate Affairs (IICA) and have passed the proficiency test, if applicable to them.
Committees of the Board
The Board has five committees:
⢠Audit Committee
⢠Corporate Social Responsibility Committee
⢠Risk Management Committee
⢠Nomination and Remuneration Committee
⢠Stakeholdersâ Relationship Committee
Details of all the committees, along with their charters, composition and meetings held during the year, are provided in the Report on Corporate Governance, as part of this Annual Report.
Annual evaluation by the Board
During the year, the Company engaged an independent consultant to conduct this evaluation, to benefit from expertise, best practise and professional insights in this area. This exercise was carried out through a structured questionnaire prepared separately for the Board, Committees, Chairman and individual Directors as well as in-person interviews by the consultant. The Chairmanâs performance evaluation was carried out by Independent Directors at a separate meeting.
The parameters assessed included various aspects of the Boardâs functioning such as: effectiveness, information flow between Board members and management, quality and transparency of Board discussions, Board dynamics, Board composition and understanding of roles and responsibilities, succession and evaluation, and possession of required experience and expertise by Board members, among other matters.
The performance of the committees was evaluated on the basis of their effectiveness in carrying out their respective mandates.
Peer assessment of Directors, based on parameters such as participation and contribution to Board deliberations, keeping oneself abreast of organisational matters, trends, knowledge and understanding of relevant areas, among other matters, was reviewed by the Board for individual feedback.
During 2022, the Company actioned feedback emerging from the Board evaluation process conducted in 2021, relating to
operational improvements of the meeting process, matters of strategy and stakeholder interaction.
The Company has a comprehensive framework for monitoring compliances with applicable laws and internal policies. Compliance reviews take place at multiple levels as follows:
⢠First line of defence: Business and corporate functions ensure implementation of laws at the primary level through checks and controls in their operational processes.
⢠Compliance Reporting tool: The compliances are further mapped into the Compliance Reporting tool and affirmed at regular frequency by the compliance owners, to generate compliance reports that are submitted to the Board on a quarterly basis.
⢠The compliance monitoring framework is periodically subject to audit by the internal auditors as per the internal audit plan.
⢠The Secretarial audit process ascertains adequacy of systems and processes for compliance, commensurate with the size and operations of the Company.
⢠The Stakeholdersâ Relationship Committee of the Company reviews instances of policy violations and breaches on a quarterly basis.
The Board has adopted policies and procedures for governance and for orderly and efficient conduct of its business, including adherence to the Companyâs policies, safeguard of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial disclosures. The Companyâs internal control systems are commensurate with the nature of its business and the size and complexity of its operations.
Significant audit observations and follow-up actions thereon are reported to the Audit Committee. For ensuring independence of the audits, internal auditors report directly to the Audit Committee. Both internal and statutory auditors have exclusive executive sessions with the Audit Committee periodically. In addition, during the year, management performed a review of key controls impacting financial reporting, at entity as well as operating levels, and submitted its report to the Audit Committee and the Board.
The Company has a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Mitigation plans for key risks identified by the businesses and functions are implemented and reviewed periodically. CRISIL has adopted a balanced approach to risk management with an endeavour to mitigate risks to an acceptable level within its tolerances and protecting CRISILâs reputation and brand while supporting the achievement of operational and strategic goals. In addition to key strategic and operational risks, data security, cyber security, technology initiatives, regulatory, talent acquisition and business continuity were of primary focus during 2022. Macroeconomic conditions are likely to remain difficult with inflationary and wage pressures together with higher interest rates creating potentially recessionary
conditions in key global markets. Economic impact due to the uncertainty in global operating environment is being continuously monitored and appropriate measures are being taken. Several new age tools and advanced security controls are being deployed to enhance information and cyber security posture. Periodic awareness campaigns are conducted for all employees through emails, blogs, videos, online trainings and employee townhalls. CRISIL continues to accord top priority to manage employee attrition by formulating talent retention and recognition programmes, and by offering a competitive salary and growth path for key talent. Focused efforts to retain talent by increasing employee engagement have been initiated. The Company is also creating awareness about its overall employee value proposition. Business continuity drill routines have been completed as per the plan during the year.
Additionally, the Company continued monitoring top risks on its risk register, which are discussed in greater detail in the Management Discussion and Analysis Report.
The Directors hereby confirm that:
i. in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
ii. 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 profits of the Company for that period;
iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company, and for preventing and detecting fraud and other irregularities;
iv. they have prepared the annual accounts on a going-concern basis;
v. they have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively;
vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws, and such systems are adequate and operating effectively.
Particulars regarding foreign exchange earnings and outgo appear as separate items in the notes to the accounts. The Company does not own any manufacturing facility and, hence, our processes are not energy intensive. Therefore, particulars relating to conservation of energy and technology absorption stipulated in the Companies (Accounts) Rules, 2014 are not applicable.
However, we endeavour to support the environment by adopting environment-friendly practices in our office premises and have rolled out a policy that aims at improving the environmental performance of CRISIL. Our efforts in this direction centre around making efficient use of natural
resources, elimination of waste and promoting recycling of resources.
Initiatives taken in the area of environment protection in 2022 are mentioned in the CRISIL ESG Report 2022 available at https:// www.crisil.com/en/home/investors/financial-information/ sustainability-report.html.
Corporate social responsibility
The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The role of the Committee is to review the CSR policy, approve activities to be undertaken by the Company towards CSR.
The CSR policy of the Company is available at https://www. crisil.com/en/home/investors/corporate-governance.html and details about initiatives taken by the Company during the year under review have been appended as Annexure I to this report.
The Chief Financial Officer has certified that the funds disbursed for CSR have been used for the purpose and in the manner approved by the Board for financial year 2022.
The Company has established a vigil mechanism for Directors and employees to report genuine concerns, details of which have been given in the Corporate Governance Report annexed to the Annual Report.
Scheme of amalgamation between CRISIL Limited (âTransferee Companyâ) and its wholly owned subsidiary companies, CRISIL Risk and Infrastructure Solutions Limited and Pragmatix Services Private Limited (âTransferor Companiesâ) in terms of Section 230 to 232 of the Companies Act, 2013
In order to rationalise the Companyâs entity structure, to bring in operational synergies and benefits, and to achieve administrative efficiencies, the Board of Directors on December 13, 2021 approved the scheme of amalgamation for merger of its wholly owned subsidiaries CRISIL Risk and Infrastructure Solutions Limited and Pragmatix Services Private Limited into the Company under sections 230 to 232 of the Companies Act, 2013.
The Scheme was approved by the National Company Law Tribunal (NCLT) on August 8, 2022. The scheme of amalgamation was made effective September 1, 2022 upon filing of the certified copy of the NCLT order with the Registrar of Companies. Consequent to the amalgamation, the risk solutions, business intelligence and infrastructure consultancy businesses have been consolidated under CRISILâs Market Intelligence and Analytics business.
Merger of Greenwich Associates LLC with CRISIL Irevna US LLC
Towards rationalising the Companyâs subsidiary structure and generating operational and administrative efficiencies, two wholly owned US-based subsidiaries of CRISIL, namely, Greenwich Associates LLC and CRISIL Irevna US LLC, agreed to merge on October 21, 2022. The merger is currently in progress.
As at December 31, 2022, the Company had one Indian and 13 overseas wholly owned subsidiaries.
In accordance with Section 129(3) of the Companies Act, 2013, CRISIL has prepared a consolidated financial statement of the Company and all its subsidiaries, which is a part of the Annual Report. A statement containing salient features of the financial statements of the subsidiaries and highlights of performance of the subsidiaries are included in the Annual Report.
The Company has no associate companies within the purview of Section 2(6) of the Companies Act, 2013.
In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company containing its standalone and consolidated financial statements has been uploaded on the website, www.crisil. com. Further, as per the fourth proviso of the said section, accounts of all subsidiaries as at December 31, 2022 have also been uploaded on www.crisil.com. Shareholders interested in obtaining a copy of the accounts of the subsidiaries may write to the Company Secretary at the Companyâs registered office or email to investors@crisil. com.
The Company has also obtained a certificate from the statutory auditors, certifying that the Company is in compliance with FEMA Regulations with respect to downstream investments.
A significant quantum of related party transactions undertaken by the Company is with subsidiaries engaged in product delivery of CRISILâs businesses and business development activities. The Companyâs Global Analytical Centre has also been providing analytical support to S&P Global entities as part of a master services agreement, which was approved by a majority vote from CRISILâs minority shareholders, without participation of S&P, through a resolution passed by postal ballot on December 15, 2014. Besides this, the Company pursues opportunities for development of risk and sustainability solutions for clients with S&P.
The Audit Committee pre-approves related party transactions as requested by the Companyâs policy. The details of such transactions undertaken during a particular quarter are placed at the meeting of the Audit Committee held in the succeeding quarter.
All contracts/arrangements/transactions with related parties that were executed in 2022 were in the ordinary course of business and at an armâs length. During the year, there were no related party transactions that were materially significant and that could have a potential conflict with the interests of the Company at large.
All related party transactions are mentioned in the notes to the accounts. The particulars of material contracts or arrangements with related parties referred to in Section 188(1) are given in a prescribed Form AOC-2 as Annexure II.
As required under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Related Party Transactions Policy, which has been uploaded on
the Companyâs website, https://www.crisil.com/en/home/ investors/corporate-governance.html. The Company has developed an operating procedures manual for identification and monitoring of related party transactions.
Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in the notes to financial statements.
M/s Walker Chandiok & Co LLP, (an affiliate of Grant Thornton network) is statutory auditor of the Company. Its report is a part of the Annual Report.
M/s Walker Chandiok & Co LLP is undergoing its second term of five years as statutory auditor of the Company, i.e. from the conclusion of the 35th Annual General Meeting held on April 22, 2022 until the conclusion of the 40th Annual General Meeting. Consequent to the amendments to Companies Act, 2013, ratification of appointment of the statutory auditor at every Annual General Meeting is no longer required.
There are no qualifications, reservations or adverse remarks or disclaimers made by M/s Walker Chandiok & Co LLP, statutory auditors, in its audit report. The statutory auditor also did not report any incident of fraud to the Audit Committee of the Company in the year under review.
The Board appointed M/s Makarand M. Joshi & Co., Practising Company Secretaries, to conduct the secretarial audit. The report is appended as Annexure III. There were no qualifications, reservations or adverse remarks or disclaimers made by M/s Makarand M. Joshi & Co., Practising Company Secretaries, in its secretarial audit report.
Also, CRISIL Ratings Limited, a material subsidiary of the Company, undertakes secretarial audit every year under Section 204 of the Companies Act, 2013. The secretarial audit of CRISIL Ratings Limited for financial year 2022 was carried out pursuant to Section 204 of the Companies Act, 2013. The secretarial audit was conducted by M/s MMJB & Associates LLP, Practising Company Secretaries. The report did not contain any qualification, reservation or adverse remark or disclaimer. The secretarial audit report of CRISIL Ratings Limited forms part of the Annual Report as per requirements of the Listing Regulations.
The Management Discussion and Analysis Report for the year under review, as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed to the Annual Report.
The Company is committed to maintaining the highest standards of corporate governance and adhering to the corporate governance requirements as set out by SEBI. The Report on Corporate Governance as stipulated under
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is part of the Annual Report. A certificate from the auditors of the Company confirming compliance with the conditions of corporate governance, as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is also published in the Annual Report.
Disclosures with respect to remuneration of Directors and employees as required under Section 197(12) of Companies Act, 2013 read with Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been appended as Annexure IV to this report.
In accordance with the provisions of Section 197(12) of the Companies Act, 2013, and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, names and other particulars of every employee covered under the said rule are available at the registered office of the Company during working hours for a period of 21 days before the Annual General Meeting and will be made available to any shareholder on request, and is also available on the Companyâs website.
The Company has three Employee Stock Option Schemes (ESOSs). Employee Stock Option Scheme - 2011 (ESOS 2011) was approved by shareholders vide a special resolution passed through postal ballot on February 4, 2011. Employee Stock Option Scheme - 2012 (ESOS 2012) was approved by shareholders vide a special resolution passed through postal ballot on April 10, 2012. Employee Stock Option Scheme - 2014 (ESOS 2014) was approved by shareholders vide a special resolution passed through postal ballot on April 3, 2014, and amended by a special resolution of shareholders at the 30th Annual General Meeting held on April 20, 2017.
In 2022, there were no material changes in the ESOSs of the Company. The schemes are in compliance with SEBI regulations. As per Regulation 14 of Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, read with Securities and Exchange Board of India circular no. CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015. Details of the ESOSs are uploaded on the Companyâs website, https://www.crisil.com/en/home/ investors/financial-information/annual-report.html.
The Company has received a certificate from M/s Makarand M. Joshi & Co., Practising Company Secretaries, that ESOS 2011, ESOS 2012 and ESOS 2014 have been implemented in accordance with SEBI regulations and resolutions passed by members in the general meetings. The certificate will be placed at the ensuing annual general meeting for inspection by members.
The complete Annual Return (Form MGT-7) is available on the Companyâs website, https://www.crisil.com/en/home/ investors/financial-information/annual-report.html.
The Company follows the calendar year as the financial year in terms of a special approval obtained from the Company Law Board in 2015.
CEO and CFO certifications
A certificate from Mr Amish Mehta, MD & CEO, and Mr Sanjay Chakravarti, Chief Financial Officer, pursuant to provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, for the year under review was placed before the Board of Directors of the Company at its meeting held on February 17, 2023.
Statutory disclosures
Directors state that there being no transactions with respect to the following items during the financial year under review, no disclosure or reporting is required with respect to:
1. Deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013, and the Companies (Acceptance of Deposits) Rules, 2014
2. Issue of equity shares with differential rights as to dividend, voting or otherwise
3. Receipt of any remuneration or commission by the Managing Director/Whole-time Director of the Company from any of its subsidiaries
4. Significant or material orders passed by the regulators or courts or tribunals, which impact the going concern status and the Companyâs operations in future
5. Buyback of shares
6. Material changes and commitments affecting the financial position of the Company that have occurred between the end of the financial year to which the financial statements relate and the date of this report, unless otherwise stated in the report
7. Maintenance of cost records as per sub-section (1) of Section 148 of the Companies Act, 2013
8. Application or proceedings made under the Indian Bankruptcy Code, 2016
Acknowledgements
The Board of Directors wish to thank the employees of CRISIL for their exemplary dedication and excellence displayed in conducting all operations. The Board also wishes to place on record its sincere appreciation of the faith reposed in the professional integrity of CRISIL by customers and investors who have patronised its services. The Board acknowledges the splendid support provided by market intermediaries as well. The affiliation with S&P Global has been a source of great strength. The Board of Directors also wish to place on record its gratitude for the faith reposed in CRISIL by the shareholders, SEBI, the RBI, the Government of India, and the state governments. In conclusion, the role played by media in highlighting the good work done by CRISIL is deeply appreciated.
For and on behalf of the Board of Directors of CRISIL Limited,
John L Berisford
Chairman
Jaipur, February 17, 2023 (DIN: 07554902)
Dec 31, 2018
Dear Member,
The Directors are pleased to present to you the 32nd Annual Report of CRISIL Limited, along with the audited financial statements, for the year ended December 31, 2018.
Financial performance
A summary of the Companyâs financial performance in 2018:
(Rs crore)
Particulars |
Consolidated |
Standalone |
||
2018 |
2017 |
2018 |
2017 |
|
Total income |
1,821.90 |
1,683.84 |
1,270.86 |
1,224.59 |
Profit before interest, depreciation, exceptional |
544.64 |
480.66 |
410.42 |
374.27 |
items and taxes |
||||
Finance cost |
2.23 |
0.41 |
1.1 8 |
0.41 |
Deducting depreciation of |
42.82 |
46.64 |
28.67 |
27.81 |
Profit before tax |
499.59 |
433.61 |
380.57 |
346.05 |
Deducting taxes of |
136.49 |
129.18 |
103.04 |
108.79 |
Profit after tax |
363.10 |
304.43 |
277.53 |
237.26 |
Other comprehensive income |
(94.63) |
(77.42) |
(99.51) |
(85.17) |
Total comprehensive income |
268.47 |
227.01 |
178.02 |
152.09 |
Appropriations are: |
||||
Final dividend |
*71.73 |
**64.20 |
*71.73 |
**64.20 |
Interim dividend |
136.79 |
128.81 |
136.79 |
128.81 |
Corporate dividend tax |
42.86 |
37.74 |
42.86 |
37.74 |
Special Economic Zone reinvestment reserve |
1.50 |
3.00 |
1.50 |
3.00 |
General reserve |
- |
- |
- |
- |
*Final dividend for 2017: Rs 10 per equity share of Re 1 each **Final dividend for 2016: Rs 9 per equity share of Re 1 each
The financial statements for the year ended December 31, 2018, have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015, read with Section 133 of Companies Act, 2013, (the âActâ) and other relevant provisions of the Act. There are no material departures from the prescribed norms stipulated by the Accounting Standards in preparation of the annual accounts. Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. The Company discloses consolidated and standalone financial results on a quarterly basis, which are subjected to limited review, and publishes consolidated and standalone audited financial results on an annual basis.
a) Consolidated operations
Consolidated total income for 2018 was Rs 1,821.90 crore, 8% higher than Rs 1,683.84 crore in the previous year. Overall expenses were Rs 1,322.31 crore as against Rs 1,250.23 crore in the previous year. Profit before tax was Rs 499.59 crore as against Rs 433.61 crore in the previous year. Profit after tax was Rs 363.10 crore as against Rs 304.43 crore in the previous year.
b) Standalone operations
Standalone total income for 2018 was Rs 1,270.86 crore, compared with Rs 1,224.59 crore in the previous year. Overall expenses were Rs 890.29 crore as against Rs 878.54 crore in the previous year. Profit before tax was Rs 380.57 crore as against Rs 346.05 crore in the previous year. Profit after tax was Rs 277.53 crore as against Rs 237.26 crore in the previous year.
A detailed analysis of the Companyâs performance, consolidated and standalone, is included in the Management Discussion and Analysis Report, which is a part of the Annual Report.
Dividend
The Directors recommend for approval of the members at the Annual General Meeting to be held on April 17, 2019, payment of final dividend of Rs 11 per equity share of face value of Re 1 each for the year under review. During the year, the Company paid three interim dividends, first and second interim dividends of Rs 6 each and third interim dividend of Rs 7 per equity share of face value of Re 1 each. The total dividend will be Rs 30 per share on a face value of Re 1 per share in 2018 as against a total dividend of Rs 28 per share on a face value of Re 1 per share in the previous year.
Increase in issued, subscribed and paid-up equity share capital
During the year, the Company issued and allotted 410,854 equity shares to eligible employees on exercise of options granted under the Employee Stock Option Scheme of the Company. At the end of the year, CRISILs issued, subscribed and paid-up capital was 72,115,782 equity shares of Re 1 each.
The movement of share capital during the year was as under:
Particulars |
No of Shares allotted |
Cumulative outstanding capital (no. of shares of face value Re 1 each) |
Capital at the beginning of the year, i.e. as on January 1, 2018 |
- |
71,704,928 |
Allotment of shares to employees on February 13, 2018 pursuant to exercise of options granted under Employee Stock Option Scheme, 2014 |
21,101 |
71,726,029 |
Allotment of shares to employees on April 17, 2018 pursuant to exercise of options granted under Employee Stock Option Scheme, 2012 and Employee Stock Option Scheme, 2014 |
80,920 |
71,806,949 |
Allotment of shares to employees on July 17, 2018 pursuant to exercise of options granted under Employee Stock Option Scheme, 2014 |
238,413 |
72,045,362 |
Allotment of shares to employees on October 16, 2018 pursuant to exercise of options granted under Employee Stock Option Scheme, 2014 |
70,420 |
72,115,782 |
Capital at the end of the year, i.e. as on December 31, 2018 |
- |
72,115,782 |
Segment-wise results
The Company has identified three business segments in line with the Indian Accounting Standard on Operating Segment (Ind AS-108), which comprise: (i) Ratings, (ii) Research and (iii) Advisory. The audited financial results of these segments are provided as a part of financial statements.
Review of Operations
A. Ratings Highlights
- Announced 2,976 new bank loan ratings (BLRs) in 2018; total BLRs outstanding exceeded 11,000
- Conducted over 19,000 gradings and assessments in the MSME sector
- Assigned rating to Indiaâs first toll-operate-transfer (TOT) road project; also rated the first transaction comprising pass through certificates (PTCs) backed by education loan receivables - the newest asset class to be securitised in India
- Successful onboarding of large corporate entities and launch of new products (Independent Credit Evaluation
- ICE) supported revenue growth; continued to maintain market share and retained the premier position in the corporate bond market despite intense competition
- Conducted a series of high-profile franchise activities during the year that were extensively covered by the media and well-appreciated by stakeholders
- Global Analytical Centre (GAC) continued to enhance partnership with S&P Global Ratings services on key surveillance and analytical domains.
- Launched CriSidEx, Indiaâs first sentiment index for MSEs developed jointly by CRISIL and SIDBI
Business environment
A sharp drop in corporate bond issuances, amid rising yields and a temporary liquidity crunch following the default by a large non-bank outweighed signs of an improvement in investor sentiment during 2018, keeping the business environment at the worldâs fastest-growing major economy muted. Even though capital market activities were subdued because of hardened yields, demand for bank credit grew driven by higher working capital requirements (necessitated by rise in commodity prices) and shift in demand from the capital market to bank loans (given slower interest rate transmission).
On the regulatory front, the Securities and Exchange Board of India (SEBI) announced a series of changes pertaining to enhancing disclosure requirements by credit rating agencies (CRAs) as well as issuers and measures to expand the debt capital market. These measures are expected to raise industry standards and broaden the domestic corporate bond market. CRISIL welcomes these initiatives as structurally positive. Enhanced disclosures by issuers will increase transparency and assist CRAs and debt market investors to closely monitor the performance of issuers and take timely decisions.
Further, the SME segment in India has witnessed massive digital transformation with the introduction of the Goods and Services Tax (GST) and other government-led digital initiatives. CRISIL remained well-equipped to address the changing customer requirements through its platform, smefirst.com, and various other digital offerings.
Operations
CRISIL Ratings maintained its market leadership in 2018 driven by new client acquisitions and healthy traction in new products. As many as 2,976 new BLRs and over 19,000 SME gradings and assessments were conducted in the year. Ratings have been assigned to more than 28,000 large and mid-size corporates till date and the performance of over 144,000 SMEs were assessed. Fewer issuances in the corporate bond market, primarily on account of hardened yields, remained a challenge. However, focus on high-growth segments and existing relationships helped us secure our bond market share. Further, we onboarded 150 new large corporate clients and gained positive revenue traction in stressed assets. Despite intense competition, we were able to maintain our market share in the BLR space, in terms of new quantum rated.
On the innovation front, CRISIL Ratings continues to be a torchbearer in the industry. In 2018, we assigned rating to Indiaâs first TOT road project. We also rated PTCs backed by education loan receivables. In another first, we assigned credit opinion to capital protection available to alternate investment fund unitholders. We were also the first to rate the resolution plan of a stressed asset, develop a detailed criteria and methodology, in line with the latest RBI circular on âResolution of Stressed Assets - Revised Framework.â We received an encouraging response on the same.
CRISIL Ratings maintained its multifaceted approach towards stakeholder relationship management. In addition to consistent engagement with issuers, we expanded our structured platform to interact with investors in deepening the relationship and understanding their perspective on the credit environment. To strengthen our involvement with issuers and investors, we collaborated with their senior management, delivered sectoral presentations and leveraged the digital channel to share our thought leadership reports and periodical publications regularly.
We strengthened our market presence by hosting web conferences on trending topics and featuring on premier news channels. We also engaged with industry associations by participating in panel discussions, taking up speaking assignments, and being the knowledge partner at various conferences. We published the fourth edition of âCRISIL Inclusixâ report that weighs three service providers (banks, insurers and microfinance institutions) on four dimensions (branch, credit, deposit and insurance).
We also worked with regulators to put forth our opinions on rating standards and governance policies for the credit rating industry.
We organised the fifth edition of its Annual Bond Market seminar themed âBonds of growth: Assessing the demand-supply matrixâ. The highlights of the seminar were the keynote addresses by Shri Ajay Tyagi, Chairman, SEBI; Shri Subhash Chandra Garg, Secretary, Department of Economic Affairs, Ministry of Finance; and Shri HR Khan, Former Deputy Governor, RBI and Chairman of SEBIâs Corporate Bonds & Securitisation Advisory Committee. The dignitaries also launched The CRISIL Yearbook on the Indian Debt Market, 2018 at the seminar. Our analysis was well received by all stakeholders, including regulators and policy makers.
Further, CRISIL Ratings successfully hosted an investor discussion forum on the Non-Banking Finance Company (NBFC) sector themed as âEvolving landscape & key imperativesâ. During the forums, CRISIL presented insights on the sector, recent market developments and asset liability maturity management. Additionally, CRISIL partnered with S&P Global Ratings to organise highly engaging forums for the investor community where opinions on the global economy, the credit quality of India Inc. and the investment outlook were discussed.
In order to deepen our engagement with the existing as well as prospective clients located in Tier 2 regions, we hosted the Ratings Regional Conclave, to present our views on relevant industry trends and have close discussions with clients. The franchise and outreach activities witnessed encouraging response from stakeholders comprising clients, investors and regulators.
CRISIL SME business also made considerable progress to sustain consistency in revenues and reduction of costs, post the National Small Industries Corporation (NSIC) subsidy withdrawal. Initial traction was witnessed in newly launched products for bulk originations through lenders such as CRISIL Credit Assessment Score (CCAS), Enhanced Due-Diligence (EDD) and i-Check. The institutional SME (ISME) business has been identified as one of the growth drivers for the SME business and exhibited robust growth in 2018 with addition of various new clients across industries and increased share of wallet from existing clients.
Further, in the near to medium term, smefirst.com, our digital portal for the SME sector, is expected to be one of the important growth contributors to the SME business. With enhanced focus on digital lending, smefirst.com will act as a one-stop solution for lenders, SMEs and corporates to meet their assessment requirements. The ISME business with its robust pipeline is expected to provide stability to the overall SME business. In continuation with last yearâs trend of aligning offerings to market requirements, we also launched a new product, SME Compare, a peer comparison tool for SMEs, accessible on smefirst.com.
The year saw us launching CriSidEx, Indiaâs first sentiment index for MSEs. This was launched by Honourable Finance Minister Arun Jaitley. This lead and lag indicator is jointly developed by CRISIL and SIDBI. We also launched WE-Check, a free digital verification and assessment service dedicated to women entrepreneurs, in association with NITI Aayog.
GAC continued to partner with S&P Global Ratings Services on key surveillance and optimisation initiatives in the data and analytical domains and enhanced its support to the risk and control functions. With increasing focus on automation and optimisation, GAC stepped up its efforts on the ongoing process improvement and automation by leveraging new age technologies. With continued focus on strengthening the first line of defence, GAC undertook several initiatives to strengthen the internal controls framework. GACâs adoption of lean management tools, work standardisation and process re-engineering initiatives resulted in consistent support levels across diverse geographies and asset classes.
B. Research
B.1. Global Research & Analytics (GR&A) Highlights
- Made strong headway in Europe with the addition of clients in previously unchartered geographies - Austria, Belgium and South Africa
- Added new logos in the buy-side, regional sell-side and credit risk segments
- Continued efforts to develop and evolve automation and data analytics offerings to meet rapidly changing client needs
- Expanded our offering portfolio with the addition of Current Expected Credit Loss (CECL) modeling and Target Review of Internal Models (TRIM) support, while the productisation agenda continued to progress with the launch of several tools and automated solutions
Business environment
Regulatory headwinds continue to lash the banking and financial services space. New regulations in the form of Markets in Financial Instruments Directive II (MiFID II) had an impact on market conditions. While it triggered a decline in business from traditional bulge bracket banks, it has opened up diverse opportunities with regional banks in the US and in the buy-side space.
As firms continue to search for differentiation in the quality of research, demand for specialised research and consequently niche research providers, has increased. Amid these changes, demand from the buy-side continues to increase as firms look to bridge the gap within equity and fixed income, and commodities research. In the credit risk space, banks are looking for cost-effective risk assessment solutions with soaring demand for credit risk surveillance and monitoring solutions, adoption of analytics and automation and improvements within the credit risk workflow.
Clients are also taking a measured approach towards adoption of data analytics solutions. Analytics are being integrated into the buy-side investment process, supported by a shift towards âquantamentalâ (a merger of computer and human based decision-making). In credit risk, there is an appetite for solutions such as the early warning system and front-to-back automation of processes such as credit risk of low default portfolios (LDP). Analytics in sell-side research is cleaving the big and small players, with the former stepping up investments in analytics-based offerings significantly.
Europe continued to be under the regulatory radar, especially with respect to model risk management guidelines as part of the TRIM and the biennial European Central Bank stress testing exercise. As such, market appetite for Risk & Analyticsâ (R&A) stress testing, model validation and regulatory change management remained strong. Adoption of advanced automation and analytics solutions using Machine Learning (ML), Artificial Intelligence (AI) and Big Data are strategic investment areas for major banks. In response, the business has been working on repackaging our current service offerings as modular solutions powered by ML, AI and Big Data. In the US, dilution of the existing regulatory requirements adversely impacted demand for our modeling and stress testing services.
On the flip side, newer regulations such as CECL and Uncleared Margin Rules (UMR) are nearing their implementation deadline and market demand for process re-engineering and business transformation services has been increasing.
Operations
The Financial Research business continued to see good traction in the buy-side, regional sell-side, data analytics, credit risk and SPARC verticals, through addition of new logos in these segments. The highlight was the addition of one of the largest global banks for a bilateral credit risk engagement and the acquisition of one of the worldâs largest professional services company as a client for high-end research services.
We also gained new clients for our research automation platform, SMART and expanded engagements with the existing clients. However, gains in these segments were offset, to an extent, by a decline in the traditional bulge bracket client segment which continues to weather adverse market conditions. Within data analytics, we scoped out projects for credit risk-related automation, completed natural language processing (NLP)-based buyside research assignments and provided alternative data related analytics assignments for the sell side. All three areas saw increased interest as measured by a pick-up in the number of discussions with banks and asset managers.
The Financial Research business steered many innovations in 2018, including: credit risk automation that covers the early warning system (a platform that automatically generates red flags against stressed constituents of a loan portfolio by combining data feeds from disparate internal and external sources), rating process automation for regulated funds, Tableau dashboards for real time reporting and analytics and automated surveillance for negative news; environmental, social and governance (ESG) research support to investment banks, asset managers and other sell-side and buy-side players for ESG investing; public finance automation (an end-to-end automated platform for customised scorecard generation and surveillance for US public finance entities), and automation of the MCG credit rating process through SMART allowing for advanced analytics and automated forecasting.
This has improved efficiency and analytical capabilities. The vertical won marquee global clients from the banking and affiliate industries during the year - including a premier global investment bank, one of the worldâs largest professional service provider, a top global insurer and a leading exchange and clearing firm.
The R&A business witnessed good cross-selling and subsequent expansion of the range of services provided to some of our largest clients, as well as the addition of several new clients across the trading, risk and finance management functions. Some of the innovations driven by the R&A business include tools and utilities such as CECL modeling platform (an analytical suite of ready-to-use credit risk models and methodologies for CECL implementation); Alert classification and clearing tool to automate the process of classifying and clearing alerts generated by the anti-money laundering (AML) systems of banks; and Risk Data Aggregation (RDA) to enable aggregation of data across divisions and databases and to run analytics on the same. It also innovated in project / knowledge management (PM/KM) framework with the launch of Tactical tool to provide a real-time view of the project health through an interactive dashboard - RAG (Red-Amber-Green) reports across all accounts were published starting June.
The marquee client wins for R&A included a leading online broker, one of the largest clearing exchanges in the world, and a large global insurer. In continuation of our efforts to groom the workforce, GR&A facilitated a comprehensive and dynamic in-house training programme, imparting the latest relevant technical and soft skill training to ensure holistic development of our talent pool. In 2018, we also developed our franchise through hosting and participating in a series of conferences, round-tables, webinars with senior client stakeholders, and publishing market relevant thought leadership research articles across topical market themes such as Brexit, CECL, Recovery and Resolution Planning, UMR and multiple use-cases of emerging technologies like Machine Learning and Blockchain for the Financial Services industry. The thought leadership initiatives produced incisive output in the form of playbooks, whitepapers and supporting franchise activities.
B.2 India Research
Highlights
- Retained its dominant and premium position in the flagship Industry Research business with the launch of its advanced âCutting Edge platformâ and topical new reports
- Witnessed healthy revenue growth in the Customised Research business on the back of significant traction in the automobiles, commodities and energy sectors
- With strong brand equity and relationship with investment banks, the business won mandates across sectors for providing the âIndustry Chapterâ for Draft Red Herring Prospectus (DRHP) filings
- Continued to be the largest provider of fixed income indices in India; consolidated our position by launching 39 new debt and five new hybrid indices, taking the total to 91
- Received positive response our new product Quantix, a comprehensive and high-end data analytics tool with an extensive database of 50,000 companies
- Launched a state-of-the-art Learning Management System (LMS portal) to provide a complete e-learning solution and onboarded three large clients
Business environment
Volatility was the new normal in 2018. Most asset classes - equity and debt, primarily - oscillated between highs and lows through the year.
Volatility in the macroeconomic environment and increased competition proved favourable for the India Research business. The year also witnessed large-scale defaults, which underscored the need for enhanced prognosis and comprehensive analytical solutions.
An evolving business environment brought to the fore the need to upskill the talent pool amongst client companies.
Operations
Uncertainty in the macroeconomic environment and volatility in asset classes augured well for the India Research business. Upturn in the capital expenditure cycle, rise in commodity prices and increasing competition boosted demand for bespoke research. Mandates for the âIndustry Chapterâ in DRHP filings brought in additional revenue.
In the backdrop of mounting defaults, banks and NBFCs have increased focus on risk mitigation and identifying early warning signals. Customers demand a comprehensive data solution (structured and unstructured data) that can be integrated into their workflow and help them with better analytics. Quantix, our new product, caters to this need with its advanced tool and analytics and comprehensive database of 50,000 companies.
In the Fixed Income Research business, we consolidated our strong position in the valuation space by winning mandates from general insurers and corporates. We continue to be the largest provider of fixed income indices in India and have launched 39 new debt and five new hybrid indices, taking the total to 91.
In mutual fund research, we enhanced our presence with corporate treasuries and exempted provident fund trusts, helping them review portfolio performance and monitor risks.
There is a constant need to upskill the talent pool at the NBFCs, small finance banks (SFBs) and other banks - especially in the public sector - given the large number of senior level retirements. Our Training business has been catering to these requirements through open house and customised programmes. We launched 48 unique open house programmes and an eLearning course that will enable a much larger user base to benefit from C RISI Lis expertise in credit and risk management.
CRISIL Centre for Economic Research (C-CER) launched the Macro Plus training programme this year. We conducted six such programmes, of which two were in collaboration with the fixed income team. The programmes not only saw massive participation by clientsâ senior management teams, but also received encouraging response from them.
Further, we continued to focus on franchise and thought leadership activities by conducting distinctive research on contemporary issues. We released 36 high impact reports, 38 bylines, 29 press releases and also held marquee events including India Outlook 2018, Fourth Pension Conference, CNBC Mutual Fund Awards, AMFI Annual Summit and Trustee Seminar by SEBI.
Some of our prominent high impact research reports covered pertinent issues concerning stakeholders, clients, market participants and policymakers. Topics covered included -assessment of four years of the Modi government; evaluation of the impact of global risks - rising oil prices, monetary tightening and trade wars - on the Indian economy; impact of rains on farmersâ profitability and inflation;and understanding the trajectory of the rupee amid the turmoil.
The India Research team participated in over 40 leading industry conferences and panel discussions and hosted events and webinars on a variety of topics.
B.3. CRISIL Coalition Highlights
- Added six new clients, including regional players
- Extended outreach by presenting views to 200 Executive Committees at banks and meeting with the heads of Global Markets (GM), Investment Banking (IB) and Transaction Banking (TB) divisions across all large banks
- Deployed automation tools and re-engineered parts of operations to increase the operating leverage across offerings
- Referenced in 350 articles across 90 global publications and in 75 investor relations presentations made by leading global banks
Business environment
The main clients for CRISIL Coalition are global corporate and investment banks (CIBs). Global CIBs had a challenging year in 2018, with revenues remaining flat. This was mainly driven by declining revenues in Fixed Income and partially offset by growth of 5-10% in Transaction Banking revenues. The Coalition IB Index, which tracks performance of top 12 global investment banks, remained flat on account of steady performance across both global markets and investment banking divisions in 2018. The Coalition TB Index, which tracks the performance of top 12 largest global transaction banks, increased on account of better performance in cash management.
Operations
We embarked on several initiatives to enhance our market relevance and connect with customers. These initiatives included reaching out to prospective clients, including regional players. In 2018, CRISIL Coalition added six new logos to its impressive list of global corporate and investment banks. New and more granular Intellectual Property (IP) was developed to cater to newer clients such as the regional banks.
We reinforced our leadership with the top 15 banks by meeting most of the heads of CIB and all heads of GM/IB businesses, in addition to presenting to 200 Executive Committees at various banks. More than 90 publications globally carried our views and quoted these during the year. We were referenced by leading global banks in 75 investor relations presentations.
On the operations side, the focus has been on enhancing productivity through increased automation and digitisation. We developed and deployed an application for automated printing of client presentations, having undertaken efforts to digitise the research value chain. This will enable better data discovery in research and analytics. CRISIL Coalition obtained the coveted SSAE16 SOC2 Type II certification in 2018. The certificate attests and describes the operating effectiveness of controls designed and implemented to protect data and IP.
C. Advisory
C.1. CRISIL Infrastructure Advisory Highlights
- Strong order book on the back of a good year for new business despite slowdown on new government programmes
- Deeper presence and client relationships at the state level
- Increased share of business from international markets -Asia and Africa
- Hosted the second edition for CRISIL India Infrastructure Conclave along with publication of CRISIL India Infrastructure Yearbook and CRISIL InfraInvex - the countryâs first investability index
Business environment
The infrastructure sector had a challenging year in India. As expected, the government shifted its focus from new flagship programmes to implementation and monitoring of the existing schemes such as Smart Cities mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Bharatmala, Ude Desh Ka Aam Nagrik (UDAN) and Saubhagya. This slowed down business momentum for Infrastructure Advisory, especially during the second half of the year.
Reeling under pressures of stressed balance sheets and a risk-averse financial sector, private investments in infrastructure development were few and far between - down to a decadal low of below 25%. The Indian government, on its part, continued to shore up infrastructure spending, with a higher budget allocation for the sector and supported the existing programmes.
A significant initiative during the year was the first successful monetisation transaction taken up by the National Highways Authority of India, where a few operational road stretches were offered to private bidders under the TOT model. A significant premium on asset valuation bodes well for the government, which can target monetisation of operational infrastructure assets as a resource mobilisation tool to shore up the infrastructure spending budgets without adversely impacting fiscal deficit, at the central and state levels.
Operations
Despite the slowdown, Infrastructure Advisory business managed to strengthen its order book, by winning several new assignments - including a couple of large-value multiyear implementation support and programme management mandates. Some of the prestigious ones included programme management for the Bharatmala Pariyojana, programme and design management for a smart city, electricity distribution improvement programme in Uttar Pradesh, transaction advisors for auction of major and minor minerals in Chhattisgarh and advisory support on city gas distribution.
We deepened our international presence by winning mandates in the emerging markets of Asia and Africa, including Indonesia, Vietnam, Tanzania, Ghana and Bangladesh. International mandates included support to the World Bank public private partnership (PPP) programme for urban local bodies in Tanzania, water supply improvement project in Indonesia and developing an international reference tool for infrastructure project preparation for the Global Infrastructure Hub.
CRISIL Infrastructure Advisory successfully hosted the second edition of CRISIL India Infrastructure Conclave, themed âEnabling private sector participation in the infrastructure build-outâ. Regulators, policymakers and industry leaders from the infrastructure domain came together to discuss and identify viable models and strategic interventions to revive and scale private investment in infrastructure. Shri Suresh Prabhu, Minister of Commerce & Industry and Civil Aviation, GoI, was the keynote speaker and Shri Amitabh Kant, CEO NITI Aayog, was the guest of honour. Several dignitaries and speakers also participated. The event received good media coverage.
C.2. CRISIL Risk Solutions Highlights
- Our efforts in the international markets, especially in collaboration with S&P Global, have led to 37% of revenues coming from that geography
- Expanded our solutions with successful implementation of the Expected Credit Loss (ECL) model and building new scoring models
Business environment
The weak credit environment has made for a compelling pitch for our risk solution products including the risk assessment model (RAM), the early warning system and portfolio evaluation and monitoring. Despite demand with both public and private financial institutions, we are treading cautiously as implementation and timeline challenges exist.
In the overseas markets, we deepened our collaboration with S&P Global to leverage its client franchise and offer combined solutions, synching its risk scorecard with our technology platform.
We have worked, and are working, closely with banks in India for early warning systems and reporting requirements
Delayed decisioning at client end and increasing competition impacted conversions and price points during the year. The business continues to focus on product development and tapping clients in newer markets to serve the needs for risk management and mitigation.
Operations
We successfully launched and implemented our ECL offering under the new International Financial Reporting Standards regime to financial institutions in India and overseas.
Our product development efforts continue and we are hopeful of launching ICON (new-age RAM) in early 2019.
Our franchise initiatives included webinars on a variety of topics, including âEvolution of early warning system for lendersâ, âRisk-based pricing: Framework and impact of IND-AS 109â and âTransition to IFRS 9: Overcoming Practical Roadblocksâ. We also participated in the AWS Summit in Mumbai and shared our views on âData-Led Decisioning for Lendersâ. We spoke at the Fintech Summit on âEffective credit assessment for small businesses using innovative methodologiesâ. We also conducted a knowledge-sharing session on early warning practices for the CRO forum in Colombo, Sri Lanka, which was appreciated by bankers.
C.3. Pragmatix Highlights
- Completed the Pragmatix acquisition, enhancing our traditional strengths in risk solutions and repositioning our business as a comprehensive advanced analytics solutions provider.
- Expanded our Middle East franchise significantly during the year; International revenues are now ~78% of total revenues.
- Continued to focus on improving and expanding our solution suite with new business solutions addressing needs in pricing, working capital and digital lending areas; all available on our common platform, Fulkrum.
Business environment
The demand for Business Intelligence (BI) and analytical solutions continues to be strong. Spend in these areas across all geographies is robust. We made significant gains with key customers across India and the Middle East. Our total revenue growth was over 50% during the 12 months ended December 31, 2018, and the environment continues to present significant growth opportunities for the business over the near future.
Operations
In 2018, the Pragmatix business saw good growth and continued to maintain excellence in execution and client satisfaction.
Pragmatix also remains focused on expanding the technology capabilities and increasing client footprint.
D. Franchise collaboration with S&P Global
In 2018, we deepened our outreach engagement with S&P Global across different geographies. Sustaining our annual joint flagship platform, India Credit Spotlight, we hosted seminars across Mumbai and Singapore on âGrowth prospects amid macro risksâ. The seminar was appreciated by investors and issuers alike.
As a part of our joint outreach initiatives, S&P Global and CRISIL hosted an exclusive investor briefing aimed at engaging with the investor community. The event had presentations on the global economic outlook by Dr Paul Gruenwald, Chief Economist, S&P Global Ratings and the Indian economic outlook by CRISILs Chief Economist Mr Dharmakirti Joshi.
Additionally, S&P Global and CRISIL Research jointly hosted the S&P-CRISIL Economist forum. Dr. Paul Gruenwald, Managing Director & Chief Economist, S&P Global Ratings presented on âGlobal growth, trade & the Belt Road Initiative (BRI)â.
Mr Dharmakirti Joshi, Chief economist, CRISIL, was also one of the eminent panellists at the Commodity Market Insights Forum organised by S&P Global Platts in Mumbai and Delhi.
Further, we organised two forums jointly with S&P Global Ratings exclusively for the investor community where key personnel from the mutual funds, insurance and wealth management institutions participated. We discussed opinions on the global economy, the credit quality of India Inc. and the investment outlook.
At the S&P Global - CRISIL Exclusive Briefing, Ms Beth Ann Bovino, US Chief Economist, S&P Global Ratings shared her views on âUS economic outlook: Sailing on in the rough global seas.â She also shared insights on the US business cycle, impact of trade wars, twin deficits in the US, the US Federal Reserveâs monetary policy under new leadership and long-term economic growth concerns.
E. Human Resources
The Human Resources team made good strides in 2018. At the closure of its financial year, CRISILs headcount was 3,796, including all wholly owned subsidiaries.
Highlights
Diversity and inclusion
- Diversity of the workforce has always been our strength. Spanning knowledge areas, age, gender, skills, experience and nationality, we have employees representing 32 nationalities.
- Women comprise about 36% of CRISILs workforce. Our programme âWinspirationâ continues to provide different interventions for our colleagues, encouraging and fostering their growth.
- Our programme on maternity benefits allows working mothers the flexibility to manage their children at their convenience.
- Our analyst certification programme continues to move from strength to strength. In 2018, we tied up with IIM Calcutta to introduce new perspectives and give an added edge to our analysts.
Employee engagement
Our annual engagement survey, âVIBEâ, is now aligned with our parent company, S&P Global, allowing us to benchmark with global best practices.
To constantly improve employee experience, we launched âECHOâ, a programme aimed at connecting with new recruits and employees who have resigned through a neutral and independent firm with the aim of obtaining candid feedback, enabling us to make a tangible difference.
Millennials make up about 88% of our workforce. To empower employees to voice their opinions and collaborate with their colleagues, we introduced CRISBuzz, a new social collaboration platform. The mobile app-based platform makes optimal use of technology allowing employees to share and express on the go.
Employee health and well-being is another important area for us. Our annual health check programme was very well received among employees of all age groups.
CRISIL Conclave - our platform to create leadership development and instill innovative thinking, continued to provide an opportunity for employees to interact and learn from leaders from different walks of life .
The Reward & Recognition programme endeavoured to motivate employees with annual awards for excellence, quarterly rewards for service excellence and spot recognition programmes.
Our stock incentive programme was leveraged for rewarding and retaining our high-potential employees and senior leadership.
Fostering a positive work environment
To foster a positive work environment, free from harassment of any nature, we institutionalised the Prevention of Sexual Harassment (POSH) framework, through which we address complaints related to sexual harassment. Our policy guarantees discretion and non-retaliation to complainants. We follow a gender neutral approach in handling complaints and we are compliant with the law of the land that we operate in.
Talent development
CRISIL believes in lifelong learning for its employees and competency development is a key focus area for us. Our Learning and Organisation Development department is at the forefront to nurture a culture of learning. We launched a new learning management tool this year,â YOUniverseâ. Through this, we have been able to make learning more intuitive and interactive. Through mobile-based programmes, employees are now able to learn on the go.
We have also facilitated a programme on managerial effectiveness, through which managers are coached on specific situations to get the best from their teams and build strong working relationships.
Directors
Members of the Companyâs Board of Directors are eminent persons of proven competence and integrity. Besides experience, strong financial acumen, strategic astuteness and leadership qualities, they have a significant degree of commitment to the Company and devote adequate time to the meetings and preparation.
The Board meets at regular intervals to discuss and decide on Company / business policy and strategy apart from other Board business. The Board exhibits strong operational oversight with regular presentations by business heads. An annual planner of topics to be discussed at the Board through its quarterly meetings is pre-discussed by the Directors. The Board / committee meetings are pre-scheduled and a tentative annual calendar of the Board and committee meetings is circulated to the Directors well in advance to help them plan their schedule and ensure meaningful participation in the meetings. Only in case of special and urgent business, if the need arises, the Boardâs approval is taken by passing resolutions through circulation, as permitted by law, which are confirmed in the subsequent Board meeting. The Company has complied with secretarial standards issued by the Institute of Company Secretaries of India on Board meetings and Annual General Meetings.
The agenda for the Board and committee meetings includes detailed notes on the items to be discussed to enable the Directors to take an informed decision. For the past three years, the Company has moved to a two-day schedule for its quarterly committee and Board meetings, which allows for greater discussion time for Board matters.
The Board met six times in financial year 2018 - on February 13, April 17, June 22, July 17, October 16 and December 14. The maximum interval between two meetings did not exceed 120 days.
The Companyâs Nomination & Remuneration Policy formulated under Section 178(3) of the Companies Act 2013, covers roles, responsibilities, criteria and procedures towards key aspects of Board governance including the size and composition, criteria for Directorship, terms and removal, succession planning, evaluation framework, and on-going training and education of Board members. The policy lays down detailed guidelines for remuneration of the Board, Managing Director and employees, covering fixed and variable components, and long-term reward options, including Employee Stock Option Schemes. The policy includes the scope and terms of reference of the Nomination & Remuneration Committee. The policy is available at https://crisil.com/en/home/investors/ corporate-governance.html.
Directorship changes
End of tenure of directorship
Dr. Nachiket Morâs tenure as an Independent Director of the Company ended on July 23, 2018. Dr. Mor had taken office as a Non-Executive, Independent Director of CRISIL in July 2008 and demitted office after completion of 10 years. CRISILs Directors place on record their sincere appreciation for the strong support, advice and guidance provided by Dr. Mor to CRISIL and its management, which was immensely valuable to drive the Companyâs growth and performance.
Appointment
Ms Arundhati Bhattacharya was appointed as Additional Director (Independent) with effect from October 16, 2018. The Company received a notice under Section 160 of the Companies Act, 2013, from a member signifying his intention to propose the candidature of Ms Bhattacharya to the office of Director.
Re-appointment
In accordance with the Articles of Association of the Company and the provisions of the Companies Act, 2013, Mr John Berisford retired by rotation and being eligible has sought reappointment.
Brief profiles of Ms Arundhati Bhattacharya and Mr John Berisford have been given in the Notice convening the Annual General Meeting.
Board independence
Our definition of âIndependenceâ of Directors is derived from Regulation 16(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149(6) of the Companies Act, 2013. Based on the confirmation / disclosures received from the Directors and on evaluation of the relationships disclosed by the Directors during the Board evaluation process, the following Non-Executive Directors are Independent:
a) Mr M. Damodaran
b) Ms Vinita Bali
c) Mr Girish Paranjpe
d) Ms Arundhati Bhattacharya
Committees of the Board
The Board has five committees:
- Audit Committee
- Corporate Social Responsibility Committee
- Investment Committee
- Nomination and Remuneration Committee
- Stakeholdersâ Relationship Committee
Details of all the committees along with their charters, composition and meetings held during the year are provided in the Report on Corporate Governance, a part of this Annual Report.
Annual evaluation by the Board
During the year, the Board carried out an annual evaluation of its performance as well as of the working of its committees and individual Directors, including Chairman of the Board. This exercise was carried out through a structured questionnaire prepared separately for the Board, committees, Chairman and individual Directors. The Chairmanâs performance evaluation was carried out by Independent Directors at a separate meeting. The questionnaire and evaluation process was reviewed in the context of amendments to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 brought about by the Kotak Committee recommendations, which require the Board to confirm fulfilment of the independence criteria by Independent Directors and their independence from management.
The questionnaire for Board evaluation is prepared taking into consideration various aspects of the Boardâs functioning such as Board membersâ understanding of their roles and responsibilities; Board meetings and the reporting process; time devoted by the Board to the Companyâs long-term strategic issues; quality and transparency of Board discussions; quality, quantity and timeliness of the information flow between Board members and management; Boardâs effectiveness in disseminating information to shareholders and in representing shareholder interests; Board information on industry trends and regulatory developments; and discharge of fiduciary duties by the Board.
Performance of the committees is evaluated on the basis of their effectiveness in carrying out their respective mandates.
Peer assessment of Directors, based on parameters such as participation and contribution to Board deliberations, ability to guide the Company in key matters, and knowledge and understanding of relevant areas were received by the Board for individual feedback.
The Board acknowledged that key improvement areas emerging through this exercise and action plans to address these are in progress.
During 2018, the Company actioned the feedback from the Board evaluation process conducted in 2017. Suggestions were incorporated by reshaping the Board meeting schedule to allow sufficient discussion time for strategic matters and categorisation of the meeting agenda for better time allocation. Certain strategic discussions brought to the fore were around long-term strategy of core businesses, technology, data-driven intellectual property generating products, regulatory changes, and operational strategy. Expert speaker sessions covering emerging and relevant themes were planned in parallel with the Board meetings. Succession planning at Board and Senior Management level was given extensive time and focus by the Nomination and Remuneration Committee as well as the Board.
Risk Management Policy, compliance framework and internal control adequacy
The Board has adopted policies and procedures for governance of orderly and efficient conduct of its business, including adherence to the Companyâs policies, safeguarding its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures. The Companyâs internal control systems are commensurate with the nature of its business and the size and complexity of its operations.
Significant audit observations and follow-up actions thereon are reported to the Audit Committee. To ensure independence of audits, internal auditors report directly to the Audit Committee. Both internal and statutory auditors have exclusive executive sessions with the Audit Committee regularly. In addition, during the year, management performed a review of key controls impacting financial reporting, at entity as well as operating levels and submitted its report to the Audit Committee and the Board.
The Company has a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Mitigation plans for key risks identified by the businesses and functions are implemented and reviewed consistently. These are discussed at the meetings of the Audit Committee and the Board. These have also been reported and discussed in detail in the Management Discussion and Analysis Report, annexed to the Annual Report.
The financial services industry continues to focus on cyber risk and information security and so does CRISIL. The management implemented several actions in 2018 to strengthen cyber security by enhancing intrusion detection systems, installing a next generation firewall and a new cybersecurity solution and upgraded data loss prevention systems. A cyber response strategy defining roles and responsibilities was outlined and focused cyber and phishing training was conducted during the year.
Initiatives such as secure printing, disablement of userâs general ability to upload data through the web by implementing a filtering solution and a tool for network advanced threat protection were implemented during 2017 and 2018 to enhance controls on information security.
An organisation-wide Business Continuity Project (BCP) was completed to align it with ISO 22301:2012 Societal Security -Business Continuity Management System (BCMS). This initiative intended to strengthen the resilience of the organisation across all businesses. BCMS enables an acceptable level of service during disaster; protects and supports employees, assets and business; reduces risk; and enables the Company to meet statutory, regulatory and contractual obligations. Business Impact Analyses (BIA) and Function Recovery Plans (FRP) were conducted across businesses and functions. BCP testing of key business units is scheduled in the current year.
The Company has a comprehensive framework for monitoring compliances with applicable laws. Functional teams operate as the first line of defence. Their procedures and actions are periodically subject to audit and test procedures monitoring adherence of the system. The Company introduced an additional IT-enabled tool to monitor compliances and augment a robust compliance assessment process. A quarterly certification on compliance with laws is provided by senior management to the Board.
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors and external consultants and the reviews performed by management and the relevant Board committees, including the Audit Committee, the Board is of the opinion that the Companyâs internal financial controls with reference to financial statements were adequate and effective during financial year 2018.
Directorsâ responsibility statement
Directors hereby confirm that:
i. in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
ii. 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 profits of the Company for that period;
iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,
2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv. they have prepared the annual accounts on a going concern basis;
v. they have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and
vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively
Changes to key managerial personnel
During the year, Mr Amish Mehta transitioned from his role of Chief Financial Officer to a new role as Chief Operating Officer. The Board approved continuation of Mr Amish Mehta as Key Managerial Person of the Company in terms of Section 203 of the Companies Act, 2013. Mr Sanjay Chakravarti was appointed as Chief Financial Officer with effect from February 13, 2018.
Particulars regarding conservation of energy, technology absorption and foreign exchange earnings and outgo
The particulars regarding foreign exchange earnings and outgo appear as separate items in the notes to the accounts. The Company does not own any manufacturing facility and, hence, our processes are not energy-intensive. Hence, particulars relating to conservation of energy and technology absorption stipulated in the Companies (Accounts) Rules, 2014, are not applicable.
However, we endeavour to support the environment by adopting environment-friendly practices in our office premises and have rolled out a policy which aims at improving environmental performance of CRISIL. Our efforts in this direction centre around making efficient use of natural resources, elimination of waste and promoting recycling of resources.
Initiatives taken in the area of environment protection during 2018 are mentioned under Principle No. 6 in the Business Responsibility Report.
Corporate social responsibility
The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The role of the committee is to review the CSR Policy, approve activities to be undertaken by the Company towards CSR, and monitor implementation of projects and activities undertaken by the Company towards CSR.
The CSR Policy of the Company is available at https://crisil.com/en/home/investors/corporate-governance. Further details about the initiatives taken by the Company on CSR during the year under review have been appended as Annexure I to the Annual Report.
Vigil mechanism
The Company has established a vigil mechanism for Directors and employees to report genuine concerns, details of which have been given in the Corporate Governance Report annexed to the Annual Report.
Subsidiaries
As on December 31, 2018, the Company had two Indian and seven overseas wholly owned subsidiaries. Pragmatix Services Private Limited became a wholly owned subsidiary of CRISIL w.e.f. January 24, 2018. In accordance with Section 129(3) of the Companies Act, 2013, CRISIL has prepared a consolidated financial statement of the Company and all its subsidiaries, which is a part of the Annual Report. A statement containing salient features of the financial statements of the subsidiaries is included in the Annual Report.
The Company has no associate companies within the meaning of Section 2(6) of the Companies Act, 2013.
In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein its standalone and the consolidated financial statements, has been placed on the website, www. crisil.com. Further, as per fourth proviso of the said section, audited accounts of all subsidiaries have also been placed on the website, www.crisil.com. Shareholders interested in obtaining a copy of the audited accounts of the subsidiaries may write to the Company Secretary at the Companyâs registered office.
The Company has obtained a certificate from the statutory auditors certifying that the Company is in compliance with FEMA Regulations with respect to downstream investments.
Particulars of contracts or arrangements with related parties referred to in Section 188(1)
A significant quantum of related party transactions undertaken by the Company is with its subsidiaries engaged in product delivery of CRISIL businesses and business development activities. The Company has also been providing analytical support to S&P Global entities as a part of a Master Services Agreement, which was approved by the shareholders though a resolution passed by postal ballot on December 15, 2014.
The Audit Committee pre-approves all related party transactions. The details of the related party transactions undertaken during a particular quarter are placed at the meeting of the Audit Committee held in the succeeding quarter.
All contracts / arrangements / transactions with related parties that were executed in 2018 were in the ordinary course of business and at an armâs length. During the year, there were no related party transactions which were materially significant and that could have a potential conflict with the interests of the Company at large. All related party transactions are mentioned in the notes to the accounts. The particulars of material contracts or arrangements with related parties referred to in Section 188(1), are given in prescribed Form AOC - 2 as Annexure II.
As required under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Related Party Transactions Policy, which has been put up on the Companyâs website - https://www.crisil.com/en/home/ investors/corporate-governance.html. The Company has developed an operating procedures manual for identification and monitoring of related party transactions.
Particulars of loans, guarantees or investments under Section 186
Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013, are provided in the Notes to Financial Statements.
Auditorsâ report
M/s. Walker Chandiok & Co LLP (an affiliate of Grant Thornton network) is the statutory auditor of the Company. Its report is a part of the Annual Report.
Shareholders of the Company have approved appointment of M/s. Walker Chandiok & Co LLP as the statutory auditor of the Company for five years, i.e. from the conclusion of the 30th Annual General Meeting held on April 20, 2017 until the conclusion of the 35th Annual General Meeting. Consequent to the amendments to Companies Act, 2013, ratification of appointment of the statutory auditor at every Annual General Meeting is no longer required.
Secretarial audit report
The Board has appointed Makarand M. Joshi & Co., Practising Company Secretaries, to conduct the secretarial audit and their report is appended as Annexure III.
Comments on auditorsâ report
There are no qualifications, reservations or adverse remarks or disclaimers made by Walker Chandiok & Co LLP, statutory auditors, in their audit report and by M/s Makarand M. Joshi & Co., Practising Company Secretaries, in their secretarial audit report.
The statutory auditors did not report any incident of fraud to the Audit Committee of the Company in the year under review.
Management discussion and analysis report
Management discussion and analysis report for the year under review, as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed to the Annual Report.
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 SEBI. The Report on Corporate Governance as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is a part of the Annual Report. A certificate from the auditors of the Company confirming compliance with the conditions of corporate governance as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is also published in the Annual Report.
Particulars of remuneration
Disclosures with respect to the remuneration of Directors and employees as required under Section 197(12) of Companies Act, 2013, read with Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, have been appended as Annexure IV to this Report.
In accordance with the provisions of Section 197(12) of the Companies Act, 2013, and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of every employee covered under the said rule are available at the registered office of the Company during working hours for a period of 21 days before the Annual General Meeting and will be made available to any shareholder on request.
Employee Stock Option Schemes
The Company has three Employee Stock Option Schemes. Employee Stock Option Scheme - 2011 (ESOS 2011) was approved by shareholders vide a special resolution passed through postal ballot on February 4, 2011. Employee Stock Option Scheme - 2012 (ESOS 2012) was approved by shareholders vide a special resolution passed through postal ballot on April 10, 2012. Employee Stock Option Scheme - 2014 (ESOS 2014) was approved by shareholders vide a special resolution passed through postal ballot on April 3, 2014 and amended by special resolution of shareholders at the 30th Annual General Meeting held on April 20, 2017.
During 2018, there were no material changes in the Employee Stock Option Schemes of the Company. The Schemes are in compliance with SEBI regulations. As per Regulation 14 of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, read with Securities and Exchange Board of India circular dated June 16, 2015, the details of the ESOS are uploaded on the Companyâs website https://www.crisil.com/en/home/investors/financial-information/annual-report.html in term of Circular No CIR/ CFD/POLICY CELL/2/2015 dated June 16, 2015, issued by SEBI.
The Company has received a certificate from M/s. Walker Chandiok & Co LLP that ESOS 2011, ESOS 2012 and ESOS 2014 have been implemented in accordance with SEBI regulations and the resolution passed by members in their general meeting. The certificate will be placed at the ensuing Annual General Meeting for inspection by members.
Extract of Annual Return
The Extract of Annual Return as provided under Section 92(3) of the Companies Act, 2013, and as prescribed in Form No. MGT-9 of the rules prescribed under Chapter VII relating to Management and Administration under the Companies Act, 2013, is appended as Annexure V. The complete Annual Return is available on the Companyâs website https://www.crisil.com/ en/home/investors/financial-information/annual-report.html
Financial year
The Company follows the calendar year as the financial year in terms of a special approval obtained from the Company Law Board in 2015.
CEO and CFO certification
Certificate from Ms Ashu Suyash, MD & CEO; and Mr Sanjay Chakravarti, Chief Financial Officer, pursuant to provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, for the year under review was placed before the Board of Directors of the Company at its meeting held on February 12, 2019.
Statutory disclosures
Directors state that there being no transactions with respect to the following items during the financial year under review, no disclosure or reporting is required with respect to the same:
1. Deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014
2. Issue of equity shares with differential rights as to dividend, voting or otherwise
3. Receipt of any remuneration or commission by the Managing Director/Whole-time Director of the Company from any of its subsidiaries
4. Significant or material orders passed by the regulators or courts or tribunals which impact the going concern status and the Companyâs operations in future
5. Buyback of shares
6. Material changes and commitments, affecting the financial position of the Company that have occurred between the end of the financial year to which the financial statements relate and the date of this report unless otherwise stated in the report
7. The Company is not required to maintain cost records as per sub-section (1) of Section 148 of the Companies Act, 2013
Acknowledgements
The Board of Directors wishes to thank the employees of CRISIL for their exemplary dedication and excellence displayed in conducting all operations. The Board also wishes to place on record its sincere appreciation of the faith reposed in the professional integrity of CRISIL by customers and investors who have patronised its services. The Board acknowledges the splendid support provided by market intermediaries. The affiliation with S&P Global has been a source of great strength. The Board of Directors also wishes to place on record its gratitude for the faith reposed in CRISIL by the shareholders, SEBI, the RBI, the Government of India, and the state governments. The role played by the media in highlighting the good work done by CRISIL is deeply appreciated.
For and on behalf of the Board of Directors of CRISIL Limited,
John L. Berisford
Chairman
Mumbai, February 12, 2019 (DIN: 07554902)
Dec 31, 2017
Directorsâ Report
Dear Member,
The Directors are pleased to present to you the 31st Annual Report of CRISIL Limited, along with the audited financial statements, for the year ended December 31, 2017. The year marked the completion of three decades of CRISIL. It is a matter of pride to have been at the forefront of India''s financial services sector since executing India''s first corporate sector rating in 1988. Today, CRISIL has ratings on more than 25,000 large and mid-scale corporate and financial institutions in India and serves more than 90% of India''s banking industry by asset base through research services. Our Global Risk & Analytics business is a leading provider of research and analytics with deep domain expertise in Financial Research and Risk & Analytics and covers over 3,300 stocks and 3,400 credits globally. We provide research support to more than 75 global banks and 50 buy-side firms. Our Coalition business provides business intelligence and high end analytics to more than 20 corporate and investment banks, including the top 15 globally. We have a well diversified research team operating from offices across US, UK, Argentina, China, Poland and India.
2017 was a year to reflect and introspect on our achievements, our capabilities, and a milestone that marks our growth and evolution as an agile and innovative global analytics company. This Report provides you insights on our enhanced market relevance, global market footprint, new services, our collaborations, our focus on innovation and technology and overall excellence across our operations.
Financial performance
A summary of the Company''s financial performance in 2017:
(Rs. in crore)
Particulars |
Consolidated |
Standalone |
||
2017 |
2016 | |
2017 |
2016 |
|
Total income for the year was |
1,683.84 1 |
,597.18 |
1,213.32 1 |
,173.93 |
Profit before interest, depreciation, exceptional items and taxes was |
480.66 |
493.00 |
374.98 |
396.85 |
Finance cost |
0.41 |
- |
0.41 |
- |
Deducting depreciation of |
46.64 |
54.52 |
28.52 |
28.51 |
Profit before tax was |
433.61 |
438.48 |
346.05 |
368.34 |
Deducting taxes of |
129.18 |
144.15 |
108.79 |
128.05 |
Profit after tax was |
304.43 |
294.33 |
237.26 |
240.29 |
Other comprehensive income |
(77.42) |
(24.71) |
(85.17) |
11.36 |
Total comprehensive income |
227.01 |
269.62 |
152.09 |
251.65 |
Appropriations are: |
||||
Final Dividend |
64.20* |
71.21** |
64.20* |
71.21** |
Interim Dividend |
128.81 |
128.34 |
128.81 |
128.34 |
Corporate dividend tax |
37.74 |
40.63 |
37.74 |
40.63 |
Special Economic Zone reinvestment reserve |
3.00 |
- |
3.00 |
- |
General reserve |
- |
20.45 |
- |
20.45 |
*Final dividend for the year 2016 Rs. 9 per equity share of Re 1 each. **Final dividend for the year 2015 Rs. 10 per equity share of Re 1 each.
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 read with Section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act. The financial statements up to and for the year ended December 31, 2016, were prepared in accordance with the Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act (''Previous GAAP''). The 2017 financial statements are the first financial statements of the Company under Ind AS. In accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards, the Company has presented a reconciliation from the previous presentation of financial statements of share holders total equity as at December 31, 2016, and January 1, 2016, and of the total comprehensive income for the year ended December 31, 2016, of the Company as a part of financial statements under Previous GAAP to Ind AS. There are no material departures from the prescribed norms stipulated by the Accounting Standards in preparation of the Annual Accounts. Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. The Company discloses consolidated and standalone financial results on a quarterly basis which are subjected to limited review and publishes consolidated and standalone audited financial results on an annual basis.
a) Consolidated operations
Revenue from the consolidated operations of the Company for the year was Rs. 1,683.84 crore, 5% higher than Rs. 1,597.18 crore in the previous year. Overall operational expenses for the year were Rs. 1,250.23 crore, against Rs. 1,158.70 crore in the previous year. EBITDA for the year was Rs. 455.28 crore, against Rs. 443.33 crore, in the previous year. Profit after tax for the year was Rs. 304.43 crore, against Rs. 294.33 crore in the previous year.
b) Standalone operations
Revenue from the standalone operations of the Company for the year was Rs. 1,213.32 crore, 3% higher than Rs. 1,173.93 crore in the previous year. Overall operational expenses for the year were Rs. 867.27 crore, against Rs. 805.59 crore in the previous year. Profit after tax for the year was Rs. 237.26 crore, against Rs. 240.29 crore in the previous year.
The movement of share capital during the year was thus, as under:
Particulars |
No. of shares allotted / (extinguished) |
Cumulative outstanding capital (No. of shares of Face Value Re. 1 each) |
Capital at the beginning of the year i.e. as on January 1, 2017 |
- |
7,13,35,358 |
Allotment of shares to employees on April 20, 2017 pursuant to exercise of options granted under the Employee Stock Option Scheme, 2011, and the Employee Stock Option Scheme, 2012 |
21,750 |
7,13,57,108 |
Allotment of shares to employees on July 18, 2017 pursuant to exercise of options granted under the Employee Stock Option Scheme, 2012, and the Employee Stock Option Scheme, 2014 |
2,70,417 |
7,16,27,525 |
Allotment of shares to employees on October 17, 2017 pursuant to exercise of options granted under the Employee Stock Option Scheme, 2012, and the Employee Stock Option Scheme, 2014 |
77,403 |
7,17,04,928 |
Capital at the end of the year i.e. as on December 31, 2017 |
- |
7,17,04,928 |
Segment-wise results
The Company has identified three business segments, in line with the Indian Accounting Standard on Operating Segment (Ind AS-108), which comprise: (i) Ratings, (ii) Research, and (iii) Advisory. The audited financial results of these segments are provided as a part of financial statements.
A detailed analysis on the Company''s performance, both consolidated and standalone, is included in the Management''s Discussion and Analysis Report, which forms part of this Annual Report.
Dividend
The Directors recommend for approval of the members at the Annual General Meeting to be held on April 17, 2018, payment of Final Dividend of Rs. 10 per equity share of face value of Re. 1 each for the year under review. During the year, the Company paid three interim dividends, each of Rs. 6 per equity share of face value of Re. 1 each. The total dividend for the year shall be Rs. 28 per share on a face value of Re. 1 per share in 2017 as against a total dividend of Rs. 27 per share on a face value of Re. 1 per share in the previous year.
Increase in Issued, Subscribed and Paid-Up Equity Share Capital
During the year, the Company issued and allotted 3,69,570 equity shares of the Company to eligible employees on exercise of options granted under Employee Stock Option Schemes of the Company. At the end of the year, the issued, subscribed and paid-up capital of the Company was 7,17,04,928 equity shares of Re. 1 each.
Review of Operations
A. Ratings Highlights
- Announced 2,982 new Bank Loan Ratings (BLRs) during the year, taking the total BLRs outstanding past 12,000
- Launched India''s first expected loss, or EL, rating scale for infrastructure projects and was the first to assign rating to a hybrid annuity model-based road project
- On-boarded large corporate entities into the portfolio and added several new marquee clients
- Cemented premier position in corporate bonds with year-on-year jump in market share
- Conducted 15,000 assessments in the MSME sector
- Conducted a series of high-profile franchise activities, which were covered extensively in media and were well-appreciated by stakeholders
- Enhanced engagement with S&P Global Ratings in surveillance and risk and regulatory support through Global Analytical Center
Business environment
India''s business environment for the credit rating business overall was positive in 2017 vis-a-vis 2016, mainly due to improving credit quality of corporate India, higher share of capital market borrowings due to falling interest rates and continued growth of the retail financing industry. However, the industry was impacted by weak investment climate, elevated level of non-performing assets in the banking sector, the implementation of the Goods and Services Tax (GST), and the transient effect of demonetization.
The capital market saw increased refinancing activity by non-banks and corporate. The corporate bond market witnessed ~14% volume growth year-on-year, most of it in the first two quarters. There were fewer issuances in the last two quarters. The dual rating requirement mandated by the Reserve Bank of India for companies issuing Rs. 1,000 crore or more of commercial paper kept activity buoyant in the third quarter.
Business environment picked up in the first and second quarters, given the waning effect of demonetization, reduced borrowing costs, and expectation of a near-normal monsoon. However, private investment and wholesale credit off take remained sluggish. Despite softer interest rates, wholesale credit growth remained muted through the year due to impaired balance sheets of banks and excess capacity in the industry. This, and the implementation of GST, led to postponement of corporate borrowings in 2017, and consequently, the BLR business witnessed a marginal decline.
While pressure on pricing and the transitory impact of GST implementation are likely to persist, we anticipate an uptick in the BLR business in 2018 on the back of increase in private investment and the Rs. 2.11 lakh crore recapitalization plan for public sector banks.
For CRISIL''s SME Ratings business, 2017 was a year of transformation because of withdrawal of subsidy under the Performance and Credit Rating Scheme. Initially, the focus shifted to maximizing revenue from non-subsidy products and increasing cost-efficiencies with improvement in productivity parameters, optimum utilization of resources, and higher automation. Then, in a major boost to digitization, the business initiated online sourcing of mandates through a digital platform, smefirst.com, which provides easy access to proprietary SME assessments and evaluations, and enables end-to-end digitization of the customer acquisition process.
Considerable emphasis was also laid on aligning business with market requirements, which resulted in the development and launch of new products such as Enhanced Due-Diligence (EDD) and i-Check. CRISIL also signed a memorandum of understanding with the Small Industries Development Bank of India to launch CriSidEx, India''s first sentiment index for MSEs.
In 2018, the focus would be on non-retail originations for new products such as CRISIL Credit Assessment Score (CCAS), EDD and i-Check. The smefirst.com platform is also expected to provide a fillip to revenue by enhancing reach across India, thereby providing MSMEs with all forms of credit assessments in an extremely convenient manner. Further, process automation will drive cost efficiencies.
The medium to long-term outlook for the MSME sector is positive given that it is a high-priority area for the government and it is also trying to facilitate greater flow of credit to the segment.
Operations
CRISIL Ratings maintained its market leadership in 2017, driven by strong performance in bond ratings and client acquisitions. There were 2,982 new BLRs and about 15,000 MSME assessments during the year. Ratings have been assigned on more than 25,000 large and mid-scale corporate to date, in addition to over 125,000 SME ratings and assessments.
We increased our bond market share by closing new deals with some marquee corporate groups and capitalizing on our relationship with existing clients. We also on-boarded 150 new large corporate clients, giving us newer avenues to grow our business.
In 2017, we were the first to assign an EL rating for infrastructure projects. The EL INFRA product witnessed modest interest as it is early days in terms of acceptance by both the market and regulators. CRISIL Ratings was the first to rate a credit-enhanced discom bond, and also rated India''s first road project based on the hybrid annuity model. Moreover, drawing from our deep understanding of credit cycle, we developed criteria and methodology for independent credit evaluation (ICE) of the sustainable portion of debt in stressed assets for banks and other financial institutions. Overall, we received promising responses for these innovations from the market.
We maintained our multi-pronged approach to stakeholder management. To strengthen our engagement with the issuer and investor community, we extensively engaged with their senior management, delivered sectoral presentations and leveraged the digital channel to share our thought leadership reports and periodical publications on a regular basis.
We strengthened our market presence by regularly hosting web conferences on topical matters, getting covered by premier news channels and engaged with industry associations through panel discussions and speaking assignments, or as knowledge partners at conferences.
We also extensively engaged and worked with regulators to put forth our opinions on rating standards and governance policies for the credit rating industry.
CRISIL Ratings successfully hosted an Investor Discussion Forum (IDF) under its ''Fin Insights'' umbrella on the nonbanking finance company (NBFC) sector. The IDF, titled ''NBFCs: Fortunes on the Uptrend'', saw us present our insights on the sector and its underlying asset-classes such as housing finance, vehicle finance and wholesale finance. We discussed the emerging trends and challenges, and shared our views on the sector''s growth trajectory and future expectations. The conference drew several eminent NBFC industry leaders and received positive feedback on content and execution.
CRISIL Ratings also organized a joint conference with S&P Global and CRISIL Research for the investor community - key personnel of mutual funds, insurance and wealth management institutions - wherein we discussed opinions on the global economy and the Indian banking sector. Furthermore, CRISIL Ratings partnered with S&P Global Ratings on joint meetings and pitches to clients. Additionally, jointly hosted the CRISIL-S&P Global Ratings annual seminar.
Other noteworthy franchise activities in 2017 included webinars on banking, renewable energy, roads sector and press releases on stressed assets, NPA resolution, municipal bonds and retailing.
We hosted the ''Ratings Regional Conclave'', to deepen our engagement with both prospective and existing clients in Tier- II geographies, providing us a platform to present our views on relevant industry trends and have close discussions with the clients.
CRISIL Global Analytical Center (GAC) partnered with S&P Global Ratings on key criteria implementation and optimization initiatives in the domains of data, public finance and EMEA structured finance, provided support to Platts, and launched new analytics products.
With the evolving global regulatory requirements, GAC continued its focus on strengthening its internal controls framework in collaboration with S&P Global Ratings'' control functions. GAC''s culture of continuous improvement has created ongoing efficiency gains for S&P Global Ratings through lean management tools, work standardization and process re-engineering. This results in more consistent support levels across diverse geographies and asset classes.
B. Research
B.1. Global Research & Analytics (GR&A)
Highlights
- Financial Research business added new logos on both sell-side and buy-side, while the focus on automation and technology remained key
- Launched our unique research automation platform, SMART
- Risk & Analytics reported strong business growth with diversification in existing accounts, acquisition of several key strategic clients, augmentation of portfolio of client offerings, and an encouraging market response for our services, designed to help clients satisfy various regulatory directives.
- Data Analytics segment witnessed growth, continuing to add new clients (including one of the biggest buy-side names in the market) and delivering analytical and innovative products and solutions to customers.
Business environment
Regulatory developments across the globe were a major driver for the banking industry in 2017. In response to persistent cost pressures and squeezed margins, banks are closely monitoring and transforming their front, middle, and back-office operations in order to realise cost-efficiencies and differentiate their services. The upcoming implementation of the Markets in Financial Instruments Directive II (MiFID II) regulations is expected to impact sell-side securities research. However, it also presents new opportunities in the buy-side space as traditional active AMs are reviewing their investment and research cost models due to tight market conditions, downward trend of research charges, and increasing cost of regulatory compliance. Global Model Risk Management guidelines have started to converge, with the US supervisors'' SR 11-7 guidelines serving as the benchmark. 2017 also witnessed continued regulatory scrutiny of banking institutions and fines for non-compliance with regulatory mandates, further exacerbating cost pressures.
Market appetite for GR&A''s stress testing, model validation, regulatory change management, and financial crime and compliance (FCC) analytics continues to be strong. Further, SPARC a subscription service platform for Credit Risk Assessments found widespread acceptance with a number of large and mid-size banks. In addition, the industry is increasingly adopting advanced automation and analytics solutions such as machine learning (ML), artificial intelligence (AI) and big data, and streamlining data analysis practice.
Within the Data Analytics space, there is growing demand for technologically entrenched solutions involving big data analytics, higher order automation, natural language generation, and application of machine learning as businesses look towards making processes more efficient and differentiated from traditional data mining.
Operations
In the Financial Research business, we managed to make inroads in regional and mid-tier bank segments in the US and the UK despite challenging business environment and uncertainties surrounding MiFID II implementation. Buy-side continues to be a growth vertical - we have added multiple new logos in this segment (including one of the biggest asset managers in the world), and have significantly increased our market outreach in various geographies.
The Risk & Analytics business has started to reap meaningful returns from investments made in previous years. 2017 was a year of substantial growth for our FCC analytics and change management offerings, specifically for FRTB and risk data aggregation guidelines. We have witnessed growth in existing clients, as well as rapid ramp-up of services provided to three new clients added during the year. We continue to focus on knowledge management and process optimization through various initiatives that have started to produce incisive outputs, allowing us to make our business processes more efficient and streamlined.
Our pursuit of an agenda focused on turning services into products continued in 2017, with a focus on modular solutions in FCC, developing tools and utilities pertaining to key regulations, and much progress in our work on the concept of a shared utility to provide data, risk models and analytics to the banking industry. Our data analytics products and offerings are continuously evolving to meet the rapidly changing market needs.
In addition, we launched our research automation platform, SMART (Simple Modular Analytics Research Toolkit) in New York this year. A proprietary platform that fully automates financial research tasks, SMART has gained a lot of interest in the market. We have also managed to complete several successful pilots and demos to our existing and prospective clients.
We continue to invest extensively in human capital, recognizing this as a key driver of our success, by grooming talent through a series of comprehensive, in-house training programmes, which are routinely reassessed to ensure continued relevance, given the rapidly evolving market landscape and changing client needs. We have continued to develop our franchise by participating in and sponsoring industry conferences, roundtable meetings of senior client stakeholders, hosting web-conferences, and publishing topical thought leadership research pieces across the spectrum of our strategic focus areas.
B.2. CRISIL Coalition Highlights
- Added 7 clients, including a few regional players
- Enhanced existing analytics, resulting in more complete relationships per client
- Increased revenues from four out of five clients
- Commercialized and scaled up services in transaction banking, and introduced new analytics for treasury and lending
- Coalition was referred to in 450 articles across 90 global publications and its analytics were referenced in 20 investor relations presentations across 15 leading banks
Business environment
CRISIL Coalition generates a majority of its business from the Corporate and Investment Banking (CIB) industry. For the CIB industry, 2017 was sombre and the outlook for 2018 is flat. The Coalition Index that tracks performance of the top 12 global investment banks continued with its trend of decline in revenues in FY2017, posting the lowest level since 2008. The decline was driven by poor performance in FICC, which was partially offset by improvement in IBD. The second half of 2017 was particularly weak across most FICC and equity products. Operating margin of these banks also deteriorated after two years of improvement. Consequently, return on equity declined 90 bps.
Most of global banks expect a similar environment to continue at least up to the second half of 2018 with no reduction in volatility. As result, we expect relatively flat to negative performance in the global markets. This would be partially compensated by moderate growth in banking. We also expect competition to intensify as European banks have completed their restructuring and became aggressive in 2017.
Operations
In the backdrop of a tight environment, CRISIL Coalition embarked on several initiatives to enhance its market relevance and connect with clients. These included reaching out to prospective clients, including regional players. In 2017, we added 7 more clients to our impressive list of global investment banks. We also enhanced our analytics portfolio to provide a comprehensive set to clients. We commercialized our services in transaction banking during the year and launched new analytics for treasury and lending. These services have received good traction with clients and are expected to contribute to growth in 2018.
CRISIL Coalition also extended its outreach to senior levels at banks and established deeper connects with heads of corporate and investment banks. More than 90 publications globally carried CRISIL Coalition''s views and quoted it during the year. CRISIL Coalition was also referenced by 15 leading banks in 20 investor relations presentations. We cleared a number of high-intensity client audits and underwent Phase 1 of the SSAE 18 Attestation, thereby confirming our high standards of controls. During the year, the business provided meaningful rotation opportunities to a number of employees, both within India and globally.
B.3. India Research Highlights
- Maintained our dominant and premium position in the flagship Industry Research business with coverage across 90 sectors
- Successfully launched our new product Quantix, a cross segment analytics tool to drive growth in the Research business.
- Entered the eLearning space with a bouquet of credit & risk management course modules
- Enhanced the Research delivery platform (Cutting Edge V2) a faster and more user friendly experience
- Launched the ULIP rankings which marks our potential to become industry benchmark in the insurance space
- Witnessed healthy revenue growth in the Customized Research business on the back of significant traction in the Automobiles, BFSI and Logistics sectors
- Largest provider of valuation of fixed-income securities to the Mutual Funds, insurance and banking industries, valuing over USD 1,573 billion of Indian debt securities.
Business environment
While pressure on profitability of banks has impacted their research spends, it has also created new opportunities for research in stressed asset segment. Further, NBFC segment is witnessing entry of many new players and robust business growth creating need for research. Apart from ongoing coverage on 90 sectors, we launched many special reports in areas such as agriculture, NBFCs, SMEs, and eight new reports focusing on niche sectors such as animal feeds, home electrical, mobile handsets, and paints.
The market witnessed an increasing demand for more dynamic, granular data / tools beyond traditional qualitative research. There is also a growing focus on investible indices and technology enabled solutions. In order to cater to such demands, in mid-2017, we successfully launched our new product Quantix - integrated data platform for Indian market. The product, positioned as a unique offering of data, tools and analytics, is being released in a modular fashion and has received positive response from the market.
Buoyant Initial Public Offering (IPO) market contributed significantly to the growth of the customized research. We were the agency of choice for Investment Banks and issuers in the IPO market for providing research content in the industry section of Draft Red Herring Prospectus (DRHP) in 2017.
Operations
CRISIL Research works with nearly 1000 Indian and global clients, including 90% of India''s banking industry by asset base, 15 of the top 25 Indian companies by market capitalization, and nearly all Indian mutual fund and life insurance companies
Addressing our increasing client needs, we have set up Analytical Quality Boards and Alpha labs, a special team created to drive innovation and new projects in the research business. They provide differentiated ahead of the curve analysis and frequent timely updates. These initiatives have been undertaken to funnel new product launches & improve existing offerings.
For the second consecutive year, the Customized Research witnessed healthy revenue growth on the back of significant traction in the core sectors - Automobiles, BFSI and Logistics sectors. We also forayed in the competitive benchmarking space and worked with some of the key clients in the industry.
In the fixed income part of our Funds & Fixed Income (F&FI) business, we consolidated our strong position in the valuation space further by winning mandates from general insurers and corporate. We are the largest provider of fixed-income indices in India and have consolidated our position by launching 11 new indices (2 in India and 9 in Sri Lanka) during the year.
In the mutual fund part of our F&FI business, we enhanced our presence with corporate treasuries and exempted provident fund trusts, helping them in portfolio performance review and risk monitoring. We have been mandated by Employees State Insurance Corporation to help in selection of fund managers, custodian and external concurrent auditor for its investment corpus.
The Executive Training business saw remarkable growth in open programmes with the introduction of specialized sector-focused trainings. In addition, the launch of eLearning courses will enable a much larger user base to benefit from CRISIL''s expertise in credit and risk management
The CRISIL Centre for Economic Research (C-CER) and the CRISIL Research businesses continued to focus on franchise and thought leadership activities by conducting distinctive research on contemporary issues. We published several landmark reports during the year, covering a wide spectrum of areas such third-year performance of the Modi government, India''s trade competitiveness, inflation growth trade off, volatility in pulses prices and farmers distress, impact of rains on the economy and performance of states. CCER participated in over 18 leading industry conferences and panel discussions, and hosted 4 events/webinars on a variety of topics.
We also released articles, press releases and reports on a wide range of sectors such as telecom, housing, wind power, cab aggregators, and impact assessment of the National Steel Policy and GST implementation on SME sectors. CRISIL Research was the knowledge partner for a series of events carried out by ASSOCHAM (The Associated Chambers of Commerce and Industry of India) and the Renewable Energy
Investment and Finance Forum (REIFF) 2017. CRISIL Research also organized a web conferences on the Launch of New NDBIB CRISIL Indices in the Sri Lankan Debt market, steel sector and trends, and MSME lending.
C. Advisory
C.1. CRISIL Infrastructure Advisory Highlights
- Deepened our presence in Urban Infrastructure/ Smart Cities segment with large multi-year program management mandates
- Highest ever new business booked during the year; strong order book
- Hosted the first ''CRISIL India Infrastructure Conclave'', which launched the inaugural edition of CRISIL India Infrastructure Yearbook and ''CRISIL InfraInvex'' - the country''s first invest ability index.
Business environment
Infrastructure sector remains one of the top-most priorities for the country, and it was heartening to see the government of India giving it the right impetus by launching new programmes and schemes like Bharatmala, Sagarmala, UDAN and Saubhagya. The Smart City mission also picked up momentum with a total of 90 cities being selected under the challenge mechanism till the end of the year. The roads sector showed appreciable progress with significant improvement in the risk profile of ongoing highway projects. The government of India continued to carry the burden, as private sector investments remain muted with the dual challenges of stressed balance sheet of developers and the banking sector hesitant to increase their exposure to the infrastructure sector.
Going forward, it is expected that the government will prioritise implementation of the ongoing programmes and schemes on ground. ''Competitive Co-operative federalism'' has been promoted by the government which will empower state and cities to have bigger role in decision making. Although the government seems focused on resolving the stressed assets and bad loans issue, the return of private sector to the infrastructure sector still seems a few quarters away.
Operations
The business started the year on a good note, with a couple of large multi-year programme management mandates in flagship programs of the government - deepening our foray in this defined strategic pursuit area. The momentum continued throughout the year, and the business had a record year in terms of new business booked. This enabled the business to build up a strong order book to deliver in the coming months. Some key wins in the urban reforms and municipal finance area - mainly in the area of implementation support for smart cities, and Value Capture Finance (VCF) potential assessment for 50 cities in India - helped the business in strengthening its leadership position in the area of urban infrastructure advisory. The business also pursued a strategic agenda of deeper relationships at the state government level, and was successful in making significant inroads in some of the target states like Maharashtra, Andhra Pradesh, Uttar Pradesh and West Bengal. The international business, although still muted, showed some improvement towards the later part of the year, with mandate wins in some of the target emerging markets like Indonesia, Tanzania and Namibia. The business reported a very robust growth in revenues and margins during this year.
An important strategic initiative this year was to increase franchise and thought leadership. The business successfully launched the inaugural edition of ''CRISIL India Infrastructure Yearbook'' - a one-of-its-kind annual publication that provides deep insights into the key infrastructure sectors in India. The business also launched ''CRISIL InfraInvex'' - the country''s first investability index for the infrastructure. These were launched by Shri Amitabh Kant, CEO NITI Aayog, at a high-profile ''CRISIL India Infrastructure Conclave'' in New Delhi in October. This conclave, hosted by the business, was attended by nearly 200 senior stakeholders, and received very good coverage in leading media. In addition, media visibility for the business had a sharp increase with several authored articles (including opinion page pieces) being published in leading business media.
C.2. CRISIL Risk Solutions
Highlights
- Continued momentum in risk advisory services, especially in non-banking space
- Expansion of footprint in South Asia, the Middle East and Africa
- Developed new offering on IFRS 9/ IndAS109, gaining good traction globally
Business environment
The business environment in India has been fairly stable over the last 12 months, with continued focus on easing stress in credit quality in the banking industry. Growth in lending has been principally contributed by NBFCs as banks continue to face stress, though going forward, the bank recapitalization plan proposed by the government could give banks the edge.
Momentum in internal credit rating platform & internal rating models continues, with small banks and NBFCs focusing on their underwriting quality. In spite of increasing awareness for credit monitoring and asset quality, institutions are adopting a cautious approach towards implementing EWS (automated monitoring product).
CRISIL Risk Solutions'' risk advisory service business has shown good momentum and continues to be an opportunity to show our deep domain expertise, especially in the credit domain and analytics. In the international market, we have seen good momentum for our new offering around Expected Credit Loss (ECL) computations catering to IFRS9 regulations. We expect traction to increase in markets including India for financial institutions, in view of the approaching deadline for compliance.
Operations
The business continued to focus on product initiatives and expanding risk advisory offerings for NBFCs. In the international market, growth was largely driven through internal credit rating platform. The year saw continued consolidation, with investments in products and efficiencies in implementation. The year witnessed significant improvement in customer satisfaction, with various customer-centric initiatives. The business took efforts to undertake outreach in the international market across South Asia, Middle East and Africa for developing a strong pipeline and increased collaboration with S&P Global. We organized webinars on Ind AS provisioning and its impact on the lending community, which was well received. In addition, thought leadership articles were published on IFRS 9.
CRISIL Risk Solutions expects to build on the current momentum on offerings, with increased analytical capabilities and by expanding its footprint in global markets in 2018.
D. Franchise collaboration with S&P Global
We deepened our engagement with S&P Global and its group companies through a variety of outreach initiatives across geographies.
We jointly hosted the annual flagship seminar India Credit Spotlight, on the theme ''Opportunities and risks in the face of reforms'', in Mumbai, Hong Kong and Singapore. The seminar was very well appreciated by investors and issuers alike.
In London, we partnered with S&P Global to organize a buy-side conference on ''MiFID II and the Changes in Research Consumption Practices'' and presented a research paper on Research Unbundling.
We also regularly participated in S&P Global webinars and shared our perspectives on a variety of topical themes.
Krishnan Sitaraman, Senior Director, Ratings, participated as a guest speaker in the webinar titled ''India Non-Bank Financial Companies - A sector whose time has arrived''. Additionally, Somasekhar Vemuri, Senior Director, Ratings, shared CRISIL views on the haircuts required for resolving non-performing assets in the banking sector during an S&P Ratings webinar on the Indian banking sector.
We hosted Economist Forums with S&P Global Asia-Pacific Chief Economist Paul Gruenwald on the rebalancing in China and its implications, and with S&P Global EMEA Chief Economist Jean-Michel Six on global trade barriers and Brexit. Additionally, CRISIL Ratings hosted a joint investor briefing with S&P Global to bolster our relationship with the investor community.
CRISIL''s Chief Economist Dharmakirti Joshi participated in several forums organized by S&P Global.
He was a panellist at the Global Economic Outlook morning briefing in New York, moderated the leadership panel on ''Financial reforms, next generation investing and keeping up with global competition'' at S&P BSE Indices'' annual thought leadership seminar, and was a panellist in the S&P Dow Jones thought leadership seminar titled ''Eyes on Asia: A brave new word'' in Hong Kong.
Additionally, CRISIL continued to provide outlook on the Indian economy, contributing an article, ''India to ride recent reforms to grow'' for an S&P Global publication. S&P Global Platts organized the 13th Annual Steel Markets Asia Conference in Mumbai, where Rahul Prithiani, Director, CRISIL Research, delivered a presentation on the latest trends in steel end-user buying patterns.
E. Human Resources
The Human Resources team made good strides in 2017. At the end of its financial year, CRISIL''s headcount was 3,904, including all wholly owned subsidiaries.
Highlights
We were able to benchmark CRISIL''s employee engagement levels globally (through the adoption of VIBE - S&P Global''s annual employee satisfaction survey), allowing us to share best practices. Adoption of technology enabled platform, has helped us engeged with employees. With a focus on improving employee benefits, a number of programmes were rolled out to be able to stay ahead of the market.
Our talent development programme was well implemented, with more than 300 employees undergoing diverse training modules. Leadership development, succession planning and other organizational development programmes progressed in line with CRISIL''s long-term strategy, with specific development focused modules for the leadership team. Our job rotation programme got a relook this year to encourage more participation from employees and facilitate their career aspirations. We imparted 6,538 person-days of diverse training to employees during the year, complementing our focus on continued learning.
Directors
The members of the Board of Directors of the Company are eminent persons of proven competence and integrity. Besides experience, strong financial acumen, strategic astuteness and leadership qualities, the Directors have a significant degree of commitment to the Company and devote adequate time for the meetings, preparation and attendance. Board members possess the education, expertise, skills and experience in various sectors and industries required to manage and guide the Company, thus bringing in diversity to Board perspectives. The brief profiles of Directors forming part of this Annual Report gives an insight into the arenas where the Directors have qualification and experience, thus enhancing the diversity of the Board.
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. The Policy includes the scope and terms of reference of the Nomination & Remuneration Committee and the roles, responsibilities, criteria and procedures towards key aspects of Board governance including the size and composition, criteria for Directorship, terms & removal, succession planning, evaluation framework and on-going training and education of Board members. The Policy lays down detailed guidelines for remuneration of the Board, Managing Director and employees, covering fixed and variable components and long term reward options, including employee stock option plans.
Directorship changes
Retirement and resignations
Mr. Douglas L. Peterson, Chairman, resigned from the Company with effect from October 17, 2017, owing to his other commitments in his role as Chief Executive Officer of S&P Global Inc. Your Directors place on record their sincere appreciation for Mr Peterson''s encouraging stewardship, constructive inputs and continuous guidance to the Company and the Board, that helped set the strategy of the Company and chart its roadmap for future growth.
Mr. H. N. Sinor''s tenure as an Independent Director of the Company ended on October 25, 2017. Mr. H. N. Sinor had taken office as a Non-Executive, Independent Director of CRISIL in October 2007 and demitted office after completion of 10 years. Your Directors place on record their sincere appreciation for the strong support, advice and guidance provided by Mr. Sinor to the Company and its Management, which was immensely valuable to drive the growth and performance of the Company.
Appointment
Mr. John L. Berisford, Non-Executive Director on the Board, was appointed as Chairman of the Board with effect from October 17, 2017.
Mr. Ewout Steenbergen was appointed as a director in casual vacancy caused by the cessation of directorship of Mr. Douglas L. Peterson and Mr. Girish Paranjpe was appointed as Additional Director (Independent) with effect from October 17, 2017. The Company has received notices under Section 160 of the Companies Act, 2013, from a member signifying his intention to propose the candidature of Mr. Ewout Steenbergen and Mr. Girish Paranjpe for the office of Directors.
Mr. Ravinder Singhania was appointed as alternate director to Mr. John L. Berisford with effect from October 18, 2017.
Re-appointment
In accordance with the Articles of Association of the Company and the provisions of the Companies Act, 2013, Ms. Martina Cheung retires by rotation and being eligible, seeks reappointment.
Brief profiles of Mr. Ewout Steenbergen, Mr. Girish Paranjpe and Ms. Martina Cheung have been given in the Notice convening the Annual General Meeting.
Board independence
Our definition of ''Independence'' of Directors is derived from Regulation 16(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149(6) of the Companies Act, 2013. Based on the confirmation / disclosures received from the Directors and on evaluation of the relationships disclosed, the following Non-Executive Directors are Independent:
a) Dr. Nachiket Mor
b) Mr. M. Damodaran
c) Ms. Vinita Bali
d) Mr. Girish Paranjpe
Committees of the Board
There are currently five Committees of the Board, as under:
- Audit Committee
- Corporate Social Responsibility Committee
- Investment Committee
- Nomination and Remuneration Committee
- Stakeholders'' Relationship Committee
Details of all the Committees along with their charters, composition and meetings held during the year, are provided in the âReport on Corporate Governanceâ, a part of this Annual Report.
Number of meetings of the Board
The Board meets at regular intervals to discuss and decide on Company / business policy and strategy apart from other Board business. The Board exhibits strong operational oversight with regular presentations by business heads to the Board. An annual planner of topics to be discussed at the Board through its quarterly meetings is pre-discussed with the Board. The Board / committee meetings are pre-scheduled and a tentative annual calendar of the Board and committee meetings is circulated to the Directors well in advance to help them plan their schedule and to ensure meaningful participation in the meetings. Only in case of special and urgent business, if the need arises, the Board''s approval is taken by passing resolutions through circulation, as permitted by law, which are confirmed in the subsequent Board meeting.
The notice of Board meeting is given well in advance to all the Directors. Usually, meetings of the Board are held in Mumbai. The agenda of the Board / committee meetings is circulated at least seven days before the date of the meeting. The agenda for the Board and committee meetings includes detailed notes on the items to be discussed at the meeting to enable the Directors to take an informed decision. Since the last two years, the Company has moved to a two-day schedule for its quarterly committee and Board meetings, which allows for greater discussion time for Board matters.
The Board met seven times in financial year 2017 viz., on February 11, April 20, June 23, June 28, July 18, September 29 and October 17. The maximum interval between any two meetings did not exceed 120 days.
Compliance with secretarial standards on Board and Annual General Meetings
The Company has complied with secretarial standards issued by the Institute of Company Secretaries of India on Board Meetings and Annual General Meetings.
Annual evaluation by the Board
During the year, the Board has carried out the annual evaluation of its own performance as well as the evaluation of the working of its Committees and individual Directors, including Chairman of the Board. This exercise was carried out through a structured questionnaire prepared separately for Board, Committees, Chairman and individual Directors. The performance evaluation of the Chairman was carried out by the Independent Directors at a separate meeting of the Independent Directors. The questionnaire and evaluation process was reviewed in the context of SEBI Guidance Note on Board evaluation dated January 5, 2017, and necessary alignment was made with the requirements.
The questionnaire for Board evaluation is prepared taking into consideration various aspects of the Board''s functioning such as understanding of Board members of their roles and responsibilities, Board meeting and reporting process, time devoted by the Board to Company''s long-term strategic issues, quality and transparency of Board discussions, quality, quantity and timeliness of the information flow between Board members and management, Board''s effectiveness in disseminating information to shareholders and in representing shareholder interests, Board information on industry trends and regulatory developments and discharge of fiduciary duties by the Board.
Committee performance is evaluated on the basis of their effectiveness in carrying out their respective mandates.
Peer assessment of Directors, based on parameters such as participation and contribution to Board deliberations, ability to guide the Company in key matters and, knowledge and understanding of relevant areas were received by the Board for individual feedback.
The Board acknowledged key improvement areas emerging through this exercise and action plans to address these are in progress.
During 2017, the Company also auctioned the feedback from the Board evaluation process conducted in the previous year, i.e. 2016. Suggestions were incorporated in strengthening the Board review calendar plan for 2017 with thematic additions on technology road-map and business continuity review, increasing the focus on internal controls through additional Audit Committee meetings, discussion on key executive succession planning and improved Board scheduling and time management. Opportunities to increase awareness on industry trends and peers were provided to the Board through sessions by internal and external speakers, including some industry experts; these helped contextualizing the budgeting and strategy exercises of the Company. During the year, the Board competencies were diversified with the addition of a Director with technology background.
Risk Management Policy, Compliance framework and Internal Control Adequacy
The Board has adopted policies and procedures for ensuring orderly and efficient conduct of its business, including adherence to the Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial disclosures. The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by statutory as well as internal auditors. Significant audit observations and follow up actions thereon are reported to the Audit Committee. For ensuring independence of audits, the internal auditors report directly to the Audit Committee. Both the internal and statutory auditors have exclusive executive sessions with the Audit Committee on a regular basis. In addition, during the year, the Management performed a review of key controls impacting financial reporting, at entity as well as operating levels, and submitted its report to the Audit Committee and the Board.
The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives, which has been enhanced during this year. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company. These have also been reported and discussed in detail in the Management''s Discussion and Analysis Report, annexed to this report.
Information security has emerged as a major risk in recent times to the financial services industry. The Company continuously evaluates exposure from this perspective. During the year, we implemented actions to enhance security by enhancing intrusion detection systems, next generation firewall, a new cybersecurity solution, and upgraded data loss prevention systems, among many measures to manage and mitigate cyber risks. Additionally, an organization-wide Business Continuity Project was initiated to align the Company''s Business Continuity Programme to ISO 22301:2012 Societal security -- Business Continuity Management System (BCMS). This initiative intended strengthening the resilience of the organization. BCMS enables an acceptable level of service during disaster, protects & supports employees, asset and business, reduces risk and enables the Company to meet statutory, regulatory and contractual obligations.
The Company has a robust framework for monitoring compliance with applicable laws. Adequately empowered functional teams operate as the first line of defense. Their procedures and actions are routinely subject to audit and test procedures ensuring robustness of the system. During the year, the Company introduced an additional IT-enabled tool to monitor compliances and support the compliance assessment process. A quarterly certification on compliance with laws is provided by senior management to the Board.
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors and external consultants and the reviews performed by management and the relevant board committees, including the Audit Committee, the Board is of the opinion that the Company''s internal financial controls with reference to financial statements were adequate and effective during financial year 2017.
Directorsâ responsibility statement
Your Directors hereby confirm that:
i. i n the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
ii. 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 profits of the Company for that period;
iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv. they have prepared the annual accounts on a going concern basis;
v. they have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and
vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
Particulars regarding conservation of energy, technology absorption, and foreign exchange earnings and outgo
The particulars regarding foreign exchange earnings and outgo appear as separate items in the notes to the accounts. As such, the Company does not own any manufacturing facility and hence our processes are not energy intensive. Hence particulars relating to conservation of energy and technology absorption stipulated in the Companies (Accounts) Rules, 2014, are not applicable.
However we endeavour to support the environment by adopting environment friendly practices in our office premises. CRISIL House, Mumbai, our corporate headquarters, is a Platinum-rated Green Building. During 2017, one more of our offices, CRISIL House, Gurgaon earned the IGBC Green Existing Buildings certification in the Gold category. These certifications recognize the efforts of the Company on waste segregation and recycling, usage of eco-friendly refrigerants for air conditioning requirements, reducing heat island effect in the design of the building and parking, using eco-friendly materials in gardening, housekeeping, rain water harvesting and other measures at water efficiency. CRISIL House was recently featured in the book ''Pathways to Green India: Innovative Ideas for Public Spaces, Vol II'', published by Earth Day Network, an international NGO, which operates in the sustainable environment space.
We have rolled out a policy which aims at improving environmental performance of CRISIL. The policy is our commitment to be environmentally responsible and encourages our employees and members of the wider community to work for the environment by setting and monitoring environmental objectives, making efficient use of natural resources, elimination of waste and promoting recycling of resources.
During 2017, we commenced an important initiative to convert wet garbage generated in CRISIL House into compost instead of giving it off for municipal collection. Organic manure thus generated from wet waste is being used for in-house garden landscaping requirement. Separate wet and dry garbage rooms have been created for storing garbage.
In addition, under the CRISIL RE employee volunteering program, CRISIL leverages its workforce as agents of change to drive environment conservation actions. Details of the outcomes from these initiatives during 2017 are given in the Corporate Social Responsibility Report published elsewhere in the Annual Report.
Corporate Social Responsibility
The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The role of the committee is to review the CSR Policy, indicate activities to be undertaken by the Company towards CSR and formulate a transparent monitoring mechanism to ensure implementation of projects and activities undertaken by the Company towards CSR.
The CSR Policy of the Company and further details about the initiatives taken by the Company on Corporate Social Responsibility during the year under review have been appended as Annexure II to this Report.
Vigil mechanism
The Company has established a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report.
Subsidiary companies
As on December 31, 2017, the Company had one Indian and seven overseas wholly owned subsidiaries. In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report. A statement containing salient features of the financial statements of the subsidiary companies is also included in the Annual Report.
On November 15, 2017, CRISIL entered into a definitive agreement to acquire 100% of the equity shares of Pragmatix Services Private Limited (''Pragmatix''). Pragmatix is a data analytics company focused on delivering cutting-edge solutions in the ''data to intelligence'' lifecycle to the banking, financial services & insurance (BFSI) vertical. Its Big Data capabilities and advanced data models provide descriptive, prescriptive and predictive analytics delivered through its proprietary Enterprise Data Analytics Platform. In its short history post incorporation in 2010, Pragmatix has successfully built and deployed solutions across the risk, sales, and finance domains in India, Middle East and North America. The transaction was valued at a total consideration of Rs. 56 crore. Pragmatix will strengthen CRISIL''s position as an agile, innovative and global analytics company. It will enable CRISIL to leverage its technology platform and deep domain expertise to enhance its business intelligence, analytics and risk management offerings for financial sector clients in India and globally. As on December 31, 2017, Pragmatix was not a subsidiary of CRISIL, but it became a wholly owned subsidiary of the Company w.e.f. January 24, 2018.
The Company has no associate companies within the meaning of Section 2(6) of the Companies Act, 2013.
In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein its standalone and the consolidated financial statements has been placed on the website of the Company, www.crisil.com. Further, as per fourth proviso of the said section, audited annual accounts of each of the subsidiary companies have also been placed on the website of the Company, www.crisil.com. Shareholders interested in obtaining a copy of the audited annual accounts of the subsidiary companies may write to the Company Secretary at the Company''s registered office.
The Company has obtained a certificate from the Statutory Auditors certifying that the Company is in compliance with the FEMA Regulations with respect to downstream investments made in its subsidiary companies as operating during the year.
Particulars of contracts or arrangements with related parties referred to in Section 188(1)
A significant quantum of related party transactions undertaken by the Company is with its subsidiary companies engaged in product delivery of CRISIL businesses and business development activities. The Company has also been providing analytical support to S&P Global entities as a part of a Master Services Agreement, which transaction has been approved by the shareholders though a resolution passed by postal ballot on December 15, 2014.
The Audit Committee pre-approves all related party transactions. The details of the related party transactions undertaken during a particular quarter are placed at the meeting of the Audit Committee held in the succeeding quarter.
All contracts / arrangements / transactions with related parties that were executed in 2017 were in the ordinary course of business and at an arm''s length. During the year, there were no related party transactions which were materially significant and that could have a potential conflict with the interests of the Company at large. All related party transactions are mentioned in the notes to the accounts. The particulars of material contracts or arrangements with related parties referred to in Section 188(1), is given in prescribed Form AOC - 2 as Annexure III.
As required under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Related Party Transactions Policy, which has been put up on the website of the Company at https://www.crisil.com/en/home/ investors/corporate-governance.html. The Company has developed an operating procedures manual for identification and monitoring of related party transactions.
Particulars of loans, guarantees or investments under Section 186
Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013, are provided in the Notes to Financial Statements.
In June 2017, CRISIL has purchased 26,22,430 equity shares of CARE Ratings Limited (CARE) representing 8.9% of its equity share capital. CARE is a SEBI registered credit rating agency and is listed on BSE and NSE. The investment has been made pursuant to a bid process conducted by Canara Bank, subsequent to their request for quotation. This stake purchase is an investment in the excellent long-term prospects of the credit rating sector in the country. This investment in the equity of CARE has no special rights.
Auditorsâ Report
M/s. Walker Chandiok & Co LLP (an affiliate of Grant Thornton network) are the Statutory Auditors of the Company. Their report is a part of the Annual Report.
Secretarial Audit Report
The Board of Directors of the Company has appointed Dr. K. R. Chandratre, Practising Company Secretary, to conduct the
Secretarial Audit and his Report on Company''s Secretarial Audit is appended to this Report as Annexure IV.
Comments on Auditorsâ Report
There are no qualifications, reservations or adverse remarks or disclaimers made by Walker Chandiok & Co LLP, Statutory Auditors, in their report and by Dr. K. R. Chandratre, Company Secretary in Practice, in his secretarial audit report.
The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.
Managementâs Discussion and Analysis Report
The Management''s Discussion and Analysis Report for the year under review, as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed to this report.
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 stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of the Annual Report. A certificate from the auditors of the company confirming compliance with the conditions of corporate governance as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is also published elsewhere in this Annual Report.
Particulars of remuneration
Disclosures with respect to the remuneration of Directors and Employees as required under Section 197(12) of Companies Act, 2013 read with Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been appended as Annexure V to this Report.
In accordance with the provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of every employee covered under the said rule are available at the Registered Office of the Company during working hours for a period of 21 days before the Annual General Meeting and shall be made available to any shareholder upon request.
The Nomination and Remuneration Committee of the Company has affirmed at its meeting held on February 13, 2018 that the remuneration is as per the remuneration policy of the Company.
Employee Stock Option Schemes
The Company has three employee stock option schemes. The Employee Stock Option Scheme - 2011 (ESOS 2011) was approved by the shareholders vide a special resolution passed through postal ballot on February 4, 2011. The Employee Stock Option Scheme - 2012 (ESOS 2012) was approved by the shareholders vide a special resolution passed through postal ballot on April 10, 2012. The Employee Stock Option Scheme - 2014 (ESOS 2014) was approved by the shareholders vide a special resolution passed through postal ballot on April 3, 2014, and amended by special resolution of shareholders at the 30th Annual General Meeting held on April 20, 2017.
During 2017, there were no material changes in the Employee Stock Option Plans of the Company except the amendment made to ESOS 2014 as specified above. The Schemes are in compliance with the SEBI Regulations on ESOS. As per Regulation 14 of SEBI (Share Based Employee Benefits) Regulations, 2014 read with SEBI circular dated June 16, 2015 the details of the ESOS are uploaded on the Company''s website https://www.crisil.com/en/home/investors/financial-information/annual-report.html in terms of Circular No CIR/ CFD/POLICY CELL/2/2015 dated June 16, 2015 issued by Securities and Exchange Board of India.
The Company has received a certificate from M/s. Walker Chandiok & Co LLP that ESOS 2011, ESOS 2012 and ESOS 2014 have been implemented in accordance with the SEBI Regulations and the resolution passed by the members in their general meeting. The certificate would be placed at the ensuing Annual General Meeting for inspection by the members.
Extract of Annual Return
The Extract of Annual Return as provided under Section 92(3) of the Companies Act, 2013 and as prescribed in Form No. MGT-9 of the rules prescribed under Chapter VII relating to Management and Administration under the Companies Act, 2013 is appended as Annexure VI.
Financial year
The Company and all its subsidiary companies, in India and across the world, except Pragmatix Services Private Limited which has been recently acquired, follow the calendar year as the financial year in terms of a special approval obtained from the Company Law Board in 2015.
CEO and CFO Certification
Certificate from Ms. Ashu Suyash, Managing Director & CEO and Mr. Amish Mehta, Chief Financial Officer, pursuant to provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, for the year under review was placed before the Board of Directors of the Company at its meeting held on February 13, 2018.
Statutory disclosures
Your Directors state that there being no transactions with respect to following items during the financial year under review, no disclosure or reporting is required in respect of the same:
1. Deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013, and the Companies (Acceptance of Deposits) Rules, 2014.
2. Issue of equity shares with differential rights as to dividend, voting or otherwise.
3. Receipt of any remuneration or commission by the Managing Director/Whole-time Director of your Company from any of its subsidiaries.
4. Significant or material orders passed by the regulators or courts or tribunals which impact the going concern status and the Company''s operation in future.
5. Buy back of shares.
6. Material changes and commitments, affecting the financial position of the Company that have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report unless otherwise stated in the report.
Acknowledgements
The Board of Directors wishes to thank the employees of CRISIL for their exemplary dedication and the excellence they have displayed in conducting the operations of CRISIL. The Board also wishes to place on record its sincere appreciation of the faith reposed in the professional integrity of CRISIL by customers and investors who have patronised its services. The Board acknowledges the splendid support provided by market intermediaries. The affiliation with S&P Global has been a source of great strength. The Board of Directors also wishes to place on record its gratitude for the faith reposed in CRISIL by the shareholders, the Securities and Exchange Board of India, the Reserve Bank of India, the Government of India and the State Governments. The role played by the media in highlighting the good work done by CRISIL is deeply appreciated.
For and on behalf of the Board of Directors of CRISIL Limited
John L. Berisford
Chairman
Mumbai,
February 13, 2018 (DIN: 07554902)
Dec 31, 2016
Dear Member,
The Directors are pleased to present to you the 30th Annual Report of CRISIL Limited, along with the audited financial statements, for the year ended December 31, 2016.
Financial Performance
A summary of the Company''s financial performance in 2016:
(Rs. in crore)
Particulars |
Consolidated |
Standalone |
||
2016 |
2015 |
2016 |
2015 |
|
Total income for the year was |
1,601.88 |
1,423.16 |
1,178.79 |
1000.70 |
Profit before depreciation, exceptional item and taxes was |
516.23 |
442.82 |
414.18 |
349.38 |
Deducting depreciation of |
40.36 |
37.12 |
28.52 |
24.03 |
Profit before tax was |
475.87 |
405.70 |
385.66 |
325.35 |
Deducting taxes of |
149.53 |
120.55 |
130.01 |
103.35 |
Profit after tax was |
326.34 |
285.15 |
255.65 |
222.00 |
The proposed appropriations are: |
||||
Dividend |
192.54 |
163.77 |
192.54 |
163.77 |
Corporate dividend tax |
39.20 |
33.60 |
39.20 |
33.60 |
General reserve |
20.45 |
22.20 |
20.45 |
22.20 |
Balance carried forward is |
74.15 |
65.58 |
3.46 |
2.43 |
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 133 of the Companies Act, 2013 read with Rule 7 of The Companies (Accounts) Rules, 2014. There are no material departures from the prescribed norms stipulated by the Accounting Standards in preparation of the Annual Accounts. Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. The Company discloses consolidated and standalone financial results on a quarterly basis which all subjected to limited review and publishes consolidated and standalone audited financial results on an annual basis.
a) Consolidated operations
Revenue from the consolidated operations of your Company for the year was Rs. 1,601.88 crore, 12.56 % higher than Rs. 1,423.16 crore in the previous year. Overall operational expenses for the year were Rs. 1,126.01 crore, against Rs. 1,017.46 crore in the previous year. Operating Profit (EBITDA) improved to Rs. 461.52 crore, against Rs. 399.60 crore, in the previous year. Profit after Tax for the year was Rs. 326.34 crore, against Rs. 285.15 crore in the previous year.
b) Standalone operations
Revenue from the standalone operations of your Company for the year was Rs. 1,178.79 crore, 17.80% higher than Rs. 1,000.70 crore in the previous year. Overall operational expenses for the year were Rs. 793.13 crore, against Rs. 675.35 crore in the previous year. Operating Profit (EBITDA) improved to Rs. 364.98 crore, against Rs. 304.78 crore, in the previous year. Profit after Tax for the year was Rs. 255.65 crore, against Rs. 222.00 crore in the previous year.
A detailed analysis on the Company''s performance, both consolidated and standalone, is included in the âManagement''s Discussion and Analysisâ Report, which forms part of this Annual Report.
Dividend
The Directors recommend for approval of the members at the Annual General Meeting to be held on April 20, 2017, payment of Final Dividend of Rs. 9 per equity share of face value of Re. 1 each for the year under review. During the year, the Company paid three interim dividends, first interim dividend of Rs. 5, second interim dividend of Rs. 6 and third interim dividend of Rs. 7 per equity share of face value of Re. 1 each. The total dividend for the year shall be Rs. 27 per share on a face value of Re. 1 per share in 2016 as against a total dividend of Rs. 23 per share (including a Special Dividend of Rs. 3 per share) on a face value of Re. 1 per share in the previous year.
Transfer to Reserves
The appropriations for the year are:
(Rupees in crore)
Particulars |
Consolidated |
Standalone |
Year Ended December 31, 2016 |
||
Net Profit for the year |
326.34 |
255.65 |
Balance of Reserve at the beginning of the year |
131.87 |
131.87 |
Transfer to General Reserve |
20.45 |
20.45 |
Adjustment on amalgamation |
(11.17) |
(11.17) |
Balance of Reserve at the end of the year |
141.15 |
141.15 |
Increase in Issued, Subscribed and Paid-up Equity Share Capital
During the year, the Company issued and allotted 1,26,255 equity shares of the Company to eligible employees on exercise of options granted under Employee Stock Option Schemes of the Company. At the end of the year, the issued, subscribed and paid-up capital of the Company was 7,13,35,358 equity shares of Re. 1 each.
The movement of share capital during the year was thus, as under:
(Rupees in crore)
Particulars |
No. of shares allotted / (extinguished) |
Cumulative outstanding capital (No. of shares of Face Value Re. 1 each) |
Capital at the beginning of the year i.e. as at January 1, 2016 |
- |
7,12,09,103 |
Allotment of shares to employees on exercise of options granted under the Employee Stock Option Scheme, 2011, and the Employee Stock Option Scheme, 2012 |
67, 575 |
7,12,76,678 |
Allotment of shares to employees on exercise of options granted under the Employee Stock Option Scheme, 2011, and the Employee Stock Option Scheme, 2012 |
58,680 |
7,13,35,358 |
Capital at the end of the year i.e. as at December 31, 2016 |
- |
7,13,35,358 |
Review of Operations
A. Ratings
Highlights
- Announced 2,741 new Bank Loan Ratings (BLRs) during the year; total BLRs outstanding exceed 13,264
- Assigned over 18,000 SME ratings and assessments during the year
- Conducted a series of high-profile franchise activities during the year that received wide coverage in media and were also well appreciated by our stakeholders
- Global Analytical Center (GAC) continued to enhance its engagement with S&P Global Ratings in the areas of risk and regulatory support, and further expanded engagement with Platts with increased support in new products and analytics across additional commodity sectors.
Business environment
India''s economic and business environment remained subdued during 2016 due to weak investment climate and muted demand for working capital. On the back of a good monsoon and mild income boost from the Seventh Pay Commission and One Rank One Pension payouts, consumption picked up in the second quarter and it looked like a consumption-led recovery was on the cards for fiscal 2017. However, growth was mildly dented in the third quarter when government demonetized Rs 500 and Rs 1,000 bank notes. Assuming the time that would be taken for full remonetisation, we expect GDP growth to be ~6.9% in fiscal 2017. The immediate channel for deceleration would be a slowdown in consumption demand, leading to a delay in fresh investment plans of corporate. That, in turn, would defer recovery in India''s private investment cycle.
Credit growth of India''s banking sector remained muted at 9% year-on-year as of December 2016. While a good monsoon has improved growth in farm credit, weak corporate credit demand and risk aversion of public sector banks were drags. We expect banks to reduce their lending rates in the near-to-medium term given the abundant systemic liquidity. However, credit growth will remain insipid given subdued consumption and investment demand, and we estimate it at 7-9% for fiscal 2017.
The capital market witnessed an increase in activity in the third quarter of the year due to favourable liquidity and falling yields, which meant bonds were the preferred route to raise funds than bank loans. We believe yield on the 10-year benchmark government security would settle around ~6.8% by March-end fiscal 2017 versus 7.5% in fiscal 2016. Effective liquidity management, reduction in the policy rate by the Reserve Bank of India (RBI), lower inflation, and falling oil prices easing pressure on government borrowings will curb yields. The RBI has also announced measures that would develop and deepen the corporate bond market, enhance participation, facilitate greater liquidity, and improve communication. We believe the measures may take some time to be felt fully, but over the long term they will make a difference.
In 2016, CRISIL''s BLR business witnessed muted growth due to weak credit off take in the manufacturing sector and intensified competition. These factors adversely impacted average realization and volume. While pricing pressures are likely to continue, expected pick up in credit growth and increased risk weights for large unrated exposures could lead to an improved BLR market in 2017.
For CRISIL''s SME Ratings business, calendar year 2016 was a crucial year as consistent engagement with regulators and key decision makers helped in the reinstatement of subsidy support by the Government of India under the NSIC - PCRS (Performance & Credit Rating Scheme). The primary focus of CRISIL SME Ratings for 2016 was to ramp up business volume by increasing capacity, thereby maximizing subsidy share. CRISIL was able to achieve quick and timely ramp-up of manpower by June 2016. One major challenge was navigating low vintage and experience issues across the business development and operations teams. This was addressed through exhaustive training and people development initiatives. Several process realignment initiatives were also undertaken in 2016, which helped to improve key business drivers such as productivity, attrition and operations efficiency. Another challenge emerged in the form of revised regulatory guidelines around client sourcing and documentation, which coupled with pricing pressure posed severe market constraints. Despite the challenging business environment, the SME Ratings business witnessed strong growth in the second half of 2016 and ended the year at a high. However, the SME-business is likely to witness challenges in 2017 owing to significant reduction in the subsidy support under PCRS for 2017-18, which will adversely impact the flagship product - SME NSIC Ratings. To mitigate this, the business is coming up with ambitious technology driven projects to re-engineer business processes, operations and achieve cost optimization, besides instituting a new strategic products cell to sharpen existing products and develop new and relevant market offerings. The medium-to-long term outlook for the MSME sector remains positive, despite potentially adverse short-term effects due to demonetization and the implementation of the Goods and Services Tax regime.
Operations
CRISIL Ratings maintained its market leadership in 2016, backed by strong performance in bond ratings and SME ratings businesses. CRISIL announced 2,741 new BLRs and 18,000 SME ratings during the year. It has, to date, assigned more than 25,000 BLRs and over 110,000 SME ratings/assessments. This year, SME ratings/ assessments were focused on newer geographies such as the north-east. The business also added clients from hinterland in north and south India.
In 2016, we rated India''s first hybrid issuance in the insurance sector. This was first subordinated debt instrument in the Indian market by an insurance company. We also released the rating criteria for hybrid instruments issued by insurers, the first of its kind in India. We also rated the largest annuity-based road project in 2016. Further, CRISIL assigned a rating on India''s first Infrastructure Investment Trust (InvIT). All these innovations were well received by the market, and are seen as significant milestones in deepening the corporate bond market in India.
CRISIL Ratings continued to conduct regular outreach programmes aimed at providing insights on credit issues to investors and other market participants. The outreach programmes included opinion pieces, bankers'' meetings, investor discussion forums, web-conferences, and newsletters.
CRISIL Ratings also held the 4th edition of its annual bond market seminar, the theme of which was ''Corporate Bonds & India''s New Financial Order''. The highlight was a keynote address by Shri Jayant Sinha, former Minister of State for Finance, Government of India. Shri Sinha also launched The CRISIL Yearbook on the Indian Debt Market, 2015, at the event. In addition, we had a power-packed panel moderated by Smt Usha Thorat, former Deputy Governor of the RBI, on regulatory facilitation for India''s corporate bond market. The participants were from the RBI, the Pension Funds Regulatory Development Authority, SEBI and the Insurance Regulatory Development Authority. Our analysis was well received by all stakeholders including regulators and policy makers. We successfully hosted a discussion forum on the non-banking finance company (NBFC) sector under the ''Fin Insights'' umbrella, where we discussed trends and perspectives on key topics pertaining to NBFCs like housing finance, structured credit, real estate financing, SME financing, loan against property, etc. The seminar included a line-up of prominent NBFC industry leaders as panelists and received promising feedback on the content and execution of the event.
We have developed a structured and sustained platform named ''CRISIL Ratings Conclave'' for our senior management to deepen relationships with existing clients and create differentiation with prospective clients across various locations beyond metros. This is designed as a select forum to drive closer client conversations and engagements.
High-impact franchise activities during 2016 included seminars on the power sector and India Outlook for Fiscal 2017 jointly with CRISIL Research team, web conferences on the telecom, road and agrochemical sectors, apart from press releases on securitization, banking, etc. We were also the speaker and knowledge partner in various conferences and summits. These outreach efforts were well received from by key stakeholders including clients and investors.
GAC continued to work closely with S&P Global Ratings, growing in new areas of support such as risk management and regulatory support, including assistants on criteria validation, operational and documentation support for control functions, while increasing the level of integration with S&P Global Ratings teams globally. GAC also expanded support to previously under-served geographical segments including Latin America and Japan.
With the evolving global regulatory requirements, GAC continued its focus on strengthening its internal controls framework in collaboration with S&P Global Ratings'' control functions. GAC''s culture of continuous improvement has created ongoing efficiency gains for S&P Global Ratings through lean management tools, work standardization and process re-engineering.
GAC also initiated new support for S&P Global Ratings in the newly formed functions and extending support in Platts to their recently acquired businesses. .
B. Research
B.1. Global Research & Analytics (GR&A)
Highlights
-Financial Research built a strong base on the buy-side and credit business segment driven by new opportunities arising out of the changing regulatory environment
- Risk & Analytics reported another year of very strong business growth with both new and existing customers, and witnessed good traction with newer offerings launched to help banks meet various regulatory mandates
- Corporate Research added several new logos across core sectors
- Coalition had very strong results driven by the expansion of existing clients and the diversification of new clients, coupled with increased brand and media dominance.
- In Data Analytics, we made good progress in delivering analytical solutions and innovative products and solutions to our customers in the buy side and sell side
Business environment
Calendar 2016 was another year of subdued growth for the global economy. As a result, the size of the investment banking industry has reached its lowest level since the global financial crisis of 2008-09 with fixed-income revenue at the same level as in 2005. Banks are also transforming their front, middle and back-office activities to provide differentiated services, achieving cost efficiencies and increasing productivity. This is opening up a number of business opportunities for the Risk & Analytics business. Increasing regulatory changes continues to drive strong growth for CRISIL GR&A, especially in the Risk & Analytics vertical, and Coalition.
The Coalition IB Index tracked the performance of the top 12 global investment banks. The results for 2016 show that overall, the index performance is down 2% year-on-year. Equity revenue has decreased 12%, while those from investment banking (from merger & acquisition activity), and debt and equity markets, have decreased 8%. However, Fixed Income Currency and Commodities (FICC) revenue has increased 9%.
Index Revenue Trend
In Financial Research, we have added clients across new business segments on the buy side and in credit risk. The imminence of the Markets in Financial Instruments Directive II (MiFiD II) regulations, and increased cost pressure is stoking demand for our services on the buy side, especially from traditional managers and hedge funds. Our sell-side business witnessed demand from the Asia-Pacific region from existing clients. Our Credit Risk business gained from new opportunities related to risk management, deal screening and underwriting, and portfolio monitoring from global financial services clients.
The Risk & Analytics business continued to witness strong demand in the areas of stress testing, model validation, regulatory change management, and financial crime and compliance analytics. In addition to the now mature US regulations such as the Comprehensive Capital Analysis and Review (CCAR) and the Dodd-Frank Act Stress Testing (DFAST) newer regulations such as the Fundamental Review of the Trading Book (FRTB), International Financial Reporting
Standards 9 (IFRS 9), Current Expected Credit Loss Standard (CECL), and Interest Rate Risk in the Banking Book (IRRBB) are also gaining momentum. We are also experiencing substantial interest for our services by banks and financial institutions to provide support for risk data aggregation, and for up gradation of risk systems and processes.
In Corporate Research, our clients continued to face cost pressures and loss of business opportunities, while witnessing increased focus on innovative sales approaches to enable new business. We added several new logos during the year, in addition to reviving a few dormant clients, which helped maintain our revenues.
In Data Analytics, we added new logos for our services on both the buy and sell sides. As analytics becomes more mainstream, we see demand for support, training and consulting assignments on visualization, digital analytics and advanced analytics. There exist opportunities for integration of unstructured data into investment decision making, and analytics solutions for end clients to quickly validate and test assumptions and hypothesis.
Operations
In Financial Research, we embarked on several initiatives to accelerate growth, maximize value to clients, increase sales effectiveness, optimize costs, and fortify our brand globally
- all of which has enhanced our competitiveness. We have significantly increased our market presence, which buoyed growth in a tough business environment. We also undertook several thought leadership initiatives in the area of changing regulations and its impact on asset managers, which received excellent response and reinforced our position as an industry leader. Our global research centers continue to scale up, with International Centers benefiting from regulation-driven-change mandates, and China building on its growth momentum due to increased demand for Asia research support.
In Risk & Analytics, investments of the previous years have started to yield results in newer areas such as financial crime and compliance analytics, FRTB and IFRS9/CECL. The past year witnessed expansion of our business across all geographies, successful conversion of some strategic prospects, and good progress on the productisation agenda. We are actively investing in our human capital and grooming in-house talent to make them industry ready through a planned series of comprehensive training programs in line with the evolving landscape of the financial services and risk industry.
We have also strengthened our core franchise via participation in industry conferences, hosting webinars on topical issues, and publishing incisive thought papers.
In Corporate Research, while we continued to add large corporations to our clientele, we also added several medium-size entities in our client portfolio - who are requesting analytics-driven research support that provide tangible results - to deal with the challenging business environment they are currently facing.
Coalition delivered strong results, driven by its core Competitor and Client Analytics, which continued to report solid growth. In 2016, 75% of Coalition''s existing corporate and investment bank clients significantly increased their investment in our services. In addition, Coalition diversified its client base by establishing new relationships with regional and national players as well as buy-side firms. This expansion is testimony to the trust and increasing reliance in Coalition''s high-quality analysis and insight across the financial services industry. Its media strategy added new publications covering corporate and investment bank analysis to reflect the growing collaboration between the two. The team has also delivered very good results, leading to an estimated media market share above 50%. In Data Analytics, we have invested in expanding our team and capabilities. We are focusing on training, and learning and development opportunities to enable up skilling.
B.2. India Research Highlights
- Maintained our dominant and premium position in the flagship Industry Research business
- Witnessed healthy revenue growth in the Customized Research business on the back of significant traction in the automobiles, energy and commodity sectors
- Remained the largest provider of fixed-income indices in India and consolidated our position by launching seven new indices during the year
- Significantly stepped up engagement with regulators and industry associations.
Business Environment & Operations
Despite sharp increase in banks'' non-performing assets and resultant pressure on profitability, which impacted research expenditure, subscription rates remained healthy, indicating the criticality and value of our research products and services. Apart from ongoing coverage on 86 sectors, we launched many special reports in areas such as on NBFCs, SMEs, agriculture and, for the first time, on railways given the strong investment focus of the government. After two years of slowdown, the Customized Research business witnessed healthy revenue growth on the back of significant traction in the automobiles, energy and commodity sectors. Continued high proportion of repeat business from Indian and global clients, and increase in average ticket size of mandates improved the performance.
In the Fixed Income Research business, we further consolidated our strong position in the valuation space by winning mandates from general insurers and corporate in 2016. We continued to be the largest provider of fixed-income indices in India and consolidated our position by launching seven new indices during the year. In the mutual fund research, we increased our presence with corporate treasuries and exempted provident fund trusts, helping them in portfolio performance review and risk monitoring.
The Executive Training business saw robust growth over the previous year. We launched our first multi-level certification programme on a customized basis. Increase in banks'' and regulators'' focus on enhancing credit and risk domains skills is likely to provide strong tailwinds, driving growth of the training business in the medium term.
Franchise
The CRISIL Centre for Economic Research (C-CER) and the CRISIL Research businesses continued to focus on franchise and thought leadership activities by conducting distinctive research on contemporary issues. We published several landmark reports during the year, covering a wide spectrum of areas such as the distress in the rural economy, impact of remittances and deficient rains, trade deficit with China, impact of GST, quality of India''s growth, impact of Brexit, the ''Make in India'' programme, and demonetization. C-CER and CRISIL Research speakers participated in over 27 leading industry conferences and panel discussions, and hosted 11 events/ webinars on a variety of topics. CRISIL Research participated as a knowledge partner and presented a report on the pension sector at ASSOCHAM''s National Conference on Social Security and The Role of Equity Market.
C. Infrastructure Advisory and Risk Solutions
CRISIL conducts its infrastructure advisory and risk solutions business through its subsidiary, CRISIL Risk and Infrastructure Solutions Limited (CRIS).
C.1. CRISIL Infrastructure Advisory Highlights
- Supported Government of India''s flagship programmes such as Smart Cities Mission, Power for All/ Ujwal Discom Assurance Yojana (UDAY), Roads and Indian Railways, and infrastructure financing
- Deepened our value offerings by supporting implementation of large infrastructure programmes through large, multiyear programme management mandates
- Successfully built a strong order book with several large mandate wins
Business environment
India''s infrastructure sector is at the threshold of significant transformation. The government has launched several new programmes and policy initiatives that have the potential to provide inclusive infrastructure to citizenry. The investment climate has, however, not yet picked up, and infrastructure financing continues to remain a key challenge. The private sector, which was expected to play a key role in infrastructure development, remains wary of investments. The global economic situation has also not improved, amid continued concerns over recovery.
The government has launched quite a few large and visionary programmes, and has committed to take up the lion''s share of investments. However, full-scale implementation is yet to be seen. How quickly the government is able to roll out various reforms and implement them remains the key.
The business is also involved closely with infrastructure development in emerging markets in Africa and South / southeast Asia. During the year, the business environment and infrastructure development in these international markets was muted.
Operations
CRISIL Infrastructure Advisory started the year slowly, but picked up momentum in the second half of the year. We won several large and prestigious mandates in India and in emerging markets as well. This helped the business to build a robust order book that is significantly larger than before. Revenue growth was steady during the year.
Our focus on government and multilateral agencies as clients continued, as we supported several flagship programmes of the government. During the year, the business was successful in deepening its foray into large multi-year implementation support mandates with government programmes - an important defined strategic pursuit area.
We worked closely with the Ministry of Power in preparing the roadmap for ''24x7 Power for All by 2019'' for 15 states and union territories, and are now supporting one of the state governments in monitoring and implementation of UDAY and Power for All schemes. We deepened our involvement in the downstream gas sector, as well as renewable energy sector by winning a few prestigious mandates during the year, including review and evaluation of the National Solar Mission.
We expanded our involvement in the Smart Cities Mission by supporting a few more cities in the second round of proposals, and are proud of the fact that barring one, all the cities we supported in the proposals round have been selected by the Ministry of Urban Development to be developed as Smart Cities. We also won a large implementation support mandate in one of the cities.
The roads sector saw a lot of action during the year, and CRISIL Infrastructure Advisory is involved with the National Highways Authority of India on some prestigious projects, including the proposed monetization of operational projects under the toll-operate-transfer model. We also worked on a first-of-its-kind mandate for the Indian Railways to set up a development fund to draw private and foreign capital to the sector.
The international business for CRISIL Infrastructure Advisory was relatively muted during the year, given the sluggishness in the emerging markets we targeted. However, the business won a few prestigious mandates in Africa and successfully tapped and deepened involvement in the Mekong region of south-east Asia with large mandates in Vietnam, Laos and Cambodia.
C.2. CRISIL Risk Solutions (CRS) Highlights
- Continued to consolidate the business, while stabilizing products for efficiencies
- Saw good traction for the business from non-banking clients in India
- Continued expansion of footprint in south Asia, the Middle East and other new geographies by increasing collaboration with S&P Global
Business environment
The business environment in India has improved significantly with favourable policies on financial inclusion and easing stress on credit quality in the banking industry. With increased focus on strengthening credit risk management and monitoring, demand from banks for our Early Warning System (EWS) and Credit Processing System (CPS) remains strong. Momentum in CRS''s rating solution continues in India with small banks and NBFCs showing keen interest in moving to a system-based solution for internal ratings. CRS''s non-product service business is also showing good momentum and would be a key growth driver in the next couple of years. We recently executed our first mandate in the risk services space for a leading NBFC in India. In the international market, especially the Middle East, momentum is building around the need for a credit monitoring tool. Though there is good traction in the market, conversions are key to growth next year.
Operations
The year saw consolidation with continued investments in our products for building sustainable business and ensuring efficiencies in implementation. Process, people and products remain the key imperatives for the business.
The second half of the year witnessed increased traction in the NBFC space for adopting improved risk practices, leveraging on our strong risk and credit expertise. We expect the momentum to continue next year as well. CRS took efforts to build outreach in the international market for developing a strong pipeline.
We continued to build our franchise through webinars and knowledge-sharing sessions in India and abroad. CRS conducted seminars in Dubai and Kuwait, focusing on increased credit monitoring by an early warning framework, implementation challenges and industry best practices. CRS also organized a web conference discussing practical, real world challenges related to effective credit assessment of MSMEs and alternative approaches to overcome difficulties.
CRS expects to build on its current momentum, expanding footprints in the non-banking space and global markets in 2017.
D. Collaboration with S&P Global
In 2016, we deepened our engagement with S&P Global for outreach initiatives in different geographies. We collaborated with S&P Global on a seminar under the annual flagship platform, India Credit Spotlight. The theme for the seminar was ''India and China: Fighting the Growth War on Different Battlegrounds''. The event was appreciated by investors and issuers alike. As part of our joint outreach initiatives, we organized a lecture by Paul Sheared, Executive Vice President and Global Chief Economist, S&P Global, on his visit to Mumbai. The lecture was organized in collaboration with the Asia Society chapter in India. We also organised a breakfast meeting for S&P Global Asia-Pacific Chief Economist Paul Gruenwald on Chinese rebalancing and its implications. CRISIL''s Chief
Economist Dharmakirti Joshi participated as a panelist in the Global Economic Outlook Conference in New York and also in a webinar on the same topic. He also moderated the leadership panel (on innovation, exploration and India''s growth trajectory) at S&P Dow Jones Indices'' annual thought leadership seminar, ''Is India''s Tomorrow Here Today,'' held in Mumbai.
C-CER continued to provide outlook on the Indian economy to S&P Global and contributed an article on prospects for the Indian economy along with an article on India''s policy focus on the manufacturing sector to a Platt''s publication. CRISIL Research hosted a webinar titled ''Steel - Is it the inflection point or a mirage?'' with participation from a senior sector specialist from Platts. Further, CRISIL''s expert participated in a panel discussion titled ''Is there a global solution to anti-dumping issues?'' at Platts'' Steel Conference held in Mumbai. CRISIL also presented on the Indian sugar industry''s financial position and outlook at Kingsman Asia Sugar Conference held in Delhi.
Risk Solutions business continued to engage with S&P Global Market Intelligence to promote its offerings in the areas of credit risk assessment for banks and financial institutions across emerging markets.
CRISIL Research started collaborating with S&P Global for cross-selling its products through the S&P Global Market Intelligence platform.
E. Human Resources
CRISIL''s Human Resources agenda made significant advancements in calendar 2016. At the closure of its financial year, CRISIL''s headcount was 3,972 including in all wholly owned subsidiaries.
Highlights
Employee engagement level moved upward significantly over the last year benchmarks. Empowerment and ownership of middle management helped immensely in talent engagement and retention. Diverse talent programmes were implemented flawlessly and with due spirit that will help us in long run.
We invested heavily in newer technologies, which would not only provide superior experience but also more control to the employees.
Leadership development, succession planning and other organizational development interventions got a relook in line with CRISIL''s long-term strategy. Specific development focused interventions were implemented for the leadership team. A structured job evaluation and career management framework was implemented to facilitate career planning and job rotation. We imparted 2,044 man-days of diverse training to employees during the year.
With a focus on improving employee benefits, a number of programs were rolled out to be able to stay ahead of the market.
Segment-Wise Results
The Company has identified three business segments, in line with the Accounting Standard on Segment Reporting (AS-17), which comprise: (i) Ratings, (ii) Research and (iii) Advisory. The audited financial results of these segments are provided as a part of financial statements.
Directors
The members of the Board of Directors of the Company are eminent persons of proven competence and integrity. Besides having financial literacy, experience, leadership qualities and the ability to think strategically, the Directors have a significant degree of commitment to the Company and devote adequate time for the meetings, preparation and attendance. Board members possess the education, expertise, skills and experience in various sectors and industries required to manage and guide the Company.
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.
Directorship changes
Mr. Yann Le Pallec resigned as Director of the Company on July 19, 2016. Your Directors place on record their sincere appreciation of his valuable support and guidance to the Board and the Company during his tenure as a Director, especially recognising his engagement with and contributions to the Risk Solutions and Advisory businesses of CRISIL, as a director of our subsidiary, CRISIL Risk and Infrastructure Solutions Limited.
Mr. John Francis Callahan Jr. resigned as Director of the Company on July 19, 2016. Your Directors place on record their sincere appreciation of his valuable support, strategic insights and guidance provided to the Board and the Company during his tenure as a Director, especially, his involvement and constructive inputs during the CRISIL Strategy exercise.
The Board of Directors appointed Ms. Martina L. Cheung and Mr. John L. Berisford as Additional Directors of the Company with effect from July 19, 2016. Ms. Cheung and Mr. Berisford hold office as Additional Directors until the ensuing Annual General Meeting, and are eligible for appointment as Directors as provided under Article 129 of the Articles of Association of the Company. The Company has received notices under Section 160 of the Companies Act, 2013 from a member signifying her intention to propose the candidature of Ms. Martina Cheung and Mr. John L. Berisford for the office of Directors. A brief profile of Ms. Martina Cheung and Mr. John L. Berisford has been given in the Notice convening the Annual General Meeting.
In accordance with the Articles of Association of the Company and the provisions of the Companies Act, 2013, Mr. Douglas Peterson retires by rotation and being eligible, seeks reappointment.
Board Independence
Our definition of ''Independence'' of Directors is derived from Regulation 16(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149(6) of the Companies Act, 2013. Based on the confirmation / disclosures received from the Directors and on evaluation of the relationships disclosed, the following Non-Executive Directors are Independent:
a) Mr. H. N. Sinor
b) Dr. Nachiket Mor
c) Mr. M. Damodaran
d) Ms. Vinita Bali
Committees of the Board
There are currently five Committees of the Board, as under:
- Audit Committee
- Corporate Social Responsibility Committee
- Investment Committee
- Nomination and Remuneration Committee
- Stakeholders'' Relationship Committee
Details of all the Committees along with their charters, composition and meetings held during the year, are provided in the âReport on Corporate Governanceâ, a part of this Annual Report.
Number of Meetings of the Board
The Board meets at regular intervals to discuss and decide on Company / business policy and strategy apart from other Board business. The Board / Committee Meetings are prescheduled and a tentative annual calendar of the Board and Committee Meetings is circulated to the Directors well in advance to help them plan their schedule and to ensure meaningful participation in the meetings. However, in case of a special and urgent business need, the Board''s approval is taken by passing resolutions through circulation, as permitted by law, which are confirmed in the subsequent Board meeting.
The notice of Board meeting is given well in advance to all the Directors. Usually, meetings of the Board are held in Mumbai. The Agenda of the Board / Committee meetings is circulated at least seven days before the date of the meeting. The Agenda for the Board and Committee meetings includes detailed notes on the items to be discussed at the meeting to enable the Directors to take an informed decision.
The Board met four times in financial year 2016 viz., on February 9, April 19, July 19 and October 14. The maximum interval between any two meetings did not exceed 120 days.
Annual Evaluation by the Board
During the year, the Board has carried out the annual evaluation of its own performance as well as the evaluation of the working of its Committees and individual Directors, including Chairman of the Board. This exercise was carried out through a structured questionnaire prepared separately for Board, Committees, Chairman and individual Directors. The performance evaluation of the Chairman was also carried out by the Independent Directors at a separate meeting of the Independent Directors. The questionnaire and evaluation process was reviewed in the context of SEBI Guidance Note on Board evaluation dated January 5, 2017 and necessary alignment was made with the requirements.
The questionnaire for Board evaluation was prepared taking into consideration various aspects of the Board''s functioning such as Board structure, understanding of Board members of their roles and responsibilities, Board meeting and reporting process, time devoted by the Board to Company''s long-term strategic issues, quality and transparency of Board discussions, quality, quantity and timeliness of the information flow between Board members and management, Board''s effectiveness in disseminating information to shareholders and in representing shareholder interests, Board information on industry trends and regulatory developments and discharge of fiduciary duties by the Board.
Committee performance was evaluated on the basis of their effectiveness in carrying out their respective mandates.
Peer assessment of Directors, based on parameters such as participation and contribution to Board deliberations, ability to guide the Company in key matters and, knowledge and understanding of relevant areas were received by the Board for individual feedback.
The Board acknowledged key improvement areas emerging through this exercise and action plans to address these are in progress.
During 2016, the Company also auctioned the feedback from the Board evaluation process conducted in the previous year, i.e. 2015. Suggestions were incorporated in strengthening the Board review calendar plan for 2016 with thematic additions on people matters & succession planning as well as increased frequency of review of regulatory developments and strategy. Special sessions were conducted throughout the year, for the senior management and Board members, by internal and external speakers, including some industry leaders. Perspective on markets, economy, corporate governance trends and public policy shared during these sessions, helped contextualizing the budgeting and strategy exercises of the Company. Attending
Board meetings allowed increased interaction between the senior management and the Board.
Risk Management Policy and Internal Control Adequacy
The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures. The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors. Significant audit observations and follow up actions thereon are reported to the Audit Committee. For ensuring independence of audits, the Internal Auditors report to the Audit Committee. Both Internal and Statutory Auditors have exclusive executive sessions with the Audit Committee on a regular basis. In addition, the Management performs a review of key controls impacting financial reporting, at entity as well as operating levels.
The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives which has been enhanced during this year. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company. These have also been reported and discussed in detail in the Management''s Discussion and Analysis Report, annexed to this report.
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors and the reviews performed by management and the relevant board committees, including the Audit Committee, the Board is of the opinion that the Company''s internal financial controls with reference to Financial Statements were adequate and effective during financial year 2016.
Directorsâ Responsibility Statement
Your Directors hereby confirm that:
i. i n the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
ii. t hey 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 profits of the Company for that period;
iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv. they have prepared the annual accounts on a going concern basis;
v. they have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and
vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
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 that have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report.
Particulars Regarding Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings and Outgo
The particulars regarding foreign exchange earnings and outgo appear as separate items in the notes to the Accounts. As such, the Company does not own any manufacturing facility and hence our processes are not energy intensive. Hence particulars relating to conservation of energy and technology absorption stipulated in the Companies (Accounts) Rules, 2014 are not applicable.
However, CRISIL is supportive of the cause of environment protection and has taken measures to reduce its carbon footprint. Some of these measures are as follows:
a) We organize workplaces such that maximum day light is used in work areas, reducing artificial illumination
b) Motion sensors are used for automatic switching on/off of lights to conserve energy
c) The air-conditioning equipment is operated through a building monitoring system, which ensures that the units are switched on or off based on occupancy
d) Recycled water through sewerage treatment is used for gardening purposes
e) We have initiated a project for converting wet waste into compost for horticultural use
We have rolled out a policy which aims at improving environmental performance of CRISIL. The policy is our commitment to be environmentally responsible and encouraging our employees and members of the wider community to work for the environment by setting and monitoring environmental objectives, making efficient use of natural resources, eliminating waste and promoting recycling of resources.
In addition, under the CRISIL Re. employee volunteering program, CRISIL leverages its workforce as agents of change to drive environment conservations actions. These include tree plantation initiatives, green cover maintenance activities, installations of solar-powered lamps for renewable electricity to disadvantaged communities and waste management solutions for the urban poor. Details of the outcomes from these initiatives during 2016 are given in the Corporate Social Responsibility Report published elsewhere in the Annual Report.
Corporate Social Responsibility
The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The role of the Committee is to review the CSR Policy, indicate activities to be undertaken by the Company towards CSR and formulate a transparent monitoring mechanism to ensure implementation of projects and activities undertaken by the Company towards CSR.
The CSR Policy of the Company and further details about the initiatives taken by the Company on Corporate Social Responsibility during the year under review have been appended as Annexure II to this Report.
Vigil Mechanism
The Company has established a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report.
Subsidiary Companies
As on December 31, 2016, the Company had one Indian and seven overseas wholly owned subsidiaries. In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report. A statement containing salient features of the financial statements of the subsidiary companies is also included in the Annual Report.
The Company has no associate companies within the meaning of Section 2(6) of the Companies Act, 2013.
In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein its standalone and the consolidated financial statements has been placed on the website of the Company, www.crisil.com. Further, as per fourth proviso of the said section, audited annual accounts of each of the subsidiary companies have also been placed on the website of the Company, www. crisil.com. Shareholders interested in obtaining a copy of the audited annual accounts of the subsidiary companies may write to the Company Secretary at the Company''s registered office.
The Company has obtained a certificate from the Statutory Auditors certifying that the Company is in compliance with the FEMA Regulations with respect to downstream investments made in its subsidiary companies as operating during the year.
Merger of Wholly Owned Subsidiaries with the Company
In order to improve operating efficiencies, the Board of Directors of the Company in their meeting held on October 17, 2015, after considering the recommendations of the Audit Committee, approved the amalgamation of its three wholly owned subsidiary companies viz., Pipal Research Analytics and Information Services India Private Limited, Coalition Development Systems (India) Private Limited and Mercator Info-Services India Private Limited, with the Company through a Scheme of Amalgamation (Scheme) under Section 391/394 of the Companies Act, 1956, as reported in the previous year''s Directors'' Report.
A Scheme of Amalgamation filed with the Hon''ble High Court of Bombay was duly approved by the High Court and the said Scheme became effective on October 25, 2016, with April 1, 2016 as the appointed date. Being wholly owned subsidiaries of the Company, the entire paid-up share capital of Pipal Research Analytics and Information Services India Private Limited, Coalition Development Systems (India) Private Limited and Mercator Info-Services India Private Limited has been cancelled and the companies stand dissolved without winding up and as a result, these three have ceased to be subsidiaries of the Company.
Particulars of Contracts or Arrangements with Related Parties referred to in Section 188(1)
A significant quantum of related party transactions undertaken by the Company is with its subsidiary companies engaged in product delivery of CRISIL businesses and business development activities. The Company has also been providing analytical support to S&P Global entities as a part of a Master Services Agreement, which transaction has been approved by the shareholders though a resolution passed by postal ballot on December 15, 2014.
The Audit Committee pre-approves all related party transactions. The details of the related party transactions undertaken during a particular quarter are placed at the meeting of the Audit Committee held in the succeeding quarter.
All contracts / arrangements / transactions with related parties that were executed in 2016 were in the ordinary course of business and at an arm''s length. During the year, there were no related party transactions which were materially significant and that could have a potential conflict with the interests of the Company at large. All related party transactions are mentioned in the notes to the accounts. The particulars of material contracts or arrangements with related parties referred to in Section 188(1), is given in prescribed Form AOC - 2 as Annexure III.
As required under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Related Party Transactions Policy, which has been put up on the website of the Company at http://www.crisil.com/investors/ corporate-governance.html. The Company has developed an operating procedures manual for identification and monitoring of related party transactions.
Particulars of Loans, Guarantees or Investments under Section 186
Details of loans, guarantees and investments covered under the provisions of section 186 of the Companies Act, 2013 are provided in the Notes to Financial Statements.
Auditorsâ Appointment
At the 28th Annual General Meeting of the Company, the Statutory Auditors, S. R. Batliboi & Co. LLP, Chartered Accountants, were appointed for a term of two years until the conclusion of the 30th Annual General Meeting.
In view of the mandatory requirement for rotation of auditors upon completion of 10 years of association with a company, in terms of Section 139 of the Companies Act, 2013, S. R. Batliboi & Co. LLP will retire as Company''s Auditors at the conclusion of the ensuing 30th Annual General Meeting. It is proposed to appoint M/s. Walker Chandiok & Co LLP as the new Statutory Auditors of the Company. M/s. Walker Chandiok & Co LLP (an affiliate of Grant Thornton India LLP) are proposed to be appointed for a period of 5 continuous years i.e. from the conclusion of 30th Annual General Meeting till the conclusion of 35th Annual General Meeting of the Company. M/s. Walker Chandiok & Co LLP, have informed the Company that their appointment, if made, would be within the limits prescribed under Section 141 of the Companies Act, 2013. M/s. Walker Chandiok & Co LLP have confirmed that they have subjected themselves to the peer review process of the Institute of Chartered Accountants of India (ICAI) and hold valid certificates issued by the Peer Review Board of the ICAI. M/s. Walker Chandiok & Co LLP, have also furnished a declaration in terms of Section 141 that they are eligible to be appointed as auditors and that they have not incurred any disqualification under the Company Act 2013. A brief profile of the Auditors is provided in the Notice of the Annual General Meeting.
The Board recommends appointment of M/s. Walker Chandiok & Co LLP as Statutory Auditors of the Company from the conclusion of 30th Annual General Meeting up to the conclusion of 35th Annual General Meeting of the Company, subject to ratification at every Annual General Meeting.
Secretarial Audit Report
The Board of Directors of the Company has appointed Dr. K. R. Chandratre, Practicing Company Secretary, to conduct the
Secretarial Audit and his Report on Company''s Secretarial Audit is appended to this Report as Annexure IV.
Comments on Auditorsâ Report
There are no qualifications, reservations or adverse remarks or disclaimers made by S. R. Batliboi & Co. LLP, Statutory Auditors, in their report and by Dr. K. R. Chandratre, Company Secretary in Practice, in his secretarial audit report.
The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.
Managementâs Discussion and Analysis Report
The Management''s Discussion and Analysis Report for the year under review, as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed to this report.
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 Securities and Exchange Board of India. The Report on Corporate Governance as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of the Annual Report. A Certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is also published elsewhere in this Annual Report.
Particulars of Remuneration
Disclosures with respect to the remuneration of Directors and Employees as required under Section 197(12) of Companies Act, 2013 read with Rule 5(1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been appended as Annexure V to this Report.
In accordance with the provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of every employee covered under the said rule are available at the Registered Office of the Company during working hours for a period of 21 days before the Annual General Meeting and shall be made available to any shareholder upon request.
The Nomination and Remuneration Committee of the Company has affirmed at its meeting held on February 10, 2017 that the remuneration is as per the remuneration policy of the Company.
Employee Stock Option Schemes
The Company has three employee stock option schemes. The Employee Stock Option Scheme - 2011 (ESOS 2011) was approved by the shareholders vide a special resolution passed through postal ballot on February 4, 2011. The Employee Stock Option Scheme - 2012 (ESOS 2012) was approved by the shareholders vide a special resolution passed through postal ballot on April 10, 2012. The Employee Stock Option Scheme - 2014 (ESOS 2014) was approved by the shareholders vide a special resolution passed through postal ballot on April 3, 2014. In terms of the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014, approval of shareholders is sought for modification of Employee Stock Option Scheme - 2014 with the objective of utilizing the stock option pool more effectively by revising the exercise price. Accordingly, a special resolution has been included in the Notice of 30th Annual General Meeting accompanying this report.
During 2016, there were no material changes in the Employee Stock Option Schemes (ESOS) of the Company and the Schemes are in compliance with the SEBI Regulations on ESOS. As per Regulation 14 of SEBI (Share Based Employee Benefits) Regulations, 2014 read with SEBI circular dated June 16, 2015 the details of the ESOS are uploaded on the Company''s website http://www.crisil.com/pdf/investors/Detail-of-ESOS-31st-Dec-2016.pdf in terms of Circular No CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 issued by Securities and Exchange Board of India.
Extract of Annual Return
The Extract of Annual Return as provided under Section 92(3) of the Companies Act, 2013 and as prescribed in Form No. MGT-9 of the rules prescribed under Chapter VII relating to Management and Administration under the Companies Act, 2013 is appended as Annexure VI.
Deposits
The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.
Litigations
During the year under review, there were no significant or material orders passed by any regulatory / statutory authorities or courts / tribunals against the Company impacting its going concern status and operations in future.
Financial Year
The Company and all its subsidiary companies, in India and across the world, follow the calendar year as the financial year in terms of a special approval obtained from the Company Law Board in 2015.
CEO and CFO Certification
Certificate from Ms. Ashu Suyash, Managing Director & CEO and Mr. Amish Mehta, Chief Financial Officer, pursuant to provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, for the year under review was placed before the Board of Directors of the Company at its meeting held on February 11, 2017.
Acknowledgements
The Board of Directors wishes to thank the employees of CRISIL for their exemplary dedication and the excellence they have displayed in conducting the operations of CRISIL. The Board also wishes to place on record its sincere appreciation of the faith reposed in the professional integrity of CRISIL by customers and investors who have patronized its services. The Board acknowledges the splendid support provided by market intermediaries. The affiliation with S&P Global has been a source of great strength. The Board of Directors also wishes to place on record its gratitude for the faith reposed in CRISIL by the Shareholders, Securities and Exchange Board of India, the Reserve Bank of India, the Government of India and the state governments. The role played by the media in highlighting the good work done by CRISIL is deeply appreciated.
For and on behalf of the Board of Directors of CRISIL Limited
Douglas L. Peterson
Chairman
Mumbai, February 11, 2017 (DIN: 05102955)
Dec 31, 2015
Dear Member,
The Directors are pleased to present to you the 29th Annual Report of
CRISIL Limited, along with the audited accounts, for the year ended
December 31, 2015.
FINANCIAL PERFORMANCE
A summary of the Company's financial performance in 2015:
(Rs. in Crore)
Particulars Consolidated Standalone
2015 2014 2015 2014
Total income for
the year was 1,423.16 1,277.07 1000.70 935.41
Profit before
depreciation,
exceptional item
and 442.82 412.17 349.38 331.31
taxes was
Deducting
depreciation
of 37.12 36.12 24.03 23.92
Proft before
tax was 405.70 376.05 325.35 307.39
Deducting
taxes of 120.55 107.62 103.35 91.88
Proft after
tax was 285.15 268.43 222.00 215.51
The proposed
appropriations
are:
Dividend 163.77 142.48 163.77 142.48
Corporate
dividend tax 33.60 27.21 33.60 27.21
General reserve 22.20 21.55 22.20 21.55
Balance carried
forward is 65.58 77.19 2.43 24.27
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
Section 211 (3C) of the Companies Act, 1956 (which continue to be
applicable in respect of Section 133 of the Companies Act, 2013 in
terms of applicable rules of The Companies (Indian Accounting
Standards) Rules, 2015) and the relevant provisions of the Companies
Act, 1956 / Companies Act, 2013, as applicable and guidelines issued by
the Securities and Exchange Board of India ("SEBI"). There are no
material departures from the prescribed norms stipulated by the
Accounting Standards in preparation of the Annual Accounts. Accounting
policies have been consistently applied except where a newly issued
accounting standard, if initially adopted or a revision to an existing
accounting standard requires a change in the accounting policy hitherto
in use. Management evaluates all recently issued or revised accounting
standards on an ongoing basis. The Company discloses consolidated and
standalone financial results on a quarterly basis of which standalone
results are subjected to limited review and publishes consolidated and
standalone audited financial results on an annual basis.
a) Consolidated operations
Revenue from the consolidated operations of your Company for the year
was Rs. 1,423.16 crore, 11% higher than Rs. 1,277.07 crore in the
previous year. Overall operational expenses for the year were Rs.
1,017.46 crore, against Rs. 901.01 crore in the previous year.
Operating Profit (EBITDA) improved to Rs. 442.82 crore, against Rs.
412.17 crore, in the previous year. Profit after Tax for the year at
Rs. 285.15 crore, 20% of revenue, was higher by 6% over Rs. 268.43
crore, 21% of revenue, in the previous year.
b) Standalone operations
Revenue from the standalone operations of your Company for the year was
Rs. 1,000.70 crore, 7% higher than Rs. 935.41 crore in the previous
year. Overall operational expenses for the year were Rs. 675.35 crore,
against Rs. 628.02 crore in the previous year. Operating Profit
(EBITDA) improved to Rs. 349.38 crore, against Rs. 331.31 crore, in the
previous year. Proft after Tax for the year at Rs. 222.00 crore or 22%
of revenue, was 3% higher than Rs. 215.51 crore or 23% of revenue, in
the previous year.
A detailed analysis on the Company's performance, both consolidated and
standalone, is included in the "Management's Discussion and Analysis"
Report, which forms part of this Annual Report.
DIVIDEND
The Directors recommend for approval of the members at the Annual
General Meeting to be held on April 19, 2016, payment of Final Dividend
of Rs. 7 per equity share and Special Dividend of Rs. 3 per equity
share of face value of Re. 1 each for the year under review. During the
year, the Company paid three interim dividends, first two interim
dividends of Rs. 4 each and the third interim dividend of Rs. 5 per
equity share of face value of Re. 1 each. The total dividend for the
year works out to Rs. 23 per share (including a Special Dividend of Rs.
3 per share) on a face value of Re. 1 per share in 2015 as against Rs.
20 per share (including a Special Dividend of Rs. 4 per share) on a
face value of Re. 1 per share in the previous year.
TRANSFER TO RESERVES
The appropriations for the year are:
(Rs. in Crore)
Particulars Consolidated Standalone
Year Ended
December 31, 2015
Net proft for the year 285.15 222.00
Balance of Reserve at the 113.37 113.37
beginning of the year
Transfer to General 22.20 22.20
Reserve
Transfer to Capital (0.05) (0.05)
Redemption Reserve
Used towards buy back of (3.65) (3.65)
equity shares
Balance of Reserve at 131.87 131.87
the end of the year
BUYBACK OF SHARES
During year, the Company had sought the approval of shareholders to
buy-back its own fully paid equity shares of Re. 1/- each ("Equity
Share"), through the stock exchange mechanism prescribed under the
Securities and Exchange Board of India (Buy-back of Securities)
Regulations, 1998 ("Buy-back Regulations") and the Companies Act, 2013
("Act"), for an amount not exceeding Rs. 102 crore (Rupees One Hundred
and two crore only) (hereinafter referred to as the "Maximum Offer
Size"), (being less than 15% of the total paid- up equity capital and
free reserves of the Company as per last standalone audited balance
sheet as on December 31, 2014), at a price not exceeding Rs. 2,310/-
(Rupees Two Thousand Three Hundred and Ten only) per Equity Share
(hereinafter referred to as the "Buy- back") from the open market
through BSE Limited and the National Stock Exchange of India Limited in
accordance and consonance with the provisions contained in the Act and
the provisions contained in the Buy-back Regulations.
The Company conducted a postal ballot seeking the approval of the
shareholders for buy-back of shares. The result of the postal ballot
was declared on June 15, 2015. The votes cast in favour of the
resolution for the buy-back were 99.98% of the total valid votes polled
and the special resolution for buy-back was thus passed with requisite
majority.
The Buy-back commenced from July 2, 2015. The Company bought back
5,11,932 equity shares for a total consideration of Rs. 101.98 crore at
an average price of Rs. 1,992.02 per share. In terms of the Buy-back
Regulations, after expending 99.98% of the total approved amount of Rs.
102 crore towards the Buy-back, the Buy- back was closed on July 14,
2015.
The equity share capital of the Company before the Buy- back was
7,14,50,520 equity shares of Re. 1 each and after extinguishment of
5,11,932 equity shares, the equity share capital of the Company was
7,09,38,588 equity shares of Re. 1 each.
INCREASE IN ISSUED, SUBSCRIBED AND PAID-UP EQUITY SHARE CAPITAL
During the year, the Company issued and allotted 3,63,980 equity shares
of the Company to eligible employees on exercise of options granted
under Employee Stock Option Schemes of the Company. At the end of the
year, the issued, subscribed and paidÂup capital of the Company at the
end of the year was 7,12,09,103 equity shares of Re. 1 each.
The movement of share capital during the year was thus, as under:
Particulars No. of shares Cumulative
allotted / outstanding
(extinguished) capital
(No. of shares
of FV Re. 1
each)
Capital at the
beginning - 7,13,57,055
of the year i.e.
as on
January 1, 2015
Allotment of
shares to 93,465 7,14,50,520
employees on
exercise
of options
granted under
Employee Stock
Option
Scheme, 2011 and
Employee Stock
Option
Scheme, 2012
Extinguishment of
shares (5,11,932) 7,09,38,588
consequent to
buy back
Allotment of
shares to 2,70,515 7,12,09,103
employees on
exercise
of options granted
under Employee
Stock
Option Scheme,
2011,
Employee Stock
Option
Scheme, 2012 and
Employee Stock
Option
Scheme, 2014
Capital at the
end of - 7,12,09,103
the year i.e.
as on
December 31,
2015
REVIEW OF OPERATIONS 2015
A. RATINgS
Highlights
- Announced 3,312 new Bank Loan Ratings (BLRs) during the year; total
BLRs outstanding exceed 13,776 Assigned over 16,000 SME ratings during
the year
- Conducted a series of high profile franchise activities during the
year that received wide coverage in media and were also well
appreciated by our stakeholders
- Provided enhanced support through Global Analytical Centre (GAC) to
Standard & Poor's Ratings Services by expanding Risk and Regulatory
support; further engaged with other MHFI businesses that included
deepening support for Plats
Business environment
India's economic and business environment remained subdued during 2015
due to weak investment demand and delay in decision-making by
corporate. However, growth has picked up pace on the back of a modest
recovery in consumption and increased government spending. We expect
GDP growth to be 7.4% in FY16 on account of moderate improvement in
capacity utilization rates. However, revival of private investments is
expected only by the second half of next fscal. Also, the Seventh
Central Pay Commission pay-outs could be an additional booster for
consumption and growth in the next fiscal.
Credit growth of India's banking sector remained muted at 11.1%
year-on-year (y-o-y) as of December 2015. Poor monsoon, muted
investments, weak working capital demand, rising risk aversion owing to
deteriorating asset quality of public sector banks, and an increase in
cheaper funds raised via commercial papers slowed credit off take. We
expect a gradual pick-up in banks' credit towards the end of FY16,
driven by a rise in retail loans, public sector investments and finance
requirements of small scale enterprises. Overall, banking sector credit
growth is projected to increase to 11-12% by March 2016 vis-Ã -vis 10%
in FY15.
The capital market witnessed an increase in activity in the third
quarter of the year due to falling interest rates in line with easing
policy rates. However, base rates of banks saw much weaker
transmission; issuances were primarily driven by refinancing of debt
and not by the need for capital investment. Hence the bond market which
saw a big leg up in quarter three was again subdued in the last
quarter. We believe the Reserve Bank of India (RBI) will keep policy
rates unchanged for the rest of this fiscal unless inflation surprises
on the downside. Additionally, the RBI is addressing the issue of weak
transmission of its repo rate cuts in to lending rates of banks by
fixing banks' base rate determination methodology on marginal cost of
funds from April 2016. We believe that growth in capital market
issuances will be linked to the pace of change in lending rates of
banks and investment demand pick-up.
In 2015, CRISIL's BLR business witnessed a muted growth due to weak
credit off take in the manufacturing sector and intensified
competition. These factors adversely impacted average realizations.
While pricing pressures are likely to continue, expectation of a
pick-up in credit growth in 2016 could result in an improvement in the
BLR market.
SME Ratings were impacted due to reduced budgetary support by
Government of India under the nSIC Â Performance & Credit Rating
Scheme. However, CRISIL continues to serve small and medium enterprises
(SMEs) without subsidy from the government and there has been an uptick
in volumes in second half of 2015 due to enhanced efforts taken to
scale the business. The outlook for the SME sector remains positive,
supported by favorable policy changes and initiatives such as MUDRA
Bank, Make in India, Digital India and Smart Cities. Furthermore,
CRISIL is carrying out extensive outreach initiatives to enhance
awareness about the benefits of ratings, and to increase banks'
acceptance of CRISIL's SME ratings. We believe these efforts will
positively impact the business.
Operations
CRISIL Ratings maintained its market leadership in 2015 backed by
strong performance in its bond ratings, bank loan ratings and SME
ratings businesses. CRISIL announced 3,312 new BLRs and 16,000 SME
ratings during the year. It has, to date, assigned more than 13,776
BLRs and over 91,000 SME ratings/assessments. This year, SME ratings/
assessments were focused on newer geographies such as the northeast
region of the country. The SME business added new clients from the
interiors of north and south India.
In 2015, CRISIL Ratings rated various innovative instruments in the
corporate bond and securitization market. We rated a
partially-guaranteed debenture issue of a passive infrastructure
special purpose vehicle (SPV). We assigned the first highest-safety
rating for a future-fow securitization of an interstate transmission
service project. We also assigned rating on the borrowings of chit
funds for the first time. In another unique example, CRISIL rated pass-
through certificates that were backed by receivables from both retail
as well as corporate loans, instead of them being usually backed only
by securitized retail loans. All the above innovations were well
received by the market, and are seen as significant milestones in
deepening of the corporate bond market in India.
CRISIL Ratings continued to conduct regular outreach programmers aimed
at providing insights on credit issues to investors and other market
participants. The outreach programmers included opinion pieces,
bankers' meetings, investor discussion forums, web-conferences, and
newsletters.
CRISIL Ratings held the 3rd edition of its annual bond market seminar
titled 'new Templates to Fund Growth', which focused on innovation in
India's corporate bond market. We organized an investor discussion
forum on the power sector to address some of the crucial industry
issues faced by both corporate and lenders. Our analysis was well
received by all stakeholders including regulators and policy makers.
Some high-impact franchise activities during 2015 included
web-conferences on loan against property market, road sector, real
estate market, apart from press releases on banking sector, telecom
sector, etc. We also launched Credit Conversations, a bi-monthly
newsletter that highlights noteworthy developments in the credit space.
This publication received appreciation from our key stakeholders
including clients and investors.
GAC continued to work closely with S&P, growing in new areas such as
risk management and regulatory support, including model validation and
documentation support while increasing the level of integration with
S&P teams globally. With the evolving global regulatory requirements,
GAC continued its focus on strengthening its internal controls
framework, in collaboration with S&P's control functions. GAC's culture
of continuous improvement has created ongoing efficiency gains for S&P
through lean management tools, work standardization and process
reengineering.
GAC also expanded its support to the larger MHFI family, including
increased support to Plats, a leading global provider of energy,
petrochemicals, metals and agriculture information, and a premier
source of benchmark price assessments for those commodity markets. The
focus this year was to grow beyond traditional credit skills and
enhance new and niche areas including quantitative skills for S&P and
product support for Plats.
B. RESEARCH
B.1. Global Research & Analytics (GR&A)
Highlights
- Financial Research and Risk & Analytics built a strong base across
business segments driven by new opportunities arising out of the
changing regulatory environment
- Risk & Analytics vertical registered strong business growth with
addition of new customers and substantial expansion with existing
clients
- In Corporate Research, the twin focus of new analytics solutions and
strengthening our relationship with existing client accounts helped
drive new business
- Coalition continued its tradition of product innovation, and has
entered the Transaction Banking and Security Services industries to
complete its offering to Corporate & Investment Banks
Business environment
2015 was another year of subdued growth for the global economy. As a
result, the size of the investment banking industry has reached its
lowest level since the global financial crisis of 2008-09 with fixed
income products at the same level as in 2005. Banks are also actively
transforming their front, middle and back-office activities to provide
differentiated services, achieving cost efficiencies and increasing
productivity: This has resulted in a large portion of the derivatives
business being shifted to captives and other cheaper (cost-friendly)
off shoring entities. On the brighter side, increasing regulatory
changes have opened up newer opportunities for CRISIL GR&A, especially
in the Risk & Analytics vertical as well as Coalition. The Coalition
Index, which tracks the performance of the top 10 global investment
banks, is expected to decrease by 2%. It is a telling barometer of the
performance of the global investment banking industry. In 2015, Fixed
Income Currency and Commodities (FICC) revenues declined by 6%
(following a 4% decrease in 2014). Revenues from equity products
provided some relative relief with an increase of 12% (following a
decrease of 5% in 2014), while investment banking revenues from mergers
& acquisitions, and debt and equity markets decreased by 4% (following
a growth of 11% in 2014).
In Financial Research, we have added clients across business segments
of buy-side, sell-side and credit risk. The majority of the
incremental business has come from new areas and/or clients. There was
excellent demand for our services from buy-side, especially from
traditional managers, insurance companies and hedge funds. Our
sell-side business witnessed increasing demand from our existing
clients on change mandates driven by a tougher regulatory environment.
Our Credit Risk business gained from new opportunities related to risk
management from financial institutions due to increased regulatory
oversight globally.
The Risk & Analytics vertical continued to see good demand from banks
in areas such as stress testing, model validation and regulatory change
initiatives. new regulations such as the Fundamental Review of the
Trading Book (FRTB) as well as increased demand for our services with
banks and financial institutions in the areas of operational risk,
credit risk, market risk, compliance analytics and risk infrastructure
support have been growth drivers. Specific opportunities such as the US
DFAST/CCAR requirements continue to drive banks to make investments in
risk modeling and model validation.
In Corporate Research, we were faced with a challenging business
environment. Due to shrinking client budgets and restricted spend,
making inroads into new client accounts was a challenge. This
necessitated increased on-ground presence with frequent outreach across
regions  showcasing our CI (Competitive Intelligence) and DA (Data
Analytics) capabilities. Further, we have shifted our focus from
supporting Strategy and Marketing functions, where client spends are
discretionary, to core functions of clients such as Operations and
Sales. With this objective in mind, we have launched multiple new
services, where we expect to see traction in coming years.
Operations
In Financial Research, we embarked on several initiatives to accelerate
growth, maximize value to clients, increase sales effectiveness,
optimize costs, and fortify our brand globally  all of which has
enhanced our competitiveness. We have significantly increased our
market presence, which buoyed growth in a tough business environment.
We also undertook several thought leadership initiatives targeting
traditional active asset managers, insurance companies, hedge funds,
investment banks and regulators across continents, which received
excellent response and reinforced our position as an industry leader.
Our global research centers continue to scale up, with Poland
benefiting from regulation-driven-change mandates, and China building
on its growth momentum due to increased demand for Asia research
support.
In Risk & Analytics, investments in previous years have put us on an
ideal footing to capitalize on the new requirements coming up in areas
such as compliance analytics, counterparty credit risk and IFRS9
modeling etc. In the past year, we have been able to expand our
business in all geographies including Poland and Argentina with several
key new project additions or expansion of existing client teams. We
continue to invest in our human capital with several training and other
learning & development initiatives to keep up pace with the
ever-changing global regulatory requirements and client mandates.
In Corporate Research, we introduced new analytics solutions and
ensured consistent outreach that helped us win multiple mandates from
both existing and new clients. Analytics has recorded strong pick-up
in the areas of customer, marketing, operations - HR in particular and
sales analytics, and we are accordingly ramping-up team strength to
meet the increased demand.
In 2015, Coalition added several clients among the top 25 global
corporate and investment banks and is now working with all of the top
15 investment banks and more than 20 corporate & investment banks.
Coalition delivered a strong performance, driven by its core Competitor
and Client Analytics, which reported solid growth. newer analytics such
as Cost/Operating Margin and RWA/Exposure have performed well. Clients
are increasingly looking at comprehensive return on equity analysis of
their performance across Revenue, Cost and Capital. Coalition has also
launched its first analysis of the Transaction Banking and Security
Services industries to offer a comprehensive view for Corporate and
Investment Banks. Its media strategy has delivered very good results,
leading to an estimated media market share of over 40%.
B.2. India Research Highlights
- Maintained its dominant and premium position in its flagship Industry
Research business Introduced our pioneering Security Level Valuations
to insurance companies and won mandates
- Our assessments of coal block bidding and potential impact of GST
shaped thinking on the issues. We sensitized the industry on importance
of better investment planning amid new provident fund investment
reforms.
- Stepped up engagement with regulators and industry associations
significantly.
Business environment
The depressed investment cycle and weak banking sector performance, on
the back of poor credit growth, high nPAs and squeezed profitability,
impacted research budgets. Consequently, the growth of the Industry
Research business remained modest. The Customized Research business was
impacted due to decline in private sector investments for the third
year in a row. CRISIL Research maintained its high quality independent
research and won repeat business from existing and large global
clients.
Economic revival is expected in the latter half of 2016 and CRISIL
Research is well positioned to assist banking, financial services and
corporate through its proprietary research and training products.
The assets under management of mutual funds grew 23% over last year and
the Research business was at the forefront, providing qualitative
research on investments. Changing market dynamics open up new
opportunities with corporate treasuries, exempt trusts and offshore
investors and these will be our focus for 2016. The business will also
focus on building new products around investment research and
investment risk management.
Therefore, we will continue to focus on enhancing our existing
offerings, launching new products with more granular and
action-oriented research, and increasing our client engagement
initiatives, keeping a sharp tab on our franchise activities that
showcase our differentiated positioning in the market.
Operations
During the year CRISIL Research launched many new, enhanced products.
The new version of 'Ratings Analytics' (CRISIL's unique web-based
platform providing information on ratings) was launched with enhanced
features and received positive customer response. We also rolled out
new products focused on corporate clients in Automobiles and Logistics
sectors. With continued rising interest in SME lending, we have
increased our focus on this space by enhancing our offerings.
We increased outreach and traction in the offshore category for
valuations and customized indices. Continued focus on increasing
outreach with corporate (treasuries and exempted trusts) helped gather
considerable momentum in the same.
CRISIL Research released a co-branded report with Financial
Intermediaries Association of India on distribution industry titled
'Indian Financial Distribution Industry at the Cusp - Vision 2020'. We
also released a report on the provident funds sector titled 'Whither
Safety net When India Ages'. Driving its thought leadership agenda
further, CRISIL Research was a knowledge partner at many industry
events including ASSOCHAM (Associated Chambers of Commerce and
Industry) conferences on provident funds where we released reports
titled 'Provident Funds in Equity: Emulating Global Trends' and 'Giving
Provident Funds the Equity Boost'; the Economic Times Pension and
Retirement Beneft Summit where we released a White Paper on retirement
industry.
We were also chosen to represent and become members of various sub
committees under the Securities and Exchange Board of India (SEBI) and
Pension Fund Regulatory and Development Authority (PFRDA).
We conducted more than 100 open programmers in 2015, compared with 80
in 2014 for the Executive Training business. By launching more
programmers per month with new focus areas across locations, the total
number of training days increased from 455 days in 2014 to 675 in 2015.
The CRISIL Centre for Economic Research (C-CER) continued to focus on
conducting distinctive research on macroeconomic issues and published
several landmark reports during the year. There were seven special
reports in its series Economy Insight covering contemporary
macroeconomic issues such as the pension challenge, impact of deficient
rains and farm stress, inflation dynamics, external trade, rupee
volatility, India's ability to face global shocks, consumption and
investment dynamics and direct benefit transfer scheme of the
government.
C-CER published a study on the need for pension reforms in India. The
report envisaged that India's aged population would treble to 300
million by 2050 and fiscal drag on the central government on providing
for this segment could increase by 120 basis points times to 3.4% of
GDP, while leaving large segment of the retired population financially
insecure if corrective steps are not taken now. The emphasis on social
security and adequate pension resonated in the Union Budget presented
in Parliament in February 2015.
CRISIL released 'Modified Expectations', a report evaluating the
economy-related performance of the narendra Modi-led government as it
completed one year in office. The report integrated the views of
Research and Ratings with a macroeconomic assessment to come out with a
360-degree view of the economy. The report received excellent response
from media, clients and other stakeholders C-CER released 'Angsty
farms', a report evaluating the impact of rising weather-related shocks
on India's agriculture, which remains highly vulnerable. The report
received very good response from various stakeholders. We also hosted
a successful webinar and a twitter chat on the report.
These reports helped build CRISIL Research's franchise among investors
and policymakers, reaffirming its position as a thought leader in the
macro economy and policy space.
C. INFRASTRUCTURE ADVISORY AND RISK SOLUTIONS
CRISIL conducts its infrastructure advisory and risk solutions business
through its subsidiary, CRISIL Risk and Infrastructure Solutions
Limited (CRIS).
C.1. CRISIL Infrastructure Advisory Highlights
- Supported the Indian government on some of their flagship programmers
such as Smart Cities Mission, Power for All, Urbanization, and Indian
Railways
- Successfully built a strong order book with several large mandate
wins
- Deepened penetration in select international markets in Africa and
Southeast Asia
Business environment
India's infrastructure sector faces several challenges. Even though
several new infrastructure programmers and policy initiatives have been
launched by the government, the investment climate has not yet picked
up. Infrastructure financing remains a key challenge, and the
government is working on a few structural changes in regards to funding
of infrastructure development. The private sector, which was expected
to play a key role in infrastructure development, is still extremely
wary of investments in the sector. Meanwhile, the government has been
working to create a more conducive business environment and has been
undertaking various reforms for sustainable economic growth. Outside
India, Africa and Southeast Asia have begun to show positive progress.
It is expected that the Government of India will take up the lion's
share of infrastructure investments over the next couple of years. The
government has launched quite a few large and visionary programmers,
and the focus is likely to shift to their implementation and
sustainability. This has created several hotspot opportunities in the
infrastructure advisory space, and the business is looking at
supporting the Indian government on several of these programmers. The
key is how quickly the government is able to rollout various reforms
and implement them on the ground.
In the international markets, Africa continues to show progress, albeit
at a very slow pace. The business is involved closely with
infrastructure development in key African markets, especially east
Africa. Some emerging markets in south-east Asia and the SAARC
countries show promise in the near future.
Operations
CRISIL Infrastructure Advisory started the year slowly but picked up
momentum in the second half of the year. We won several large and
prestigious mandates in India and in the international markets as well.
This has helped the business to build up a robust order book, which is
significantly larger than previous years. We have maintained steady
revenue growth with improved margins.
Our focus on government, and multilateral agencies as clients has paid
off. The infrastructure advisory business is proud to support several
flagship programmers of the Indian government, viz., Smart Cities
Mission, Power for All, Urbanization, national Solar Mission, northeast
regional development, and funding of Railways' investments.
We worked closely with the Ministry of Power in preparing the roadmap
for 24 x 7 Power for All by 2019 for 11 states and union territories.
CRISIL Infrastructure Advisory was the frst consultant appointed for
this programmed. In the energy sector, we also supported Ministry of
Petroleum & natural Gas (MoPNG) and Directorate General of Hydrocarbons
(DGH) in preparing the hydrocarbon vision document for the northeast.
Another prestigious mandate with the Petroleum Planning and Analysis
Cell involved preparing a comprehensive master plan for increasing and
scaling up the coverage of LPG usage in the country.
CRISIL Infrastructure Advisory won an important mandate with the World
Bank to support the Ministry of Rural Development in rolling out the
Shyama Prasad Mukherjee Rurban Mission. On the Smart Cities Mission
programmed, the business won mandates with five cities in Maharashtra,
to assist them in preparing proposals for the Smart Cities Challenge.
The business has also got the mandate from World Bank on proposing a
Railways Development Fund to support the investment plan of Indian
Railways. The business is also supporting the karnataka government on
its state highways improvement programmed.
CRISIL Infrastructure Advisory had a higher share of international
business in the year, as compared to the previous year. The business
won several large mandates in Africa and Southeast Asia, including an
Urban Water Supply and Sanitation management project, energy
improvement programs in Africa, and a Regional infrastructure
development fund project in a leading south-east Asian country.
C.2. CRISIL Risk Solutions (CRS) Highlights
- Focused on consolidation through investments in products.
- Witnessed good traction for model development and credit risk
management services with several mandates from banking and non-banking
clients.
- Continued to expand footprint in South-Asia, Middle- East and other
new geographies.
Business environment
The business environment continued to witness improved traction during
the year in India. With increasing focus on strengthening credit risk
management and monitoring, demand from banks for both our Early Warning
System (EWS) and Credit Processing System (CPS) continues. Momentum in
CRS's rating solution and models business continued in India and other
emerging markets. The overall business pipeline and visibility for 2016
is good.
Operations
2015 was a year of consolidation with investments in various products.
These investments made to strengthen the product base are expected to
play a key role in the expansion and growth of the business and
significantly contribute to revenues over the next 3 years.
The new channels of business through partnerships began to yield good
results with significant mandate wins in the Middle East and Sri Lanka.
These partnerships and plans for increased collaboration within MHFI
should help growth and deepen business penetration in the international
markets.
Apart from new products, investments are being planned to upgrade our
old stack of products to newer technology platforms and also develop
mobile-based applications for them. We anticipate faster proliferation
of mobile-based applications in financial services and have, therefore,
taken measures to enter this space early. Also, there were several
process initiatives undertaken during the year to standardize the
implementation of projects to improve quality, and reduce
implementation costs and timelines.
The business development team continued to build CRS's franchise. We
were knowledge partners for the Small Business Banking network workshop
in Goa in January where the Deputy Governor of the Reserve Bank of
India was the chief guest. We spoke at several banking forums such as
the ASSOCHAM conference on SME financing, and a financial services
round table. We organized a webinar on effective credit monitoring and
undertook a training session on effective credit risk management for
the senior management of a leading government financing entity. We will
continue to invest time and money in building our franchise in the
coming years.
CRS expects to maintain its growth momentum in 2016 and anticipates
revenue to be driven by newer products. The investments made in
products and structure should provide much needed impetus to drive the
business growth in India and international markets.
D. COLLABORATION WITH S&P
In 2015, we deepened our engagement with Standard & Poor's for outreach
initiatives in different geographies. An S&P - CRISIL joint seminar,
'India  Grinding up amidst challenges', was organized for investors in
Hong Kong and Singapore. The discussions at the seminar revolved around
India's macro-economic overview and outlook, the road ahead for India's
sovereign rating, views on the credit quality of Indian companies and
the outlook for key sectors. We also collaborated with S&P this year on
their flagship event 'India through the lens of global financial
markets' in Mumbai. The speakers made presentations on major credit
trends and outlook for India Inc. from a global perspective, and the
event was appreciated by investors and issuers alike.
As part of our joint outreach initiatives, we also organized a
breakfast meeting for S&P Asia-Pacific Chief Economist Paul Grunewald
and S&P US Chief Economist Beth Ann Bovino to exchange notes on the
Indian and global economy. CRISIL Chief Economist Dharmakirti Joshi
participated as a panelist in the Global Economic Outlook Conference in
New York sponsored by the McGraw Hill Financial Global Institute. He
was also the keynote speaker at S&P Dow Jones Indices' annual thought
leadership seminar 'India: Truly emerging' held in Mumbai.
S&P hosted our special report 'Modified Expectations' on the S&P Global
Credit Portal. In addition, C-CER continued to provide an outlook on
the Indian economy to S&P and contributed two articles on India in
S&P's bi-annual publication 'Global Economic Outlook'. CRISIL and S&P
jointly hosted the postÂbudget webinar.
Following their success in the Middle East, S&P Capital IQ and CRISIL
Risk Solutions continue to collaborate successfully in other regions to
expand their global footprint. In 2015, they also tasted our first
joint success in kazakhstan. The two companies commenced their
relationship in 2011-12 with one project in Saudi Arabia; it has since
progressed to over eight projects over the last three years across six
countries. In 2015, they are currently delivering two key projects in
kuwait and kazakhstan that, we believe, will provide the required
impetus in these new markets for future growth. The success in the
Middle East needs to be translated in other regions and the focus of
2016 will be to create synergies on products and markets to create
value globally.
E. HUMAN RESOURCES
CRISIL's Human Resources team successfully ran its talent acquisition,
retention and development agendas during the year. As on December 31,
2015, CRISIL's headcount was 3,753 including all its wholly owned
subsidiaries.
Highlights
- CRISIL's senior management team was strengthened through hiring of
leaders in strategic roles. CRISIL also continued to strengthen its
campus programmed, which has been a key source of talent.
- Business HR partners helped drive employee engagement and people
agenda across businesses and regions. key areas involved assimilation
of new talent, performance management process, rewards and recognition
and employee connect. The team was also instrumental in driving and
executing various employee engagement and fun activities through the
year.
- This year, the function focused hugely on training need
identification. CRISIL conducted 116 training programmers throughout
the year, covering 2,041 man- days.
- We had a rigor in implementation performance management by early
closure of individual goals, higher objectivity in goal setting,
mid-year review and leadership surveys.
SEGMENT-WISE RESULTS
The Company has identified three business segments in line with the
Accounting Standard on Segment Reporting (AS- 17), which comprise: (i)
Ratings, (ii) Research, (iii) Advisory. The audited financial results
of these segments are provided as a part of financial statements.
DIRECTORS
The members of the Board of Directors of the Company are eminent
persons of proven competence and integrity. Besides having financial
literacy, experience, leadership qualities and the ability to think
strategically, the Directors have a significant degree of commitment to
the Company and devote adequate time for the meetings, preparation and
attendance. Board members possess education, expertise, skills and
experience in various sectors and industries required to manage and
guide the Company.
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.
CEO SUCCESSION AND DIRECTORSHIP CHANGES
During the year, Ms. Roopa kudva took early retirement as the Managing
Director & Chief Executive Officer of the Company on April 30, 2015.
Your Directors place on record their sincere appreciation of the
valuable contribution made by her to CRISIL.
Ms. Ashu Suyash took over as the Managing Director & Chief Executive
Officer of CRISIL. The Board approved her appointment as Additional
Director and Managing Director & Chief Executive Officer with effect
from june 1, 2015. The appointment of Ms. Ashu Suyash as director
liable to retire by rotation and the terms and conditions of
appointment were put up to the shareholders for their approval by way
of postal ballot, results of which were announced on June 15, 2015. The
shareholders approved the said resolution.
Mr. neeraj Sahai resigned as Director of the Company on October 17,
2015. Your Directors place on record their sincere appreciation of the
valuable contribution made by him to CRISIL.
The Board of Directors appointed Mr. John Francis Callahan Jr. as an
Additional Director of the Company with effect from October 18, 2015.
Mr. john Callahan holds office as Additional Director until the ensuing
Annual General Meeting, and is eligible for appointment as Director as
provided under Article 129 of the Articles of Association of the
Company. The Company has received notice under Section 160 of the
Companies Act, 2013 from a member signifying her intention to propose
the candidature of Mr. john Callahan for the offce of Director. A brief
profile of Mr. john Callahan has been given in the notice convening the
Annual General Meeting.
In accordance with the Articles of Association of the Company and the
provisions of the Companies Act, 2013, Mr. Yann Le Palled retires by
rotation and being eligible, seeks re- appointment.
BOARD INDEPENDENCE
Our definition of 'Independence' of Directors is derived from
Regulation 16(b) of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015 and Section
149(6) of the Companies Act, 2013. Based on the confirmation /
disclosures received from the Directors and on evaluation of the
relationships disclosed, the following Non-Executive Directors are
Independent :
a) Mr. H. N. Sinor
b) Mr. M. Damodaran
c) Dr. nachiket Mor
d) Ms. Vinita Bali
COMMITTEES OF THE BOARD
There are currently fve Committees of the Board, as under:
- Audit Committee
- Corporate Social Responsibility Committee
- Investment Committee
- Nomination and Remuneration Committee
- Stakeholders' Relationship Committee
Details of all the Committees, along with their charters, composition
and meetings held during the year, are provided in the Report on
Corporate Governance, a part of this Annual Report.
NUMBER OF MEETINGS OF THE BOARD
The Board meets at regular intervals to discuss and decide on Company /
business policy and strategy, apart from other Board business. The
Board / Committee Meetings are pre-scheduled and a tentative annual
calendar of the Board and Committee Meetings is circulated to the
Directors well in advance to facilitate them to plan their schedule and
to ensure meaningful participation in the meetings. However, in case of
a special and urgent business need, the Board's approval is taken by
passing resolutions through circulation, as permitted by law, which are
confirmed in the subsequent Board meeting.
The notice of Board meeting is given well in advance to all the
Directors. Usually, meetings of the Board are held in Mumbai. The
Agenda of the Board / Committee meetings is circulated at least a week
prior to the date of the meeting. The Agenda for the Board and
Committee meetings includes detailed notes on the items to be discussed
at the meeting to enable the Directors to take an informed decision.
The Board met fve times in financial year 2015 viz., on February 14,
April 17, April 28, july 17 and October 17. The maximum interval
between any two meetings did not exceed 120 days.
ANNUAL EVALUATION BY THE BOARD
During the year, the Board has carried out the annual evaluation of its
own performance as well as the evaluation of the working of its
Committees and individual Directors, including Chairman of the Board.
This exercise was carried out through a structured questionnaire
prepared separately for Board, Committee and individual Directors.
The questionnaire for Board evaluation was prepared taking into
consideration various aspects of the Board's functioning such as
understanding of Board members of their roles and responsibilities,
time devoted by the Board to Company's long-term strategic issues,
quality and transparency of Board discussions, quality, quantity and
timeliness of the information fow between Board members and management,
Board's effectiveness in disseminating information to shareholders and
in representing shareholder interests, Board information on industry
trends and regulatory developments and discharge of fduciary duties by
the Board.
Committee performance was evaluated on the basis of their effectiveness
in carrying out respective mandates.
Peer assessment of Directors, based on parameters such as participation
and contribution to Board deliberations, ability to guide the Company
in key matters and, knowledge and understanding of relevant areas were
received by the Board for individual feedback.
The Board acknowledged certain key improvement areas emerging through
this exercise and action plans to address these are in progress. The
performance evaluation of the Chairman was carried out by the
Independent Directors at a separate meeting of the Independent
Directors.
CHANGES TO KEY MANAGERIAL PERSONNEL
During the year, Ms. Roopa kudva took early retirement as a Managing
Director & Chief Executive Officer of the Company on April 30, 2015.
Ms. Ashu Suyash took over as the Managing Director & Chief Executive
Officer of CRISIL with effect from June 1, 2015.
Mr. neelabja Chakrabarty resigned as the Company Secretary on February
27, 2015 and Ms. Minal Bhosale was appointed as the Company Secretary
with effect from June 1, 2015.
RISK MANAgEMENT POLICY AND INTERNAL CONTROL ADEQUACY
The Board has adopted the policies and procedures for ensuring the
orderly and efficient conduct of its business, including adherence to
the Company's policies, the safeguarding of its assets, the prevention
and detection of frauds and errors, the accuracy and completeness of
the accounting records, and the timely preparation of reliable
financial disclosures. The Company's internal control systems are
commensurate with the nature of its business and the size and
complexity of its operations. These are routinely tested and certified
by Statutory as well as Internal Auditors. Significant audit
observations and follow up actions thereon are reported to the Audit
Committee. For ensuring independence of audits, the Internal Auditors
report directly to the Audit Committee. Both Internal and Statutory
Auditors have exclusive executive sessions with the Audit Committee on
a regular basis. In addition, during the year, the Management performed
a review of key financial controls, at entity as well as operating
levels.
The Company has in place a mechanism to identify, assess, monitor and
mitigate various risks to key business objectives which has been
enhanced during this year. Major risks identified by the businesses
and functions are systematically addressed through mitigating actions
on a continuing basis. These are discussed at the meetings of the Audit
Committee and the Board of Directors of the Company. These have also
been reported and discussed in detail in the Management's Discussion
and Analysis Report, annexed to this report.
Based on the framework of internal financial controls and compliance
systems established and maintained by the Company, work performed by
the Internal, Statutory and Secretarial Auditors and external
consultants and the reviews performed by Management and the relevant
Board committees, including the Audit Committee, the Board is of the
opinion that the Company's internal financial controls were adequate
and effective during the financial year 2015.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors hereby confirm that:
i. in the preparation of the annual accounts, the applicable accounting
standards have been followed and that no material departures have been
made from the same;
ii. 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 profits of the
Company for that period;
iii. they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 2013, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
iv. they have prepared the annual accounts on a going concern basis;
v. they have laid down internal financial controls for the Company and
such internal financial controls are adequate and operating
effectively; and
vi. they have devised proper systems to ensure compliance with the
provisions of all applicable laws and such systems are adequate and
operating effectively.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF
THE COMPANY
There have been no material changes and commitments, if any, affecting
the financial position of the Company which have occurred between the
end of the financial year of the Company to which the financial
statements relate and the date of the report.
PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION,
AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars regarding foreign exchange earnings and outgo appear as
separate items in the notes to the Accounts. Since the Company does
not own any manufacturing facility, the other particulars relating to
conservation of energy and technology absorption stipulated in the
Companies (Accounts) Rules, 2014 are not applicable.
However, in order to protect and conserve precious natural resources,
following design aspects have been factored while designing CRISIL's
office building in Mumbai.
a) Maximum day light in the office area to avoid artificial
illumination.
b) Optimum usage of Air-conditioning.
c) Roof Top covering by adequate natural landscaping which acts as a
thermal insulation to minimize the air- condition load on the foor
beneath.
d) Usage of recycled water through sewerage treatment for fishing and
gardening purpose.
The daily steps taken to reduce energy consumption are as follows.
a) Operating the air-conditioning equipment through the Building
Monitoring system (BMS) which ensures that the A.C. units are switched
on based on occupancy only.
b) In order to save energy and cost of recycling water, the key valve
system has been set up for waterless sanitation systems.
Similar design aspects have been factored for Gurgaon offce also. The
Pune SEZ (Hinjewadi) offce, which is of about 42,500 sq. ft., is
designed with LED lighting. This gives higher savings in energy
consumption as compared with the CFL lighting.
CORPORATE SOCIAL RESPONSIBILITY
The Company has constituted a Corporate Social Responsibility (CSR)
Committee in accordance with Section 135 of the Companies Act, 2013.
The role of the Committee is to review the CSR Policy, indicate
activities to be undertaken by the Company towards CSR and formulate a
transparent monitoring mechanism to ensure implementation of projects
and activities undertaken by the Company towards CSR.
The CSR Policy of the Company and further details about the initiatives
taken by the Company on Corporate Social Responsibility during the year
under review have been appended as Annexure II to this Report.
VIGIL MECHANISM
The Company has established a vigil mechanism for Directors and
employees to report their genuine concerns, details of which have been
given in the Corporate Governance Report annexed to this Report.
SUBSIDIARY COMPANIES
As on December 31, 2015, the Company had four Indian and seven overseas
wholly owned subsidiaries. There has been no change in the number of
subsidiaries or in the nature of business of the subsidiaries, during
the year under review. In accordance with Section 129(3) of the
Companies Act, 2013, the Company has prepared a consolidated financial
statement of the Company and all its subsidiary companies, which is
forming part of the Annual Report. A statement containing salient
features of the financial statements of the subsidiary companies is
also included in the Annual Report.
The Company has no associate companies within the meaning of Section
2(6) of the Companies Act, 2013.
In accordance with third proviso of Section 136(1) of the Companies
Act, 2013, the Annual Report of the Company, containing therein its
standalone and the consolidated financial statements has been placed on
the website of the Company, www.crisil.com. Further, as per fourth
proviso of the said section, audited annual accounts of each of the
subsidiary companies have also been placed on the website of the
Company, www.crisil.com. Shareholders interested in obtaining a copy of
the audited annual accounts of the subsidiary companies may write to
the Company Secretary at the Company's registered offce.
The Company has obtained a certificate from the Statutory Auditors
certifying that the Company is in compliance with the FEMA regulations
with respect to the downstream investments made in its subsidiary
companies as operating during the year.
MERGER OF WHOLLY OWNED SUBSIDIARIES WITH THE COMPANY
In order to improve operating efficiencies, the Board of Directors of
the Company in their meeting held on October 17, 2015, after
considering the recommendations of the Audit Committee, approved the
amalgamation of its three wholly owned subsidiary companies viz., Pipal
Research Analytics and Information Services India Private Limited,
Coalition Development Systems (India) Private Limited and Mercator
Info-Services India Private Limited, with the Company through a Scheme
of Amalgamation (Scheme) under Section 391/394 of the Companies Act,
1956 subject to necessary approvals of the Stock Exchanges and sanction
of the Hon'ble High Court of judicature at Mumbai.
The Company has received, in terms of Clause 24(f) of the erstwhile
Listing Agreement, observation letters, dated December 31, 2015 from
nSE (national Stock Exchange of India Limited) and December 30, 2015
from BSE (BSE Limited), the Stock Exchanges where the equity shares of
the Company are listed, to the draft Scheme of Amalgamation conveying
their no Objection for filing the Scheme with the Hon'ble High Court.
The petition seeking sanction of the proposed Scheme by Hon'ble High
Court has already been fled and will come up for hearing in due course
in 2016.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED
TO IN SECTION 188(1)
A significant quantum of related party transactions undertaken by the
Company is with its subsidiary companies engaged in product delivery of
CRISIL businesses and business development activities. The Company has
also been providing analytical support to McGraw Hill Financial Inc.
(MHFI) entities as a part of a Master Services Agreement, which
transaction has been approved by the shareholders though a resolution
passed by postal ballot on December 15, 2014.
The Audit Committee pre-approves all related party transactions. The
details of the related party transactions undertaken during a
particular quarter are placed at the meeting of the Audit Committee
held in the succeeding quarter.
All contracts / arrangements / transactions with related parties that
were executed in 2015 were in the ordinary course of business and at an
arms' length. During the year, there were no related party transactions
which were materially significant and that could have a potential
confect with the interests of the Company at large. All related party
transactions are mentioned in the notes to the accounts. The
particulars of material contracts or arrangements with related parties
referred to in Section 188(1), is given in prescribed Form AOC - 2 as
Annexure III.
As required under Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015, the Company
has formulated a Related Party Transactions Policy, which has been put
up on the website of the Company at http://www.
crisil.com/investors/corporate-governance.html.The Company has
developed an operating procedures manual for identification and
monitoring of related party transactions.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186
Details of loans, guarantees and investments covered under the
provisions of section 186 of the Companies Act, 2013 are provided in
the notes to Financial Statements.
AUDITORS' APPOINTMENT
At the last Annual General Meeting of the Company, the Statutory
Auditors, S. R. Batliboi & Co. LLP, Chartered Accountants, were
appointed for a term of two years until the conclusion of the 30th
Annual General Meeting, subject to ratification by the shareholders at
the intermittent 29th Annual General Meeting.
The Company has received letter from them to the effect that their
appointment, if ratified, would be within the prescribed limits under
Section 141(3)(g) of the Companies Act, 2013 and that they are not
disqualified from appointment.
The Board recommends ratification of their appointment from the
conclusion of this Annual General Meeting up to the conclusion of next
Annual General Meeting of the Company.
SECRETARIAL AUDIT REPORT
The Board of Directors of the Company has appointed Dr. k. R.
Chandratre, Practicing Company Secretary to conduct the Secretarial
Audit and his Report on Company's Secretarial Audit is appended to this
Report as Annexure Iv.
COMMENTS ON AUDITORS' REPORT
There are no qualifications, reservations or adverse remarks or
disclaimers made by S. R. Batliboi & Co. LLP, Statutory Auditors, in
their report and by Dr. k. R. Chandratre, Company Secretary in
Practice, in his secretarial audit report.
The Statutory Auditors have not reported any incident of fraud to the
Audit Committee of the Company in the year under review.
MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT
The Management's Discussion and Analysis Report for the year under
review, as stipulated under Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations, 2015, is
annexed to this report.
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 Securities and Exchange Board of India. The
Report on Corporate Governance as stipulated under Securities and
Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015 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 the
aforementioned Listing Regulations is also published elsewhere in this
Annual Report.
PARTICULARS OF REMUNERATION
During the year, 78 employees received remuneration of Rs. 6 million or
more per annum. In accordance with the provisions of Section 197(12) of
the Companies Act, 2013 and Rule 5(2) of Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, the names and other
particulars of employees are available at the Registered Office of the
Company during working hours for a period of 21 days before the Annual
General Meeting and shall be made available to any shareholder on
request. Such details are also available on your Company's website,
http://www.crisil.com/investor/financial-reports.html.
Disclosures with respect to the remuneration of Directors and Employees
as required under Section 197(12) of Companies Act, 2013 read with Rule
5(1) Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014 have been appended as Annexure v to this Report.
The nomination and Remuneration Committee of the Company has affirmed
at its meeting held on February 9, 2016 that the remuneration is as per
the remuneration policy of the Company.
EMPLOYEE STOCK OPTION SCHEMES
The Company has three employee stock option schemes. The Employee
Stock Option Scheme - 2011 (ESOS 2011) was approved by the shareholders
vide a special resolution passed through postal ballot on February 4,
2011. The Employee Stock Option Scheme - 2012 (ESOS 2012) was approved
by the shareholders vide a special resolution passed through postal
ballot on April 10, 2012. The Employee Stock Option Scheme - 2014
(ESOS 2014) was approved by the shareholders vide a special resolution
passed through postal ballot on April 3, 2014.
The summary information on ESOS 2011, ESOS 2012 and ESOS 2014 is
provided as Annexure vI to this Report.
EXTRACT OF ANNUAL RETURN
The Extract of Annual Return as provided under Section 92(3) of the
Companies Act, 2013 and as prescribed in Form no. MGT-9 of the rules
prescribed under Chapter VII relating to Management and Administration
under the Companies Act, 2013 is appended as Annexure vII.
DEPOSITS
The Company has not accepted any public deposits and as such, no amount
on account of principal or interest on public deposits was outstanding
as on the date of the balance sheet.
LITIGATIONS
During the year under review, there were no significant or material
orders passed by any regulatory / statutory authorities or courts /
tribunals against the Company impacting its going concern status and
operations in future.
FINANCIAL YEAR
The applications made by CRISIL and all its Indian subsidiary companies
for seeking exemption from applicability of section 2(41) of the Act
were approved by the Hon'ble Company Law Board during the year and
accordingly, the Company and all its subsidiary companies, in India and
across the world, would follow the calendar year as the financial year.
CEO & CFO CERTIFICATION
Certificate from Ms. Ashu Suyash, Managing Director & CEO and Mr. Amish
Mehta, Chief Financial Officer, pursuant to provisions of Securities
and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015, for the year under review was placed
before the Board of Directors of the Company at its meeting held on
February 9, 2016.
ACKNOWLEDGEMENTS
The Board of Directors wishes to thank the employees of CRISIL for
their exemplary dedication and the excellence they have displayed in
conducting the operations of CRISIL. The Board also wishes to place on
record its sincere appreciation of the faith reposed in the
professional integrity of CRISIL by customers and investors who have
patronized its services. The Board acknowledges the splendid support
provided by market intermediaries. The affiliation with Standard and
Poor's has been a source of great strength. The Board of Directors also
wishes to place on record its gratitude for the faith reposed in CRISIL
by the Shareholders, Securities and Exchange Board of India, the
Reserve Bank of India, the Government of India, and the state
governments. The role played by the media in highlighting the good work
done by CRISIL is deeply appreciated.
For and on behalf of the Board of
Directors of CRISIL Ltd.
Douglas L. Peterson
Chairman
Mumbai, February 9, 2016 (DIN: 05102955)
Dec 31, 2014
Dear Member,
The Directors are pleased to present to you the 28th Annual Report of
CRISIL Limited, along with the audited accounts, for the year ended
December 31, 2014.
Financial performance
A summary of the Company''s financial performance in 2014:
Rupees in crore
Consolidated Standalone
Particulars 2014 2013 2014 2013
Total income for the
year was 1,277.07 1,147.28 935.41 832.18
Profit before
depreciation,
exceptional item 412.17 397.19 331.31 312.57
and taxes was
Deducting depreciation
of 36.12 37.92 23.92 23.22
Profit before exceptional
item was 376.05 359.27 307.39 289.35
Exceptional item - 65.89 - 99.36
Profit before tax was 376.05 425.16 307.39 388.71
Deducting taxes of 107.62 127.33 91.88 107.52
Profit after tax was 268.43 297.83 215.51 281.19
The proposed appropriations are:
Dividend 142.48 134.15 142.48 134.15
Corporate dividend tax 27.21 23.15 27.21 23.02
General reserve 21.55 28.12 21.55 28.12
Balance carried forward is 77.19 112.41 24.27 95.90
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
Section 211 (3C) of the Companies Act, 1956 (which continue to be
applicable in respect of Section 133 of the Companies Act, 2013 in
terms of Rule 7 of The Companies (Accounts) Rules, 2014) and the
relevant provisions of the Companies Act, 1956 / Companies Act, 2013,
as applicable and guidelines issued by the Securities and Exchange
Board of India ("SEBI"). Accounting policies have been
consistently applied except where a newly issued accounting standard,
if initially adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use. Management
evaluates all recently issued or revised accounting standards on an
ongoing basis. The Company discloses standalone audited financial
results on a quarterly and an annual basis, consolidated un-audited
financial results on a quarterly basis and consolidated audited
financial results on an annual basis.
a) Consolidated operations
Revenue from the consolidated operations of your Company for the year
was Rs. 1,277.07 crore, 11% higher than Rs. 1,147.28 crore in the
previous year. Overall operational expenses for the year was Rs. 901.01
crore, against Rs. 788.01 crore in the previous year. Operating Profit
(EBITDA) was Rs. 412.17 crore, against Rs. 397.19 crore in the previous
year. Profit after Tax (excluding exceptional item) for the year at Rs.
268.43 crore, 21% of revenue, was higher by 6% over Rs. 254.27 crore,
22% of revenue, in the previous year.
b) Standalone operations
Revenue from the standalone operations of your Company for the year was
Rs. 935.41 crore, 12% higher than Rs. 832.18 crore in the previous
year. Overall operational expenses for the year was Rs. 628.02 crore,
against Rs. 542.84 crore in the previous year. Operating Profit
(EBITDA) was Rs. 331.31 crore, against Rs. 312.57 crore in the previous
year. Profit after Tax (excluding exceptional item) for the year at Rs.
215.51 crore, 23% of revenue, was higher by 6% over Rs. 204.17 crore,
25% of revenue, in the previous year.
A detailed analysis on the Company''s performance, both consolidated and
standalone, is included in the "Management''s Discussion and
Analysis" Report, which forms part of this Annual Report.
Voluntary disclosures under Companies Act, 2013
The provisions with respect to preparation of financial statements and
Board''s Report under the Companies Act, 2013 are applicable for
companies whose financial year had commenced on or after April 1, 2014.
Since our financial year commenced on January 1,2014, the provisions
with respect to preparation of financial statements and the contents of
Board''s Report are not applicable to us for the year under review. We
have, however, voluntarily made certain additional disclosures
prescribed under the new Act in the Board''s Report.
Dividend
The Directors recommend for approval of the members at the Annual
General Meeting to be held on April 17, 2015, payment of final dividend
of Rs. 6 and a special dividend of Rs. 4 per equity share of face value
of Re. 1 each for the year under review. During the year, the Company
paid three interim dividends, first two interim dividends of Rs. 3 each
and the third interim dividend of Rs. 4 per equity share of face value
of Re. 1 each. The total dividend for the year works out to Rs. 20 per
share on a face value of Re. 1 per share in 2014 (including a special
dividend of Rs. 4 per share) as against Rs. 19 per share (including a
special dividend of Rs. 6 per share) on a face value of Re. 1 per share
in the previous year.
Increase in issued, subscribed and paid-up equity share capital
During the year, the Company issued and allotted 4,06,607 equity shares
of the Company to eligible employees on exercise of options granted
under Employee Stock Option Scheme - 2011 and 2,97,558 equity shares of
the Company to eligible employees on exercise of options granted under
Employee Stock Option Scheme - 2012. Consequently, the issued,
subscribed and paid-up capital of the Company increased from
7,06,52,890 equity shares of Re. 1 each to 7,13,57,055 equity shares of
Re. 1 each.
Review of operations - 2014
A. Ratings
Highlights
- Announced 3,245 new bank loan ratings (BLRs); total BLRs
outstanding exceed 12,800
- Assigned 14,798 SME ratings during the year
- Introduced the CRISIL Analytical Excellence framework, based on
four pillars, to establish a common understanding of what constitutes
analytical excellence at CRISIL
- Provided enhanced support through Global Analytical Centre (GAC) to
Standard & Poor''s Ratings Services and commenced support for Platts,
another McGraw-Hill Financial business unit
Business environment
The Indian economy and business environment remained largely subdued
during 2014, especially in the first half, owing to slowing demand and
expectations of GDP growing at 5.5% for 2014-15 with limited investment
by Indian corporates. Credit growth of the Indian banking sector has
been low and is projected to be less than 10% for the financial year
2014-15.
The bond market witnessed moderate growth on account of sizeable
issuances by large corporates and financial institutions to refinance
their high-cost debt. However, the new Companies Act was introduced
with stringent guidelines with respect to debt issuances, resulting in
fewer companies approaching the bond market. The securitisation market
also witnessed a slowdown for the second year running with continued
regulatory uncertainty. While the RBI has not lowered interest rates,
bond market yields have come down due to abundant liquidity, and we
expect the bond market to see increased issuances in 2015.
In 2014, CRISIL''s BLR ratings witnessed strong growth. This was despite
a challenging business environment due to weak credit off-take and
increased competitive pressures impacting realisation adversely. While
pricing pressures are likely to continue, expectation of a pick-up in
investments in 2015 could result in an improvement in the BLR market.
SME ratings showed healthy volume growth in the backdrop of a
challenging business environment and high interest rates. Enhanced
awareness about the benefits of ratings, banks'' growing acceptance of
CRISIL''s SME ratings, and CRISIL''s intensive outreach initiatives and
expansion into new markets are expected to drive demand in 2015.
Operations
CRISIL Ratings maintained its market leadership in 2014 backed by
strong performance in its bond ratings, bank loan ratings and SME
ratings businesses. CRISIL announced 3,245 new BLRs and 14,798 SME
ratings during the year. It has, to date, assigned more than 12,800
BLRs and over 75,800 SME ratings/assessments. This year, SME ratings/
assessments were focused on newer geographies like the North-East
region. The SME business added new clients from the interiors of North
and South India.
CRISIL Ratings also introduced the CRISIL Analytical Excellence
framework. The framework is based on four pillars - Proprietary Tools &
Frameworks, Multiple Levels of Transparency, Robust Processes, and
Highest Level of Analytical Rigour - and establishes a common
understanding of what constitutes analytical excellence, how CRISIL
strives to achieve it, and how it enables us to stand apart in the
market.
In 2014, CRISIL Ratings rated various innovative instruments in the
corporate bond market, such as BASEL III Tier I Bonds and Infra Bonds.
We also introduced Fund Management Capability Ratings for the mutual
fund industry. In addition, CRISIL rated India''s maiden Commercial
Mortgage Backed Securitisation (CMBS) transaction for a leading
developer. This rating reflects CRISIL''s commitment to supporting
innovation in the Indian bond market. Structures like CMBS provide a
fine balance between the developers'' requirement for diversified
funding and investors'' need for higher safety. All the above
innovations were well received by the market, and are seen as
significant milestones in the deepening of the corporate bond market in
India.
CRISIL Ratings continued to conduct regular investor and market
outreach programmes aimed at providing insights on credit issues. These
initiatives included opinion pieces, bankers'' meetings, investor
discussion forums and seminars which helped CRISIL reach out to
relevant stakeholders, such as issuers and investors, across the
country.
GAC continues to work closely with Standard & Poor''s Ratings Services,
growing in new areas such as risk management, while increasing the
level of integration with S&P teams across the corporate,
infrastructure, financial services, public finance, and structured
finance domains globally. GAC has steadily increased its value-addition
to S&P, moving up the curve in terms of analytical and content support,
and assisting S&P in implementing key projects. GAC''s culture of
continuous improvement creates ongoing efficiency gains for S&P through
automation, work standardisation and process reengineering.
GAC has also expanded its support to the larger McGraw-Hill Financial
universe. In 2014, GAC began supporting Platts, a leading global
provider of energy, petrochemicals, metals and agriculture information,
and a premier source of benchmark price assessments for those commodity
markets.
B. Research
B.1. Global Research & Analytics (GR&A)
(Includes Financial Research / Risk and Analytics (Irevna), Corporate
Research and Coalition)
Highlights
- Innovations and new work-stream additions to our Risk & Analytics
vertical in response to regulatory changes seen gaining traction with
clients
- I n Corporate Research, a combination of product-based strategy and
extensive market outreach generated growth momentum
- Coalition continued its tradition of product innovation, and now
serves all the top 15 investment banks in the world
- CRISIL GR&A and Coalition collaborated to organise thought
leadership seminars in London and New York titled ''Investment Banking:
The Road Ahead''
Business environment
In 2014, the global economy witnessed another year of subdued growth.
As a result, banks focused on re- assessing front, middle and
back-office activities to provide differentiated services, achieve cost
efficiency and increase productivity. This, coupled with increasing
regulatory changes, opened up new opportunities for CRISIL GR&A,
especially in the Risk & Analytics vertical. The Coalition Index that
tracks the performance of the top 10 global investment banks is
expected to be flat in 2014 after decreasing 4% in 2013. It is a
telling barometer of the performance of the global investment banking
industry. In 2014, Fixed Income Currency and Commodities - or FICC -
revenues declined by 4% (following a 19% decrease in 2013). Similarly,
revenues from equity products decreased 5% (following a strong growth
of 24% in 2013), while investment banking revenues from mergers &
acquisitions, and debt and equity markets surged by 11% (following a
growth of 13% in 2013).
In Financial Research, we have added clients on both the buy and sell
sides. A majority of the incremental business has come from new areas
and new clients. There was excellent demand for our services from the
buy-side, especially private equity and fixed-income research clients.
We also saw positive traction from regional and mid-sized banks that
were keen to partner high-end and bespoke service providers like us in
order to sharpen their focus on offering differentiated services.
The Risk & Analytics vertical saw good demand as banks continued to
face pressure from new regulations such as on fundamental review of
trading book, data aggregation and reporting. US regulators, as part of
the Comprehensive Capital Analysis and Review - or CCAR - exercise,
focused on the qualitative aspect of submissions such as data
integrity, model appropriateness and documentation.
In Europe, comprehensive stress testing returned after three years.
This more-stringent regulatory regime has led to a global shortage of
good quality risk-management talent, especially those with
risk-modelling expertise.
In Corporate Research, an extensive market outreach plan coupled with a
focus on productisation provided growth momentum during the year. With
a balanced mix of introductory meetings and rigorous follow-ups, we
have cemented relationships with existing clients, initiated fresh
engagements, entered new geographies and gained traction for our
products.
Global investment banks are increasingly making strategic choices on
their business. This is creating business opportunities for Coalition.
In the current uncertain and challenging environment, investment banks
turn more than ever to Coalition to assess which product/region/client
type to grow or exit and how to optimise scarce resources (capital and
balance sheet). As a result, its Client Analytics and recently launched
Return on Equity (RoE) Analytics are showing strong growth.
Operations
In Financial Research, we embarked on several initiatives to accelerate
growth, maximise value to clients, increase sales effectiveness,
optimise costs, and fortify our brand globally - all of which has
enhanced our competitiveness. We have significantly increased our
market presence and customer engagement, which buoyed growth in a tough
business environment. We also undertook several thought leadership
initiatives for hedge funds, private equity firms, investment bankers
and regulators across continents which received excellent response and
reinforced our position as an industry leader. Our global research
centres continue to scale up, with China continuing its growth momentum
and Argentina expanding its client roster and also moving to a larger
facility to accommodate future expansion. Investments made in the past
two years to add new work-streams in Risk & Analytics to cater to new
regulatory requirements have begun paying off. We have quickly
achieved scale in model development, model validation and
stress-testing support and have added many clients in these areas.
We also hosted and sponsored multiple thought leadership events and
summits, and made presentations at premier risk conferences such as the
GARP Annual Summit and Risk Americas. This year, our annual regulator''s
roundtable titled ''Conversation with the US Regulators'' was held in New
York. Senior regulators from the US Federal Reserve and about 50 risk
practitioners participated. CRISIL GR&A and Coalition collaborated to
organise thought leadership seminars, titled ''Investment Banking: The
Road Ahead'' in London and New York. These seminars brought the best of
both teams'' expertise and analysis to our clients and were landmark
global events for CRISIL.
In Corporate Research, our investments and efforts, including a new
data analytics offering, are expected to deliver results in 2015. We
kept focus through the year on skills development and quality
initiatives.
In 2014, Coalition added several clients among the top 25 global
investment banks and is now working with all of the top 15 investment
banks. Coalition delivered a strong performance, driven by its core
Competitor and Client Analytics, which reported solid growth, and the
recently launched Cost /Operating Margins Analytics. Coalition
continued its tradition of product innovation, and launched Balance
Sheet/Leverage Ratio Analysis to complete its suite of RWA Analytics,
as well as a new Cost/Operating Margin Analytics to complete its
Revenue Analytics offerings. Coalition is now able to offer a
comprehensive RoE analysis of investment banks by combining its
Revenue, Cost and RWA Analytics. Its media strategy in each region has
delivered very good result with more than 350 articles quoting
Coalition and a resulting media market share estimated at more than
40%. Together with two conferences organised in London and New York in
partnership with the GR&A business, this strategy has led to
significant improvement in Coalition''s reach among current and
prospective clients.
B.2. India research Highlights
- Released three new fixed-income indices including the
Inflation-Indexed Government Securities (IIGS) Index, the first of its
kind in India
- I ntroduced bond valuations for individual debt securities and now
provides daily valuations for 4,000 securities, affirming our position
as a key player in India''s capital markets
- Got a mandate from the Employees'' Provident Fund Organisation for
the third time in a row to help it select and monitor the performance
of fund managers
- Continued to focus on deepening coverage of niche sectors where
research is not available easily; launched special one-time reports on
three new sectors - NBFC, agriculture and iron ore
Business environment
The business environment remained subdued in the first half of 2014,
but we have seen some green shoots emerging in the second half.
The Industry Research business grew at a steady pace despite
significant profitability pressure on our banking-sector clients who
constitute a major portion of our revenues. The Funds & Fixed Income
business also continued to grow at a healthy rate due to increased
sophistication and adoption of better practices like daily
security-wise pricing for debt securities by market participants such
as mutual funds and insurance companies.
However, the continuing slowdown in the economy and corporate
investment cycle impacted the growth of Customised Research and Equity
Research businesses as fewer projects were being commissioned and
fund-raising activities declined.
Going forward, we believe that as the business environment improves,
the profitability of the banking, financial services and insurance - or
BFSI - segment will also improve, leading to greater demand for
research and training support and a pick-up in the investment cycle
will increase the demand for customised research.
Therefore, we will continue to focus on enhancing our existing
offerings, launching new products, sharpening our communication about
value proposition and increasing our client engagement initiatives. We
will also increase our franchise activities to showcase differentiated
offerings in the market place.
Operations
During the year, CRISIL Research continued its efforts to expand its
client base and leverage its analytical capabilities to serve clients
better.
Our flagship industry research product, www.crisilresearch. com, which
provides near-real-time update on industry and economy, continued to be
extensively used by clients. Since its launch in 2009, this online
platform has increasingly synchronised with the internal processes of
clients - as underscored by the 60%-plus increase in the average number
of hits it has received per month, over the last one year.
We continued to expand our coverage of industries, and included niche
and emerging sectors on which research is not easily available. We
expanded our coverage to 86 sectors in 2014 from 70 earlier, and
launched special one-time reports on the NBFC, agriculture and iron-ore
sectors. The agriculture- sector report received excellent feedback
from clients owing to the depth of its coverage.
In the Customised Research space, we continued to receive repeat
business from existing clients, signalling the superior quality of our
work. This was accompanied by an increase in the number of mandates
received from multinationals looking to invest in India.
In the Capital Markets space, we launched three new indices, including
the Inflation-Indexed Government Securities, or IIGS, Index. We also
leveraged our domain expertise and analytical capabilities to increase
penetration in mutual funds, corporate treasuries, provident funds and
banks. Additionally, and for the third straight time, the Employees''
Provident Fund Organisation gave us the mandate to select and monitor
the performance of its fund managers.
We also added 20 new modules to our Executive Training programme. The
modules were based on a wide range of financial topics including
capital markets. They will help broaden our product offerings and
approach a more diversified set of clients.
The CRISIL Centre for Economic Research (C-CER) continued to focus on
conducting distinctive research on macroeconomic issues and published
several landmark reports during the year. There were seven special
reports in its series ''Economy Insight'' covering contemporary
macroeconomic issues such as the implications of interest rate cuts,
employment, food wastage and inflation, goods and services tax, trade
competitiveness, and growth possibilities in the short and medium run.
C-CER''s report ''Of growth and missed opportunity - What 5% / 6.5% / 9%
GDP growth will mean for India in the next 5 years'' analysed growth
possibilities and their ramifications for business and economy over the
medium term. It also evaluated the implications of each of these growth
outcomes for employment and poverty reduction.
C-CER also published two reports on employment, ''Hire & Lower: Slowdown
compounds India''s job-creation challenge'' and ''What can a pro-jobs
policy do for India" These reports assessed the challenge of
generating jobs for India''s burgeoning young population and how to
address it.
These reports helped build CRISIL''s franchise among media and
policymakers and reaffirmed its position as a thought leader in the
macro-economy and policy space.
C. infrastructure Advisory and Risk Solutions
CRISIL conducts its infrastructure advisory and risk solutions business
through its subsidiary, CRISIL Risk and Infrastructure Solutions
Limited (CRIS).
C.1. CRISIL Infrastructure Advisory Highlights
- Enhanced our engagement with government and multilateral agencies,
both at the Centre and state, to align with the new government''s
breakthrough agenda
- Won several marquee assignments in the urban infrastructure sector
- Deepened our focus on international business and investing in
developing key markets in Africa
Business environment
The business environment in India was extremely challenging during the
first half of calendar 2014 due to the general elections and adverse
investment climate. With a new stable government at the Centre, things
have improved significantly in the second half. Outside India, the
economic situation in Indonesia, one of our key markets, was impacted
through the year due to the prolonged Presidential elections. Africa
showed positive progress, although the pace of infrastructure
development remains extremely slow.
Various policy initiatives identified by the new government in the
infrastructure sector look promising. The positive impact of the
initiatives is likely to translate into investments and an improvement
in the overall economic climate by the second half of 2015. The private
sector is expected to play a major role in infrastructure development,
and the new government is likely to address major challenges in
financing frameworks and bottlenecks, to provide a renewed impetus to
public-private-partnership (PPP).
Operations
Despite a challenging business environment through 2014, the business
won several large and prestigious mandates, and has built up a
significantly larger, more robust order book. The focus on increasing
the size of orders continued, due to which the year saw a sharp
increase in the average bid and mandate size. On the revenue side,
there was modest growth over the previous year.
Focus on the eminence and outreach agenda was sharper during the year,
both in India and Africa. We were nominated as a member of the Expert
Group for the proposed ''Shyama Prasad Mukherji Rurban Mission'' in the
Ministry of Rural Development. We were the knowledge partners of the
Africa Public-Private-Partnerships (PPP): Investment and Development
Summit in Ghana, and our team participated in the event as key
speakers. We were special invitees at the Rajasthan Chief Minister''s
workshop on creating an urban transformation blueprint for the state.
In addition, the business won prestigious assignments from multilateral
agencies and governments. We are working on a large mandate with the
Asian Development Bank (ADB) on the City Cluster Development Project in
Bangalore. Another significant project with the ADB is to develop a
Bond Guarantee Fund for India. We were deeply involved with the private
sector in advising them on the recent City Gas Distribution (CGD) bids
announced by Petroleum and Natural Gas Regulatory Board (PNGRB). We
provided key inputs to the Ministry of Coal for the new coal block
auction process.
The business has also built up a healthy order book to sustain growth
during 2015.
C.2. CRISIL Risk Solutions (CRS)
Highlights
- Expanded our product suite beyond the traditional regulatory risk
products are working to create two new products to help banks manage
their loan lifecycle management - Early Warning Systems (EWS) and
Credit Processing Systems (CPS)
- Obtained two large-ticket mandates for EWS, one from a leading
private sector bank, and the other from one of the largest public
sector banks in India
- Expanded our coverage to newer geographies in Africa and the
Middle-East
Business environment
The business environment for the CRISIL Risk Solutions (CRS) business
in India improved compared with last year. Portfolio management was in
sharp focus as the banking sector witnessed further deterioration in
asset quality. Consequently, there was demand for both, our Early
Warning System (EWS) and Credit Processing System (CPS) services from
banks in India. Our credit rating and credit processing systems were
sought in the Middle-East and North Africa (MENA) region. It''s
heartening to note that large banks in India and South Asia are looking
to invest in integrated risk management solutions.
Operations
It was a year of growth for CRISIL Risk Solutions (CRS). The recovery
was driven by investments in new products and new geographies. The new
products have started to contribute significantly to the revenues in
2014. The revenue mix was geographically distributed across India,
MENA, and South and South-East Asia.
Focused efforts were made towards creating new channels of business. We
forged teaming agreements with two vendors in MENA and aspire to
increase our share in these markets in the coming years. There were
multiple transaction-level partnerships with systems integrators and
product vendors alike, which enabled access to new opportunities.
Our EWS product drew interest from a cross-section of banks. The
release of a Framework for Revitalising Distressed Assets in the
Economy by the Reserve Bank of India in February 2014 provided an
impetus for the same, and came as an affirmation of our investment in
EWS. We received three EWS implementation mandates in 2014 - from the
largest public and private sector banks in India and from a commercial
bank in Nigeria. We also received mandates to implement CPS at two of
the top three private sector banks in India and from the aforementioned
bank in Nigeria. The demand for our flagship product RAM/ CRE has been
steady, and we continue leveraging S&P Capital IQ to win mandates for
CRE implementation in the MENA region.
Apart from new products, investments were made to upgrade our old stack
of products to newer technology platforms and to develop mobile apps.
We anticipate faster proliferation of mobile applications in financial
services and have, therefore, taken measures to enter this space early.
There were several process initiatives undertaken to standardise
project implementation, improve quality and reduce implementation costs
and timelines.
The business development team continued to build CRS''s franchise in
India and abroad. We participated in multiple banking seminars
conducted by CAFRAL on resolving stressed assets in banking books. We
spoke at multiple banking forums conducted by SBBN in Turkey, FIBAC,
ASSOCHAM and Infrastructure Financing. We will continue to invest time
and money in building our franchise in the coming years.
CRS expects to maintain its growth momentum in 2015 and anticipates
revenue to be driven by newer products. The business has been realigned
to synchronise with changing product dynamics, and will continue to
invest in new products. At the same time, we will look to expand our
operations to new markets and customer segments to hasten growth.
D. Collaboration with S&P
In 2014, we deepened our engagement with Standard & Poor''s for outreach
initiatives in different geographies. An S&P- CRISIL joint seminar,
''India - The Way Ahead'', was organised for investors in Hong Kong and
Singapore. The discussions at the seminar revolved around the
macro-economic overview and outlook for India, the road ahead for
India''s sovereign rating, views on the credit quality of Indian
companies and the outlook for key sectors. We also held an S&P-CRISIL
roundtable in Mumbai, on ''Trends and Developments in Asia Pacific and
Indian Insurance Industry''. The speakers'' presentations covered recent
global and regional regulatory developments and their implications for
insurers in India and the Asia-Pacific, credit trends in the
Asia-Pacific insurance sector, an overview of the Indian general
insurance industry and enterprise risk management trends.
As part of our joint outreach initiatives, we also organised a
breakfast meeting for S&P Asia-Pacific Chief Economist Paul Gruenwald
with senior Indian economists to exchange notes on the Indian and
global economy.
S&P hosted our special report ''Of growth and missed opportunity'' on
the S&P Global Credit Portal. In addition, C-CER continued to provide
an outlook on the Indian economy to S&P and contributed two articles on
India in S&P''s bi-annual publication - Global Economic Outlook.
The collaboration between S&P Capital IQ and CRISIL Risk Solutions to
increase market outreach in the risk solutions arena continue to
progress well in the Middle-East and Africa, with plans to expand our
footprint in other regions. Synergies on products and methodologies are
being explored for jointly creating value to customers globally.
E. Human Resources
CRISIL''s Human Resources team successfully ran its talent acquisition,
retention and development agendas during the year. As on December 31,
2014 CRISIL''s headcount stood at 3,313.
Highlights
- CRISIL''s senior management team was strengthened through hiring of
leaders in various domains, including business development.
- CRISIL''s Business Leadership Programme, designed in association
with the University of Michigan''s Ross School of Business, focused on
developing skills critical for enabling strategic thinking capabilities
and strategic talent development. The programme was attended by 47
senior leaders of the organisation.
- Talent development and coaching programmes were further
strengthened to make the process robust. Young leaders identified
through ''The Young Leaders Development Programme'' launched last year
were assigned mentors and projects. This group has gone through varied
assignments aimed at providing necessary exposure to face future
challenges.
- Global offices continued to build the CRISIL GR&A brand through
partnership with premier universities, sponsorship of events, job fairs
and others. CRISIL is looking at hiring from premier campuses
internationally.
- The focus on employee development through training modules that
were created in-house continued. More than 160 training programmes were
conducted during the year, over 86% of them through in-house trainers
and business leaders. The programmes added up to over 23,350 man- hours
/ 3,590 man-days of training.
- To strengthen the Performance Management Process and to link it to
development goals, 360-degree leadership polls were conducted for all
team managers and detailed analysis and feedback provided to them. This
initiative has sharpened the feedback process and brought out clear
development goals for the leaders.
Number of meetings of the Board
The Board meets at regular intervals to discuss and decide on Company /
business policy and strategy apart from other Board business. The Board
/ Committee Meetings are pre- scheduled and a tentative annual calendar
of the Board and Committee Meetings is circulated to the Directors in
advance to facilitate them to plan their schedule and to ensure
meaningful participation in the meetings. However, in case of a special
and urgent business need, the Board''s approval is taken by passing
resolutions through circulation, as permitted by law, which are
confirmed in the subsequent Board meeting.
The notice of Board meeting is given well in advance to all the
Directors. Usually, meetings of the Board are held in Mumbai. The
Agenda of the Board / Committee meetings is circulated at least a week
prior to the date of the meeting. The Agenda for the Board and
Committee meetings includes detailed notes on the items to be discussed
at the meeting to enable the Directors to take an informed decision.
The Board met four times in financial year 2014 viz., on February 14,
April 17, July 18 and October 17. The maximum interval between any two
meetings did not exceed 120 days.
Committees of the Board
During the year, in accordance with the Companies Act, 2013, the Board
re-constituted some of its Committees and also formed a Corporate
Social Responsibility Committee. There are currently five Committees of
the Board, as follows:
- Audit Committee
- Corporate Social Responsibility Committee
- Investment Committee
- Nomination and Remuneration Committee
- Stakeholders'' Relationship Committee
Details of all the Committees along with their charters, composition
and meetings held during the year, are provided in the "Report on
Corporate Governance", a part of this Annual Report.
CEO succession
The Nomination and Remuneration Committee of the CRISIL Board of
Directors is overseeing the search for a successor to Ms. Roopa Kudva,
MD & CEO. Ms. Kudva has informed the Board of Directors of her intent
to leave CRISIL after ensuring a smooth succession.
The Nomination and Remuneration Committee has engaged an executive
search firm to conduct the search. All interested candidates, internal
and external, will be assessed and evaluated objectively by the
Committee.
Directors'' responsibility statement
Your Directors hereby confirm that:
i. In the preparation of the annual accounts for financial year ended
December 31, 2014, the applicable accounting standards have been
followed.
ii. The Directors 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 December 31, 2014 and of the profit of the Company
for the year ended on that date.
iii. The Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities.
iv. The Directors have prepared the annual accounts for financial year
ended December 31, 2014 on a ''going concern'' basis.
Board independence
Our definition of ''Independence'' of Directors is derived from Clause 49
of the Listing Agreement with Stock Exchanges and Section 149(6) of the
Companies Act, 2013. Based on the confirmation / disclosures received
from the Directors and on evaluation of the relationships disclosed,
the following Non-Executive Directors are Independent in terms of
Clause 49 of the Listing Agreement and Section 149(6) of the Companies
Act, 2013 :-
a) Mr. H. N. Sinor
b) Mr. M. Damodaran
c) Dr. Nachiket Mor
d) Ms. Vinita Bali
Company''s 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.
Comments on auditors'' report
There are no qualifications, reservations or adverse remarks or
disclaimers made by S. R. Batliboi & Co. LLP, Statutory Auditors, in
their report and by Dr. K. R. Chandratre, Company Secretary in
Practice, in his secretarial audit report.
The Statutory Auditors have not reported any incident of fraud to the
Audit Committee of the Company in the year under review.
Particulars of contracts or arrangements with related parties referred
to in Section 188(1)
The particulars of contracts or arrangements with related parties
referred to in Section 188(1), as prescribed in Form AOC - 2 of the
rules prescribed under Chapter IX relating to Accounts of Companies
under the Companies Act, 2013, is appended as Annexure II.
Transfer to reserves
The appropriations for the year are:
Rupees in crore
Consolidated Standalone
Year Ended
December 31, 2014
Net Profit for the year 268.43 215.51
Balance of Reserve at the 91.82 91.82
beginning of the year
Transfer to General Reserve 21.55 21.55
Balance of Reserve at the 113.37 113.37
end of the year
Material changes and commitments affecting the financial position of
the Company
There have been no material changes and commitments, if any, affecting
the financial position of the Company which have occurred between the
end of the financial year of the Company to which the financial
statements relate and the date of the report.
Particulars regarding conservation of energy, technology absorption,
and foreign exchange earnings and outgo
The particulars regarding foreign exchange earnings and outgo appear as
separate items in the notes to the Accounts. Since the Company does
not own any manufacturing facility, the other particulars relating to
conservation of energy and technology absorption stipulated in the
Companies (Accounts) Rules, 2014 are not applicable.
Risk management policy and internal adequacy
The Company has in place a mechanism to identify, assess, monitor and
mitigate various risks to key business objectives. Major risks
identified by the businesses and functions are systematically addressed
through mitigating actions on a continuing basis. These are discussed
at the meetings of the Audit Committee and the Board of Directors of
the Company.
The Company''s internal control systems are commensurate with the nature
of its business and the size and complexity of its operations. These
are routinely tested and certified by Statutory as well as Internal
Auditors. Significant audit observations and follow up actions thereon
are reported to the Audit Committee.
Corporate Social Responsibility
The Company has constituted a Corporate Social Responsibility (CSR)
Committee in accordance with Section 135 of the Companies Act, 2013.
The CSR Committee was constituted by the Board of Directors of the
Company at its meeting held on February 14, 2014. The CSR Policy of the
Company and the details about the development of CSR Policy and
initiatives taken by the Company on Corporate Social Responsibility
during the year as per annexure attached to the Companies (Corporate
Social Responsibility Policy) Rules, 2014 have been appended as
Annexure III to this Report.
Vigil mechanism
The Company has established a vigil mechanism for Directors and
employees to report their genuine concerns, details of which have been
given in the Corporate Governance Report annexed to this Report.
Annual evaluation by the Board
The evaluation framework for assessing the performance of Directors
comprises of the following key areas:
i. Attendance of Board Meetings and Board Committee Meetings
ii. Quality of contribution to Board deliberations
iii. Strategic perspectives or inputs regarding future growth of
Company and its performance
iv. Providing perspectives and feedback going beyond information
provided by the management
v. Commitment to shareholder and other stakeholder interests
The evaluation involves Self-Evaluation by the Board Member and
subsequently assessment by the Board of Directors. A member of the
Board will not participate in the discussion of his / her evaluation.
Subsidiary Companies
As on December 31, 2014, the Company had four Indian and seven overseas
wholly owned subsidiaries. There has been no change in the number of
subsidiaries or in the nature of business of the subsidiaries, during
the year under review. In accordance with Section 129(3) of the
Companies Act, 2013, the Company has prepared a consolidated financial
statement of the Company and all its subsidiary companies, which is
forming part of the Annual Report. A statement containing salient
features of the financial statements of the subsidiary companies is
also included in the Annual Report.
In accordance with third proviso of Section 136(1) of the Companies
Act, 2013, the Annual Report of the Company, containing therein its
standalone and the consolidated financial statements has been placed on
the website of the Company, www.crisil.com. Further, as per fourth
proviso of the said section, audited annual accounts of each of the
subsidiary companies have also been placed on the website of the
Company, www.crisil.com. Shareholders interested in obtaining a copy of
the audited annual accounts of the subsidiary companies may write to
the Company Secretary at the Company''s registered office.
Directors and key managerial personnel
Mr. David Pearce resigned as Director of the Company on October 17,
2014. Your Directors place on record their sincere appreciation of the
valuable contribution made by him to CRISIL.
During the year, Mr. Ravinder Singhania ceased to be Alternate Director
to Mr. Douglas L. Peterson, Mr. Yann Le Pallec and Mr. David Pearce
with effect from July 18, 2014. He was appointed as Alternate Director
to Mr. Douglas L. Peterson under Companies Act, 2013 with effect from
the same date.
The Board of Directors appointed Mr. Neeraj Sahai as an Additional
Director of the Company with effect from October 17, 2014. Mr. Neeraj
Sahai holds office as Additional Director until the ensuing Annual
General Meeting, and is eligible for appointment as Director as
provided under Article 129 of the Articles of Association of the
Company. The Company has received notice under Section 160 of the
Companies Act, 2013 from a member signifying her intention to propose
the candidature of Mr. Neeraj Sahai for the office of Director. A brief
profile of Mr. Neeraj Sahai has been given in the Notice convening the
Annual General Meeting.
In accordance with the Articles of Association of the Company and the
provisions of the Companies Act, 2013, Mr. Douglas L. Peterson retires
by rotation and being eligible, seeks re-appointment.
During the year, Mr. Dinesh Sharma resigned as the Chief Financial
Officer of the Company on May 21,2014. Mr. Amish Mehta has been
appointed as the Chief Financial Officer of the Company with effect
from October 3, 2014. Further, Ms. Roopa Kudva is the Managing Director
& Chief Executive Officer of the Company and, Mr. Neelabja Chakrabarty
is the Company Secretary.
Auditors'' appointment
The Statutory Auditors, S. R. Batliboi & Co. LLP, Chartered
Accountants, hold office up to the ensuing Annual General Meeting and
being eligible, offer themselves for re- appointment. The Board
recommends their re-appointment for a term of two consecutive years
from the conclusion of this Twenty Eighth Annual General Meeting up to
the conclusion of Thirtieth Annual General Meeting of the Company in
the calendar year 2017, subject to ratification of their appointment in
the intermittent Annual General Meeting to be held in calendar year
2016. The Company has received letter from them to the effect that
their appointment, if made, would be within the prescribed limits under
Section 141(3)(g) of the Companies Act, 2013 and that they are not
disqualified from appointment.
Secretarial audit report
The Board of Directors of the Company has appointed Dr. K. R.
Chandratre, Practising Company Secretary, to conduct the Secretarial
Audit and his Report on Company''s Secretarial Audit is appended to this
Report as Annexure IV.
Management''s Discussion and Analysis Report
The Management''s Discussion and Analysis Report for the year under
review, as stipulated under Clause 49 of the Listing Agreement with the
Stock Exchanges in India, is annexed to this report.
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 Securities and Exchange Board of India. The
Report on Corporate Governance as stipulated under Clause 49 of the
Listing Agreement 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 Clause 49 is also published
elsewhere in this Annual Report.
Particulars of remuneration
During the year, 65 employees received remuneration of Rs. 6 million or
more per annum. In accordance with the provisions of Section 197(12) of
the Companies Act, 2013 and Rule 5(2) of Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, the names and other
particulars of employees are set out in the annexure to the Directors''
Report. In terms of the provisions of Section 136(1) of the Companies
Act, 2013, the Directors'' Report is being sent to the shareholders
without this annexure. Shareholders interested in obtaining a copy of
the annexure may write to the Company Secretary at the Company''s
registered office.
The Nomination and Remuneration Committee of the Company has affirmed
at its meeting held on February 14, 2015 that the remuneration is as
per the remuneration policy of the Company.
Employee Stock Option Schemes
The Company has three employee stock option schemes. The Employee
Stock Option Scheme - 2011 (ESOS 2011) was approved by the shareholders
vide a special resolution passed through postal ballot on February 4,
2011. The Employee Stock Option Scheme - 2012 (ESOS 2012) was approved
by the shareholders vide a special resolution passed through postal
ballot on April 10, 2012. The Employee Stock Option Scheme - 2014 (ESOS
2014) was approved by the shareholders vide a special resolution passed
through postal ballot on April 3, 2014.
The details of options granted under ESOS 2014 and the summary
information on ESOS 2011, ESOS 2012 and ESOS 2014 are provided as
Annexure V to this Report.
Deposits
The Company has not accepted any public deposits and as such, no amount
on account of principal or interest on public deposits was outstanding
as on the date of the balance sheet.
Financial year
Section 2(41) of the Companies Act, 2013 has defined "financial
year" as the period ending March 31 for all companies and bodies
corporate. However, if a company which is a holding company or a
subsidiary of a company incorporated outside India and is required to
follow a different financial year for consolidation of its accounts
outside India, it can make an application to National Company Law
Tribunal (NCLT) or Company Law Board (till NCLT is formed) to have a
different financial year.
CRISIL is a subsidiary of McGraw Hill Financial Inc. (MHFI) which
follows calendar year as its financial year. CRISIL had changed its
financial year from March 31 to December 31 in the year 2005 so as to
have a uniform accounting year with MHFI. The above referred section
mandates that the companies / bodies corporate should align its
financial year within two years from the date of notification of the
section, that is on or before March 31, 2016. As CRISIL intends to
continue to follow calendar year as its accounting / financial year,
the Company will make an application to Company Law Board to seek
necessary exemption from applicability of section 2(41) of the Act.
CEO & CFO certification
Certificate from Ms. Roopa Kudva, Managing Director & CEO and Mr. Amish
Mehta, Chief Financial Officer, pursuant to provisions of Clause 49(V)
of the Listing Agreement, for the year under review was placed before
the Board of Directors of the Company at its meeting held on February
14, 2015.
A copy of the certificate on the financial statements for the financial
year ended December 31, 2014 is annexed along with this Report.
Acknowledgements
The Board of Directors wishes to thank the employees of CRISIL for
their exemplary dedication and the excellence they have displayed in
conducting the operations of CRISIL. The Board also wishes to place on
record its sincere appreciation of the faith reposed in the
professional integrity of CRISIL by customers and investors who have
patronised its services. The Board acknowledges the splendid support
provided by market intermediaries. The affiliation with Standard and
Poor''s has been a source of great strength. The Board of Directors
also wishes to place on record its gratitude for the faith reposed in
CRISIL by the Securities and Exchange Board of India, the Reserve Bank
of India, the Government of India, and the state governments. The role
played by the media in highlighting the good work done by CRISIL is
deeply appreciated.
For and on behalf of the Board of
Directors of CRISIL Limited
Douglas L. Peterson
Chairman
Mumbai, February 14, 2015
Dec 31, 2013
The Directors are pleased to present to you the 27th Annual Report of
CRISIL Limited, along with the audited accounts, For the year ended
December 31, 2013.
PERFORMANCE
A summary of the Company''s Financial performance in 2013:
(Rupees in crore)
Particulars Standalone Consolidated
2013 2012 2013 2012
Total income For the year
was 832.18 759.25 1,147.28 998.10
Profit before depreciation
and taxes was 312.57 294.21 397.19 348.01
Deducting depreciation of 23.22 23.92 37.92 34.32
Profit before exceptional
item 289.35 270.29 359.27 313.69
Exceptional item 99.36 - 65.89 -
Profit before tax was 388.71 270.29 425.16 313.69
Deducting taxes of 107.52 77.42 127.33 93.29
Profit after tax was 281.19 192.87 297.83 220.40
The proposed appropriations
are:
Dividend 134.15 112.32 134.15 112.32
Corporate dividend tax 23.02 18.22 23.15 18.34
General reserve 28.12 19.29 28.12 19.29
Balance carried Forward is 95.90 43.04 112.42 70.45
DIVIDEND
The Directors recommend For approval of the members at the Annual
General Meeting to be held on April 17, 2014, payment of Final Dividend
of Rs. 4 and a Special Dividend of Rs. 6 per equity share of Face value
of Re. 1 each For the year under review. During the year, the Company
paid three interim dividends of Rs. 3 each per equity share of Face
value of Re. 1 each. The total dividend For the year works out to Rs.
19 per share on a Face value of Re. 1 per share in 2013 (including a
Special Dividend of Rs. 6 per share) as against Rs. 16 per share
(including a Special Dividend of Rs. 3 per share) on a Face value of
Re. 1 per share in the previous year.
VOLUNTARY OPEN offer BY MCGRAW HILL FINANCIAL, INC.
During the year, McGraw Hill Financial, Inc. ("MHFI"), through its
subsidiary McGraw-Hill Asian Holdings (Singapore) Pte Limited,
announced a Voluntary Open offer to the shareholders of CRISIL Limited
under Regulation 6 of the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011 to
acquire up to 15,670,372 equity shares, representing 22.23% of the
total equity shares outstanding in CRISIL Limited, at a price of Rs.
1,210 per share.
The offer was made by McGraw-Hill Asian Holdings (Singapore) Pte
Limited ("the acquirer") along with S&P India LLC, Standard & Poor''s
International LLC and McGraw Hill Financial, Inc., in their capacity as
"Persons acting in Concert" with the acquirer.
The tender period under the offer was From July 24, 2013 to August 6,
2013. The total number of shares tendered under the offer was
10,623,059 representing 15.07% of the share capital of the Company.
Consequently, the shareholding of MHFI increased From 52.77% to 67.84%
of the share capital of the Company.
INCREASE IN ISSUED, SUBSCRIBED AND PAID- UP EQUITY SHARE CAPITAL
During the year, the Company issued and allotted 402,080 equity shares
of the Company to eligible employees on exercise of options granted
under Employee Stock Option Scheme - 2011 and 15,070 equity shares of
the Company to eligible employees on exercise of options granted under
Employee Stock Option Scheme - 2012. Consequently, the issued,
subscribed and paid-up capital of the Company increased From 70,235,740
equity shares of Re. 1 each to 70,652,890 equity shares of Re. 1 each.
SALE of SHAREHOLDING IN INDIA INDEX SERVICES AND PRODUCTS LIMITED
During the year, CRISIL sold its equity shareholding in India Index
Services and Products Limited (IISL), CRISIL''s joint venture with the
National Stock Exchange of India Limited. CRISIL sold 637,000 equity
shares of IISL of Face value Rs. 10 each, representing 49% of the total
equity share capital of IISL, to NSE Strategic Investment Corporation
Limited For a total consideration of Rs. 100 crore.
REVIEW of OPERATIONS - 2013 A. RATINGS
Highlights
Announced 3,106 new bank loan ratings (BLRs); total BLRs outstanding
exceed 12,100
Assigned 12,857 SME ratings during the year
Increased support to Standard & Poor''s through Global Analytical Centre
(GAC), adding more groups and more complex analytical requirements on a
larger scale
Business Environment
The Indian economy and business environment remained subdued during
2013 owing to slowing demand, high inflation and tight liquidity, made
worse in the second half by a volatile rupee and high interest rates.
All this meant a weak investment climate - with large projects getting
deferred - and subdued debt markets.
Bond market issuances saw a trend reversal - the volume dropped 13% in
the First half of this year compared with a 39% growth seen in the year
ending March 31, 2013, primarily due to a decrease in issuances From
the regular issuers. But in a sign of structural strengthening of the
bond market, the number of issuers accessing the bond market increased,
led by private sector players.
The securitisation market sagged in 2013 because lack of clarity on
taxation issues curbed investor appetite For structured paper.
BLRs, however, continued to show healthy growth, with numerous small
corporate opting For ratings despite the sluggish environment. The BLR
market is expected to remain buoyant due to the growing trend among
small companies, of getting their loans rated.
The bond market could rebound in the latter half of 2014 if
expectations of a stable domestic business environment, higher growth
and lower interest rates materialise. Measures taken by policymakers
and regulators to develop the bond
CRISIL Ratings instituted several innovations aimed at development of
the corporate bond market in 2013. We rated India''s First: Basel
Ill-compliant Tier-ii bond : Inflation-indexed debenture
Infrastructure debt fund - NBFC market and the improving macroeconomic
environment are expected to strengthen the market''s long-term
prospects.
SME ratings showed healthy growth during the year despite the
challenging business environment. Enhanced awareness about the benefits
of ratings, banks'' growing acceptance of CRISIL''s SME ratings, and
CRISIL''s intensive outreach initiatives and expansion into new markets
are expected to drive demand in 2014.
Operations
CRISIL Ratings maintained its market leadership in 2013 backed by
strong performance in its bond ratings, bank loan ratings and SME
ratings businesses. CRISIL announced 3,106 new BLRs and 12,857 SME
ratings during the year. It has till date assigned more than 15,600
BLRs and 60,000 SME ratings/assessments. CRISIL Real Estate Star
(CREST) Ratings has been well accepted in the real estate sector
CRISIL announced 3,106 new BLRs and 12,857 SMG ratings during the year.
It has till date assigned more than 15,600 BLRs and 60,000 SMG
ratings/assessments. and witnessed significant demand this year, with
leading developers across cities choosing to get their projects rated
by CRISIL.
In 2013, CRISIL Ratings rated various innovative instruments in the
corporate bond market, such as India''s First Basel III- compliant
Tier-II bond, the First inflation-indexed debenture, the First 50-year
rupee bond and the First infrastructure debt Fund through the NBFC
route. These innovations were well received by the market and are seen
as significant milestones in the deepening of the corporate bond market
in India.
CRISIL Ratings continued to conduct regular outreach programmes aimed
at providing insights on credit issues to investors and market
participants. These included opinion pieces, bankers'' meetings,
investor discussion Forums and seminars which helped CRISIL reach out
to relevant stakeholders including issuers and investors across the
country.
GAC continues to be closely integrated with Standard & Poor''s Ratings
Services, extending the scope of its support into areas such as risk
and rating operations, deepening the engagement in structured Finance
ratings, and broadening the scope of support in Europe and the
Asia-Pacific.
B. RESEARCH
B.1. Global Research & Analytics (GR&A)
[Includes Financial Research / Risk & Analytics (Irevna), Corporate
Research and Coalition]
Highlights
Added large and marquee clients including a number of buy-side and
private equity Firms, global Financial institutions and corporate
Investments in the Risk & Analytics vertical and a product-based
go-to-market strategy in Corporate Research are providing impetus to
new client addition Coalition grew strongly by adding new global
investment banks as clients and successfully launching new products
Business Environment
In 2013, the global economic environment remained subdued despite an
improvement over 2012. The European economy remained weak with no
near-term signs of recovery, while the US economy was on a recovery
path. In 2013, the global banking industry remained stressed with lower
profitability despite recovery in trading volumes in certain asset
classes. Banks are Focusing on improving cost-to-income ratios of
their businesses, which led to stretched decision cycles, tough pricing
negotiations and tight client budgets.
The Coalition Index that tracks the performance of top 10 global
investment banks For 2013 was down 4% after growing 10% in 2012. It is
a strong barometer of the performance of the global investment banking
industry. The Coalition Index 2013 total revenues of USD 153 billion
continue to be Far behind the year 2009 number of USD 223 billion. In
2013, Fixed Income Currency and Commodities (FICC) revenues declined by
19% (grew by 20% in 2012) as the European Central Bank canned Long Term
Refinancing Operations (LTRO) and institutional activity decreased. In
contrast, 2013 revenues From equity products surged by 24% after a 6%
decline witnessed in 2012. Equity as an asset class returned the best
results since 2010. In 2013, Investment Banking revenues From mergers
and acquisition, debt capital markets and equity capital markets grew
by 13% after a modest growth of 1% in the previous year.
In the Financial Research vertical, we witnessed several client
additions on the buy-side. We also continued to pursue a number of
mid-tier and regional banks across the globe. Addition of mid-tier
banks to the client roster in 2012 augmented role additions in 2013.
The continued Focus and introduction of new service offerings in the
Risk & Analytics vertical, has resulted in a number of clients engaging
with us For our services to help mitigate the challenges they are
Facing due to rapid regulatory changes. Building on the First-mover
advantage in the global markets and derivatives space, we have quickly
achieved scale in new work streams such as model validation and
stress-testing support.
During the year, a revised go-to-market strategy provided growth
momentum in the Corporate Research vertical. A mid- year launch of
web-based products using CRISIL''s proprietary Frameworks resulted in
positive client responses and additions to the client base.
In 2013, Coalition delivered a strong performance driven by its core
Competitor and Client Analytics, which reported solid growth, and the
recently launched RWA (Risk Weighted Assets) Analytics, which enjoyed a
strong start. A comprehensive media strategy in each region has
delivered results, leading to significant improvement in our reach
among prospective clients. Coalition added new clients among the top 20
global investment banks and renewed its exclusive relationship with a
leading consulting Firm.
Operations
Investments made in 2012 towards new approaches - sales team, work
streams and go-to-market strategies - began showing results in 2013.
This has led to an expansion of our existing customer base, addition of
clients in newer work streams and strengthening of relationships with
existing clients. We also took a number of steps to manage costs
through pruning of database costs, reduction in IT and infrastructure
costs by consolidating research centers and tighter control of
headcount.
In the Risk & Analytics vertical, we built scale of operations in model
validation and stress-testing by hiring number of subject experts,
developing robust training modules and putting in place strong process
and quality measures. These steps have resulted in positive client
Feedback and opened new avenues of engagement.
In Corporate Research, we took steps to productise the institutional
knowledge built over the years by serving global Fortune 500 companies
in the areas of Key Account Management and Competitive Intelligence. We
launched two new products in the market - COMPASS, a key account
management product, and CI 360, a competitive intelligence tool. Both
products are built on strong analytical Frameworks that provide
actionable insights to clients. The Feedback From clients on these has
been very positive.
Coalition continued its tradition of new product innovation and
launched Risk Weighted Assets (RWA) product that witnessed a strong
start. Coalition continued to grow its existing suite of analytics
products by adding a number of new clients.
Our global research centers continue to scale up. The China research
centre grew rapidly in 2013. We have expanded our client roster in
Argentina and moved into a larger Facility to accommodate growth plans.
This year also saw a series of high-impact thought-leadership
initiatives on topical issues, that shape decision-making by our
customers. Our global web conferences on critical topics saw active
participation of Fund managers, research analysts, academicians and the
media across the Americas, Europe and Asia. We hosted a roundtable
conference on risk analytics and published a comprehensive report on
risk and procurement analytics at the NASSCOM Big Data and Analytics
Summit 2013. We have also initiated a relationship with a leading
industry education body to produce research.
Our global research centers continue to scale up. The China research
centre greuj rapidly in 2013. We have expanded our client roster in
Argentina and moved into a larger Facility to accommodate growth plans.
B.2. India Research
Highlights
Launched ''Research Plus'' to Further enhance our leading, near-real-time
web platform offering economy, industry and company research
Rolled out security-level valuations For the debt securities owned by
mutual Funds Launched ''CRISIL-AMFI Mutual Fund Performance Indices''
jointly with the Association of Mutual Funds in India across Five
categories
Business Environment
The business environment remained challenging, with the lowest GDP
growth in a decade and a virtual halt in investments. This has impacted
demand For research in India, which is seen as a discretionary expense.
To counter this, we continued to Focus on enhancing our current
offerings, launching relevant new products, sharpening our value
proposition and increasing client engagement which will support growth
in coming years. An expected improvement in the economic outlook in
2014 and a possible revival in the investment cycle augur well, too.
The slowdown in equity Fundraising and capital market activities
impacted demand For equity research and IPO grading, while a sharp
slowdown in corporate investment cycle impacted demand For customised
research. On the other hand, industry research and Funds and
Fixed-income research displayed steady growth.
Operations
CRISIL Research continued to proactively launch products that address
the evolving market dynamics.
As part of our ongoing efforts to enhance the utility of our Flagship
industry research product, we have added new premium content to our
near-real-time web platform www.crisilresearch.com, offering economy,
industry and company research. The new module, called Research Plus,
offers additional Features, including sector-wise ratings data and
important industry news with CRISIL Research''s commentary and
sector-wise Financial aggregates.
We Focused on building capabilities in project viability studies. Our
high-quality research and customer orientation is reflected in the
repeat business that we have won From clients.
As a mark of our commitment to providing solutions that make markets
Function better, we successfully rolled out security-level valuations
For the debt securities owned by mutual Funds. Independent
security-level valuations From CRISIL Research will ensure uniformity
in prices used by mutual Funds For valuation of debt securities.
In addition, CRISIL Research and the Association of Mutual Funds in
India (AMFI) jointly launched the CRISIL-AMFI Mutual Fund Performance
Indices across Five categories to represent the performance of various
mutual Fund categories and enable comparison with benchmarks across
timeframes and market cycles.
The CRISIL Centre For Economic Research (C-CER) continued to Focus on
research on the macroeconomic situation in India, consistently building
CRISIL''s Franchise in Indian and global media, and positioning the
company as the Foremost analytics- based commentator on the economy.
C-CER published a number of high impact thought leadership articles
covering a range of contemporary macroeconomic issues like Food
security, GDP and standard of living across states which received wide
recognition From market participants and the media.
C. INFRASTRUCTURE ADVISORY AND RISK SOLUTIONS
CRISIL conducts its infrastructure advisory and risk solutions business
through its subsidiary, CRISIL Risk and Infrastructure Solutions
Limited (CRIS).
C.1. CRISIL Infrastructure Advisory Business Highlights
Continued Focus on international business and working with multilateral
agencies resulted in execution of a number of high-profile assignments
Worked with central and state government departments in Formulating,
advising and implementing plan and policies in the areas of urban
development, coal, Food and power
Business environment
The economic environment in India continued to be challenging during
the year, particularly For the infrastructure sector. Several projects
were stuck, or made little progress, owing to lack of policy and
regulation clarity, while the milieu impacted the viability of some
others. The stress in the Financial sector compounded the challenges.
We won large and prestigious mandates in Indonesia, Laos and Vietnam in
Southeast Rsia, and Tanzania, Malawi and Namibia in Africa.
The investments of USD 1 trillion envisaged in infrastructure in India
during the 12th Five Year Plan period present a sizeable opportunity
over a medium term. However, we expect a muted First halF in 2014,
given the general elections. Investments in the infrastructure sector
are likely to pick up only in the second half of the year as clarity
emerges on key policies.
Operations
There was sharper Focus on Africa and Southeast Asia, which got a boost
From long-term multilateral spending programmes this year. We won large
and prestigious mandates in Indonesia, Laos and Vietnam in Southeast
Asia, and Tanzania, Malawi and Namibia in Africa.
We saw a significant increase in the average ticket size of business
won during the year Following better Focus and cherry-picking of
mandates.
The business has also built up a healthy order book to sustain growth
during 2014.
C.2. CRISIL Risk Solutions (CRS)
Highlights
Saw much success in new markets such as Egypt, Kuwait and Philippines
Launched a First-of-its-kind early warning solution, ''BRECON'', aimed at
solving the critical issue of early detection of non-performing assets
in the banking sector
Business environment
The overall business environment led to slower decision- making amongst
potential clients, but there was increasing traction in the latter part
of the year with banks expressing a need to implement risk management
systems and Framework. CRS products and services across the risk
spectrum are, therefore, likely to be in increasing demand, especially
For improving the credit quality and assessment processes.
Operations
CRS maintained its Focus on both consulting and software solutions, and
won 22 mandates in 2013.
CRS offerings enable banks to comply with regulatory risk requirements.
CRS moved a step ahead by assisting banks in moving beyond compliance
through its enhanced product suite of credit processing systems For
loan life cycle management and a unique early warning system which
proactively assists banks in identifying potentially delinquent
accounts.
These products will help banks augment their best practices in credit
risk management and have been developed by leveraging on CRISIL''s
pedigree in credit risk assessment.
CRS reached out to newer markets across EMEA and Southeast Asia, got
new mandates and built a strong pipeline For Future growth.
There were multiple Franchise initiatives undertaken during the year.
CRS conducted a knowledge-sharing seminar on operational risk in
Singapore which 46 banks attended. CRS was the lead speaker on Early
Warning System in the Small Business Banking Network Seminar at Dubai
which was attended by more than 60 banks. CRS also continued with its
engagements with the Reserve Bank of India through presentations and
training on risk management.
D. COLLABORATION WITH STANDARD & POOR''S
In 2013, CRISIL jointly organised a seminar with Standard & Poor''s
titled ''The global economic outlook and its impact on the Indian
capital markets''. The keynote address titled ''Global Economic Outlook''
was delivered by Paul Sheard, S&P''s Chief Global Economist. S&P''s
Asia-Pacific Chief Economist Paul Gruenwald participated in a panel
discussion titled ''How are Asian economic and sovereign trends shaping
the Indian capital markets''. Ramraj Pai, President, CRISIL
CRS reached out to newer markets across GMGR and Southeast Rsia, got
new mandates and built a strong pipeline For future growth.
Ratings, and Dharmakirti Joshi, Chief Economist, CRISIL, made
presentations on the outlook For India''s debt markets and economy,
respectively.
In addition, C-CER continued to provide an outlook on the Indian
economy to S&P.
The collaboration between S&P Risk Solutions (now Capital IQ) and
CRISIL Risk Solutions, which was initiated last year to jointly reach
out to global markets, progressed well in 2013. We saw increased
traction in newer geographies such as Saudi Arabia, Egypt and the UAE
with large-ticket mandates From these regions this year. Leveraging on
our synergies, we plan to expand our global Footprint with increased
traction and business From both EMEA and Southeast Asia in 2014.
E. CONTINUING THE THOUGHT LEADERSHIP TRADITION
In 2013, we launched the CRISIL Inclusix, released the ''State of The
Nation'' report and hosted the 2nd Annual bond market seminar that
significantly enhanced the thought leadership position of CRISIL.
CRISIL Inclusix
In June, CRISIL launched Inclusix, an index that comprehensively
measures Financial inclusion in India at the national, regional and
district levels. It was launched by Honorable Finance Minister of
India, Shri P. Chidambaram and Shri Rajiv Takru, Secretary, Department
of Financial Services, Ministry of Finance at an event attended by
leading representatives of the government and industry. The analytical
excellence behind the index''s development and its usefulness in
measuring and Furthering the cause of Financial inclusion in the
country was well appreciated.
The State of The Nation report
In September, CRISIL released the ''State of The Nation'' report, a
top-down-meets-bottom-up analysis using data From 2,481 CRISIL rated
investment-grade companies across 70 sectors. The report was well
appreciated For its incisive take on what was ''good'', ''bad'' and ''ugly''
about the Indian economy, and received widespread media coverage. Its
timing - coming as it did in the middle of the raging national debate
on stagnating growth - helped create a major impact.
Annual bond market seminar
CRISIL organised the 2nd Annual seminar on expanding India''s corporate
bond market in November with the theme ''Financing India''s Future''. It
was attended by around 300 senior executives and government
Functionaries. The distinguished speakers included Shri U. K. Sinha,
Chairman, Securities and Exchange Board of India (SEBI),
Dr. Arvind Mayaram and Dr. K. P. Krishnan, Secretary and Additional
Secretary, respectively, the Department of Economic AFFairs, Ministry
of Finance, Government of India and Shri R. K. Nair, Member (Finance),
Insurance Regulatory Development Authority. Several corporate leaders
also participated in two high-powered panel discussions organised at
the event. CRISIL''s observations on the bond market and the way Forward
resonated well with stakeholders and policymakers. We also released
''The CRISIL Yearbook On The Indian Debt Market 2013''.
F. HUMAN RESOURCES
Highlights
The CRISIL Young Leaders Development Programme was launched For
mid-management employees. It aims to develop leaders through structured
interventions, stretch assignments and mentoring.
Global ofFices continued to build the CRISIL GR&A brand through
partnership with premier universities, sponsorship of events and job
Fairs.
The Focus continued on employee development through in-house training
modules. With over 97% of the programmes being delivered by in-house
trainers and business leaders, it aggregated to over 23,298 man-hours or
3,883 Mondays, with over 693 training programmes conducted in the year.
Our talent development programme was strengthened with the Formation of
a Talent Council, whose mandate is to draw up people strategies and
ensure the leadership pipeline across the organisation stays robust.
The Council reviewed progress made by individuals under different
programmes twice during the year.
G. SUBSIDIARIES
As on December 31, 2013, the Company had Four Indian and seven overseas
wholly owned subsidiaries. The Ministry of Corporate Affairs,
Government of India, has granted a general exemption under Section 212
(8) of the Companies Act, 1956 From the requirement of attaching
detailed Financial statements of each subsidiary. The Board of
Directors has passed a resolution on October 18, 2013 For not attaching
individual annual reports of its subsidiary companies to its Annual
Report. In compliance with the exemption granted, a statement
containing brief Financial details of these companies is included in
the Annual Report. Annual accounts of subsidiary companies and related
information will be made available to shareholders who seek such
information.
H. DIRECTORS
CRISIL has made changes in its Board of Directors in January 2014 in
view of the upcoming regulations which specify a maximum tenure of 10
years For independent directors. Even though this provision is
applicable on a prospective basis and only once the new regulations
come into Force, the Board of Directors of CRISIL Felt it would be
important to Follow the spirit of the provision to maintain the highest
standards of corporate governance. Accordingly, two independent
directors, Mr. B.V. Bhargava and Ms. Rama Bijapurkar, who have spent
more than 10 years on the Board of Directors of CRISIL, had stepped
down.
Mr. B.V. Bhargava resigned as Director of the Company on January 13,
2014. Your Directors wish to place on record their sincere appreciation
of the valuable contribution made by him to CRISIL.
Ms. Rama Bijapurkar resigned as a Director of the Company on January
13, 2014. Your Directors wish to place on record their sincere
appreciation of the valuable contribution made by her to CRISIL.
The Board of Directors appointed Mr. M. Damodaran and Ms. Vinita Bali
as Additional Directors of the Company with effect From January 14,
2014 and February 14, 2014 respectively. Mr. M. Damodaran and Ms.
Vinita Bali hold ofFice as Additional Directors until the next Annual
General meeting.
In accordance with the Articles of Association of the Company and the
provisions of the Companies Act, 1956, Dr. Nachiket Mor, Mr. Douglas L.
Peterson and Mr. Yann Le Pallec retire by rotation and being eligible,
seek re-appointment.
I. AUDITORS
During the year under review, as per the internal policy of the
statutory auditors, M/s. S. R. Batliboi & Co. LLP, Chartered
Accountants, wherein they rotate the partners For each of their clients
aFter every 3-5 years, Mr. Jayesh Gandhi had replaced Mr. Shrawan Jalan
as partner For reviewing the accounts of CRISIL.
M/s S. R. Batliboi & Co. LLP, Chartered Accountants, hold office up to
the ensuing Annual General Meeting and being eligible, offer themselves
For re-appointment.
The Board recommends their re-appointment.
J. MANAGEMENT''S DISCUSSION AND ANALYSIS REPORT
The Management''s Discussion and Analysis Report For the year under
review, as stipulated under Clause 49 of the Listing Agreement with the
Stock Exchanges in India, is annexed to this report.
K. 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 SEBI. The report on corporate governance as
stipulated under Clause 49 of the Listing Agreement 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 Clause 49 is annexed to this report.
L. OTHERS L.1 Particulars Regarding Conservation of Energy, Technology
Absorption, and Foreign Exchange Earnings and Expenditure Particulars
regarding Foreign exchange earnings and expenditure appear as separate
items in the notes to the Accounts. Since the Company does not own any
manufacturing Facility, the other particulars relating to conservation
of energy and technology absorption stipulated in the Companies
(Disclosure of Particulars in the Report of the Board of Directors)
Rules, 1988 are not applicable.
L.2. Particulars of Employees
During the year, 36 employees received remuneration of Rs. 6 million or
more per annum. In accordance with the provisions of Section 217 (2A)
of the Companies Act, 1956 and the rules Framed there under, the names
and other particulars of employees are set out in the annexure to the
Directors'' Report. In terms of the provisions of Section 219(1)(b)(iv)
of the Companies Act, 1956, the Directors'' Report is being sent to the
shareholders without this annexure. Shareholders interested in
obtaining a copy of the annexure may write to the Company Secretary at
CRISIL''s registered office.
L.3. Directors'' Responsibility Statement as Required under the
Provisions Contained in Section 217(2AA) of the Companies Act, 1956
Your Directors hereby confirm that:
(i) In the preparation of the annual accounts For Financial year ended
December 31, 2013, the applicable accounting standards have been
Followed.
(ii) The Directors 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 as on December 31, 2013 and of the profit of the Company
For the year ended on that date.
(iii) The Directors have taken proper and sufficient care For the
maintenance of adequate accounting records in accordance with the
provisions of this Act For safeguarding the assets of the Company and
For preventing and detecting Fraud and other irregularities.
(iv) The Directors have prepared the annual accounts For Financial year
ended December 31, 2013 on a ''going concern'' basis.
Employee Stock Option Schemes
The Company has two employee stock option schemes. The Employee Stock
Option Scheme - 2011 (ESOS 2011) was approved by the shareholders vide
a special resolution passed through postal ballot on February 4, 2011.
The Employee Stock Option Scheme - 2012 (ESOS 2012) was approved by the
shareholders vide a special resolution passed through postal ballot on
April 10, 2012.
Summary Information on ESOS 2011 and ESOS 2012 of the Company is
provided as Annexure to this Report. The information is being provided
in compliance with Clause 12 of the Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, as amended.
Acknowledgements
The Board of Directors wishes to thank the employees of CRISIL For
their exemplary dedication and the excellence they have displayed in
conducting the operations of CRISIL. The Board also wishes to place on
record its sincere appreciation of the Faith reposed in the
professional integrity of CRISIL by customers and investors who have
patronised its services. The Board acknowledges the splendid support
provided by market intermediaries. The affiliation with Standard &
Poor''s has been a source of great strength. The Board of Directors also
wishes to place on record its gratitude For the Faith reposed in CRISIL
by the Securities and Exchange Board of India, the Reserve Bank of
India, the Insurance Regulatory Development Authority, the Government
of India, and the state governments. The role played by the media in
highlighting the good work done by CRISIL is deeply appreciated.
For and on behalf of the
Board of Directors of CRISIL Limited
H. N. Sinor
Director*
Mumbai, February 14, 2014
Dec 31, 2012
Dear Member,
The Directors are pleased to present to you the 26th Annual Report of
CRISIL Limited, along with the audited accounts for the year ended
December 31, 2012.
PERFORMANCE
A summary of the Company''s financial performance in 2012:
Rupees in crore
Standalone Consolidated
Particulars
2012 2011 2012 2011
Total income for
the year was 759.25 682.17 998.10 849.78
Profit before
depreciation and
taxes was 294.21 269.15 348.01 305.23
Deducting depreciation of 23.92 21.68 34.32 29.83
Profit before tax was 270.29 247.47 313.69 275.40
Deducting taxes of 77.42 60.96 93.29 68.98
Profit after tax was 192.87 186.51 220.40 206.42
The proposed
appropriations are:
Dividend 112.32 77.82 112.32 77.82
Corporate Dividend Tax 18.22 12.56 18.34 12.65
General Reserve 19.29 18.65 19.29 18.65
Balance carried forward is 43.04 77.48 70.45 97.29
DIVIDEND
The Directors recommend, for approval of the members at the Annual
General Meeting to be held on April 18, 2013, payment of final dividend
of Rs. 4 per share for the year under review. During the year, the
Company paid three interim dividends of Rs. 3 per share each on face
value of Re. 1 per equity share. In addition, the Company paid a
Special Silver Jubilee Dividend of Rs. 3 per share on a face value of
Re. 1 per share in 2012. The total dividend for the year works out to
Rs. 16 per share on a face value of Re. 1 per share in 2012 as against
Rs. 11 per share on a face value of Re. 1 per share in the previous
year.
acquisition of coalition, uk-based analytics firm
On June 1, 2012, CRISIL entered into an agreement to buy, subject to
statutory approvals, 100% of the equity shares of Coalition Development
Limited, along with its subsidiaries (Coalition). Coalition, which has
its headquarters in London, provides high-end analytics, mainly to
leading global investment banks. Formed in 2002, Coalition is a dynamic
high-growth company, firmly established as a premium brand. The
transaction was completed on July 4, 2012, and Coalition has been
consolidated with CRISIL with effect from this date.
Coalition deploys unique proprietary frameworks and algorithms to
provide analytics on market size and dynamics, revenue opportunities
and human capital. Coalition''s analytics provide a clear, actionable
picture of the markets and are used by boards, strategy teams and top
managements at leading financial services institutions.
INCREASE IN ISSUED, SUBSCRIBED AND PAID-UP EQUITY SHARE CAPITAL
During the year, the Company issued and allotted 1,77,300 equity shares
of the Company to eligible employees on exercise of options granted
under Employee Stock Option Scheme 2011. Consequently, the issued,
subscribed and paid-up capital of the Company increased from
7,00,58,440 equity shares of Re. 1 each to 7,02,35,740 equity shares of
Re. 1 each.
REVIEW OF OPERATIONS - 2012
A. RATINGS
Highlights
Announced 3,600 new bank loan ratings (BLRs); tally of BLRs outstanding
exceeds 11,500
Assigned more than 10,000 small and medium enterprise (SME) ratings
during the year Launched annual series of seminars for the bond market
Increased support through Global Analytical Centre (GAC) to new
business groups and meeting more complex requirements of analytics for
S&P Ratings
Business Environment
The domestic environment remained challenging during 2012 with slowing
demand, high inflation and interest rates, and tight liquidity. The
global macroeconomic conditions deteriorated, with recession in the
Eurozone, and slackening in the uS economy. These factors resulted in a
weak investment climate, and subdued debt markets in India. The
corporate bond market had very few new issuers. The securitisation
market, however, revived in the second half of 2012, with issuers and
investors getting accustomed to the new guidelines issued by the
Reserve Bank of India. Bank Loan Ratings (BLRs) showed healthy growth
over the previous year, with numerous small corporates opting for
ratings, despite a sluggish overall business environment. The BLR
market is expected to remain buoyant on the back of the growing trend
among small companies to get their loans rated.
The bond market may remain sluggish in the first half of 2013, on
account of slowdown in the global business environment and persistently
high inflation. However, reform measures by the government to spur
domestic growth, and expected revival in investments in the second half
of 2013 may strengthen the long-term prospects for the bond market.
The demand for SME ratings was steady during the year. Enhanced
awareness about the benefits of ratings, the banks'' growing acceptance
of CRISIL''s SME ratings, and CRISIL''s intensive outreach initiatives
and expansion into new markets and territories are expected to continue
spurring demand for SME ratings in 2013, despite the challenging
business environment.
Operations
CRISIL Ratings maintained its market leadership in 2012, backed by
strong performance in the BLR and SME ratings businesses. CRISIL
announced 3,600 new BLRs and 10,000 SME ratings during the year. CRISIL
has assigned more than 11,500 BLRs and 46,000 SME ratings / assessments
so far. CRISIL Real Estate Star Ratings (CREST), launched in 2010, has
been well accepted in the real estate sector and witnessed significant
demand this year, with leading developers across cities choosing to get
their projects graded by CRISIL.
In 2012, CRISIL Ratings launched the annual series of seminars on the
bond market. The inaugural seminar ''Expanding India''s Corporate Bond
Market'' was hosted in 2012. The keynote address at the seminar was made
by Dr. Subir Gokarn, Deputy Governor, Reserve Bank of India. We
presented investors and regulators with a compendium showcasing 507
CRISIL A-rated companies. CRISIL Ratings released ''Industry Insights''
for 22 key industries covering more than 5,000 clients, showcasing the
depth of our analytics and breadth of our client base.
Our article on the importance of liquidity back-up for commercial paper
was well received by investors and even prompted mutual funds to revise
their internal policies on liquidity. Our article on the importance of
evaluating credit rating agencies received positive feedback from
market participants and influencers. CRISIL Ratings published
quarterly updates on its rating portfolio, and on the corporate credit
quality and default rates.
CRISIL Ratings has continued to conduct regular outreach programmes to
provide value to investors and market participants. A large number of
events, including leadership conclaves, bankers'' meetings, investor
discussion forums and seminars were conducted, which helped CRISIL to
reach around 15,000 stakeholders, including companies and bankers
across the country.
CRISIL Ratings organised a series of discussion forums during the year
to increase awareness on the developing market trends and the impact on
the capital markets. These discussion forums covered capital market
entities, the telecom sector, gold loan, non-banking finance companies
(NBFCs), and loan restructuring by banks. The forums saw excellent
market participation and received extensive media coverage. We also
engaged proactively with regulators in providing opinion on key
sectoral and economic trends, and participated in several regulatory
committees and forums.
GAC further consolidated its relationship with S&P Ratings, and
extended support to business groups across geographies and higher-end
analytical tasks.
B. RESEARCH
B.1. GLOBAL RESEARCH & ANALYTICS (GR&A)
(INCLuDES IREVNA, PIPAL RESEARCH AND COALITION)
Highlights
Acquired Coalition, a leading u.K.-based analytics firm in July 2012
Added large new clients, including several global and regional
financial institutions, and Fortune 500 companies
Published a comprehensive report, ''Big Data - The Next Big Thing'' in
association with NASSCOM
Received NASSCOM''s NExT award, for the second year in a row, for our
talent management practices
Strengthened our position as a global analytical company by rebranding
of Irevna and Pipal Research as CRISIL Global Research & Analytics
Business Environment
uncertainty in the global economic environment, driven by the European
sovereign and debt crisis, and significant regulatory upheavals in the
banking industry have affected the business environment.
The global banking industry remained in a phase of reduced
profitability. Banks have undertaken massive restructuring of their
operations, rationalising staff headcount, and winding down business
segments. In particular, the investment banking industry witnessed low
trading volumes and deal flows that impacted their business adversely.
Regulatory changes, in addition, have forced banks to set up
infrastructure to meet new requirements and reporting standards.
Though the corporate segment (manufacturing and non-financial services)
turned in improved performance across the globe, this was largely
driven by the proactive cost-cutting and cash conservation initiatives,
and postponement of decisions on projects.
While the changes in the banking industry presented CRISIL GR&A with a
challenging business environment, we believe that these structural
changes in the global banking industry are positive for the GR&A
business. These changes are compelling banks to restructure quickly
and fully, and seek the support of high-end research and analytics
firms like us. In the short term, however, the restructuring will
marginally impact the performance of analytics companies. The new
environment is also opening up newer opportunities - to provide
solutions for meeting regulatory requirements and stress testing.
We have significantly stepped up efforts to provide services and
support to clients, in areas such as stress testing, validation of
price models, and risk analytics, which are becoming very critical for
the global banks.
The global business environment is expected to recover in 2013, backed
by policy interventions in the developed economies. Regulatory and
compliance requirements for banks and financial institutions in U.S.A.
and Europe are also expected to drive demand for the services of
research and analytics firms.
Operations
CRISIL acquired Coalition, a U.K.-based firm providing high-end
analytics, mainly to leading global investment banks. This marks our
entry into proprietary research outside India. Coalition complements
our offerings to the financial institutions - while we offer research
and analytics services in trading and risk management to banks,
Coalition works with the same financial institutions'' top management
and strategy teams.
We have consolidated our leadership position in the research and
analytics space, adding numerous new clients in 2012, including banks
and Fortune 500 companies. Our high-end research has enabled clients to
improve their rankings, increase research coverage, enter new markets,
get better business insights, and deliver path-breaking research. Our
regulatory and risk management practice has helped clients comply with
regulations.
We won special recognition at the NASSCOM Exemplary Talent (NExT)
Awards for the second year in a row in ''The Talent Magnets'' category,
in recognition of our compelling and differentiated employee value
proposition.
The rebranding of Irevna and Pipal Research to CRISIL GR&A has
strengthened our position as a global analytics provider. The new
positioning leverages on the strong CRISIL brand, and has received
positive reception from stakeholders, including customers, employees
and industry bodies.
Our franchise-building initiatives gained momentum during the year. We
published ''Big Data - The Next Big Thing'', the most comprehensive study
on the subject in India, jointly with NASSCOM. We actively participated
in several global conferences and seminars, in addition to hosting
roundtables in London and San Francisco that were attended by chief
risk officers, risk practitioners and regulators.
Our global business model has continued to scale up well to support
demand from clients. Our research centres in Hangzhou (China), and
Buenos Aires (Argentina) and our quantitative research centres in
Wroclaw (Poland) have grown significantly.
B.2. INDIA RESEARCH
Highlights
Commenced valuation of market-linked debentures (MLDs) for the first
time in India and covered more than 10 issuers. These valuations are
available on the CRISIL website Launched India''s first SME Fundamental
Grading service for enterprises proposing to raise equity capital
through SME exchanges
Released two special reports: covering 16 less- known sectors that are
in a phase of strong growth and offer significant scope for lenders and
investors; and on 68 SME clusters across 30 sectors
Prepared research reports on 1,442 companies listed and traded on the
National Stock Exchange of India Limited (NSE); these reports are
available to investors free-of-cost on the NSE website
Launched, together with Sri Lanka''s NDB Investment Bank, a group of
four indices for Sri Lanka''s government securities market, to help
investors benchmark investments and allocate assets better
Business Environment
The business environment remained challenging during the year with
lower GDP growth and slowdown in investments. High inflation and
interest rates, together with growing uncertainty, have proved to be a
setback to the domestic capital markets. Volatility in the equity
markets affected CRISIL Research''s Independent Equity Research (IER)
and Initial Public Offering (IPO) grading businesses. In Customised
Research, however, the flow of mandates has been positive, with
corporates valuing our independent research inputs highly. The outlook
for the business will be guided by the successful implementation of key
domestic reforms. India''s adverse economic and political environment,
the deepening Eurozone crisis, and slowdown in the u.S. remain key
risks.
Operations
CRISIL Research continued to build on its powerful value proposition -
of timely and relevant research. The revamped subscription-based web
platform (www. crisilresearch.com) provides near-real-time access to
research, and continues to attract growing usage by clients.
CRISIL Research continues to proactively launch products that address
evolving market dynamics and customer requirements. During the year,
the Industry Research business expanded coverage by adding more sectors
through two special reports - the first report was on 16 less-known,
high-growth sectors, and the second was on 68 SME clusters in 30
sectors. In addition, CRISIL Research, in association with Kotak Wealth
Management, launched the second edition of the ''Top of the Pyramid''
report, which highlights insightful features about the spending,
investing and income patterns of India''s Ultra High Networth
Households.
The Equity Research segment completed another year of preparing
research reports on 1,442 companies listed and traded on NSE. It also
launched India''s first SME Fundamental Grading service for enterprises
proposing to raise equity capital through the SME exchanges. Through a
tie-up with NSE, IPOs of all SMEs proposing to be listed on EMERGE
(NSE''s SME platform) will have CRISIL SME Fundamental Grading. CRISIL
Research will also release IER reports on these SMEs.
The Funds and Fixed Income Research segment commenced valuation of
market-linked debentures (MLDs), making CRISIL the first rating agency
in the country to provide these valuations. During the year, valuations
(available on the CRISIL website) have been released for more than 10
issuers.
In addition, having completed the prestigious assignment of selecting
fund managers to manage the Employee Provident Fund Organisation (EPFO)
corpus, CRISIL Research continues to assist EPFO in evaluating the
performance of its fund managers.
The CRISIL Centre for Economic Research (C-CER) continued to focus on
research on the macroeconomic situation in India and the Asia Pacific,
consistently building CRISIL''s franchise in Indian and foreign media,
and positioning the Company as the foremost analytics- based
commentator on the economy in the region.
C-CER published 10 special reports in its series, Economy Insight,
covering contemporary macroeconomic issues such as inflation, exchange
rate, role of the private sector in the economy, and impact of the
Eurozone crisis on India''s growth. A report analysing rural consumption
patterns in India, titled ''Sustaining the rural consumption boom'',
received extensive coverage in the national and regional print media
and drew the attention of policymakers. During the year, C-CER also
released a new indicator of core inflation for India - CRISIL Core
Inflation Indicator.
C. INFRASTRUCTURE ADVISORY AND RISK SOLuTIONS
CRISIL conducts its infrastructure advisory and risk solutions business
through its subsidiary, CRISIL Risk and Infrastructure Solutions
Limited (CRIS).
C.1. CRISIL INFRASTRUCTURE ADVISORY BUSINESS Highlights
Assisted the Ministry of Coal, Government of India, in formulating a
methodology to fix the floor and reserve prices for coal block auctions
under captive mining Helped Indonesia Infrastructure Guarantee Fund
(IIGF) as the Financial and Transaction Advisory Consultant for Puruk
Cahu Bangkuang Coal Rail Project in Indonesia
Advised Asian Development Bank (ADB) in preparing a strategic framework
for a slum-free New Delhi
Acted as advisors to the Central Electricity Supply Utility of Odisha
on smart grid solutions for energy management and energy efficiency
Business Environment
The sluggishness of the Indian economy continued, and the energy sector
in India was adversely impacted due to delays in key policy actions.
This, compounded with the Eurozone crisis, and the attendant general
risk aversion have continued to impact the India business of CRISIL
Infrastructure Advisory. However, the international business has
remained stable on the back of long- term multilateral spending
programmes. The business won large and prestigious mandates in
Indonesia and Vietnam in South-East Asia, and Tanzania and Ethiopia in
Africa.
The investments of USD 1 trillion envisaged in infrastructure in India
during the 12th Five Year Plan period present a sizeable opportunity
over a medium term. 2013, however is likely to remain challenging as
clarity on policies will emerge over time and investments could pick up
in the sector only in the later half.
Operations
The business won significant mandates from government and urban local
bodies. The advisory business had a challenging year in the energy and
natural resources verticals. Our focus on the international business -
especially in South-East Asia and Africa - has helped maintain growth
during the year.
C.2. CRISIL RISK SOLUTIONS (CRS)
Highlights
Diversified client base with a third of revenues coming from
non-banking segment, and a third each from the overseas market and risk
consulting, respectively
Extended flagship internal rating solution Risk Assessment Model (RAM)
to cover the entire credit process in financial institutions
Successfully entered markets in Europe, the Middle East and Africa
(EMEA) and South East Asia in collaboration with S&P Risk Solutions.
Business Environment
Steady investments in risk management systems and framework
enhancements globally are likely to continue over the medium term
across segments in the financial sector like banks and NBFCs. CRS
products and services across the risk spectrum are, therefore, likely
to be in increasing demand.
Operations
CRS maintained its focus on both consulting and software solutions, and
won and executed 32 mandates in 2012.
CRS offerings are geared to cover Basel III requirements in all areas
of risk (credit, market, liquidity, operational and ICAAP). In 2012,
the focus was to add modules and features to keep products in line with
global practices. During the year, we added new modules to the RAM /
credit risk evaluator, developed and implemented a comprehensive loan
origination system; developed, and began implementing a system to help
banks meet reporting requirements for automated data flow and enhanced
features of the existing product suite. CRS has also:
Enhanced operational risk system (CORE) with advanced statistical
techniques for banks looking to move to the AMA approach
Strengthened credit risk capital computation system (CAM Retail) with
advanced techniques to pool retail assets
Improved the market risk capital computation system (CAM Market) to
cover multiple instruments and all approaches in estimating value at
risk (VaR)
The business continues to maintain internal process standards at ISO
9001:2008 certification levels.
CRS partnered with S&P Risk Solutions to bid for, and win, projects in
the EMEA and South East Asia. The partnership won its first assignment
in July in the U.A.E., and has since won one assignment each in Saudi
Arabia and Malaysia. There are multiple assignments in the pipeline for
2013.
Multiple franchise initiatives were undertaken during the year: these
included co-sponsoring an operational risk seminar in Dubai,
participating in a global risk conference in New York, serving as
knowledge partner in CGD Innovative Products & Services Conclave 2012,
making a presentation at Platts Commodity Week in Mumbai, showcasing
our operational risk offerings to the RBI DBOD team, and participating
in an SME event organised by the Small Business Banking Network in
Dubai.
D. COLLABORATION WITH S&P
CRISIL and S&P jointly released the Standard & Poor''s Indices Versus
Active (SPIVA) reports for the Indian mutual funds industry. This
report, a bi-annual publication, compares the performance of indices
and active mutual funds.
CRS partnered with S&P Risk Solutions to bid for, and win, projects in
Europe, the Middle East and Africa (EMEA), and South East Asia. The
partnership won the first assignment in July in the U.A.E., and has
since won one deal each in Saudi Arabia and Malaysia.
CRISIL was involved with S&P in rebalancing and maintaining the S&P ESG
(Environment, Social and Corporate Governance) India Index. The
50-stock Index, developed by a consortium of Standard & Poor''s, CRISIL
and KLD Research and Analytics, is a financial tool for investors who
look beyond financial criteria, to integrate the social, environmental
and governance conduct of firms into their investment decisions. The
universe for S&P ESG India Index includes the top 500 Indian companies
as per market capitalisation and listed on the National Stock Exchange
of India Limited. In addition to this, CRISIL also worked with S&P to
develop a new ESG methodology for creating / launching of global S&P
ESG indices.
As part of the collaborative efforts, C-CER published 4 reports /
articles on Asia-Pacific economies for S&P and we also brought out 4
issues of the South Asia Economic Outlook to provide an overview of and
insights on the South Asian economies in the region, along with the key
initiatives of Standard & Poor''s in the region.
E. HUMAN RESOURCES
During 2012, CRISIL''s Human Resources team strengthened its talent
acquisition, retention and development agenda. CRISIL''s headcount
increased to 3,450 as on December 31, 2012, from 3,207 a year ago.
Highlights
Augmented the senior management team
Introduced two new talent augmentation programmes: CRISIL Certified
Internship Programme, which involves having promising graduates intern
with CRISIL for six months, as they decide on whether to pursue higher
studies or consider long-term career options; and the Graduate Trainee
Programme, which involves hiring high- calibre graduates from premier
colleges. Trainees are led through an intensive programme to help them
understand concepts in Finance
Attracting and Developing Talent Team HR:
Focused on the key goal for the year - to attain excellence in quality
of interface and communication. Workshops on ''Conducting High-Impact
Meetings'' were custom-designed for the businesses, with inputs from
business leaders. The workshops, conducted by the leadership teams,
including the Managing Director and CEO and members of the Executive
Committee, involved case studies and role play simulations
Persisted with policy on employee development through training modules
prepared in-house. More than 85 per cent of the training programmes
this year were facilitated by in-house trainers and business leaders.
More than 300 training programmes were conducted, aggregating to more
than 6,000 man days
F. SUBSIDIARIES
During the year, consequent to the acquisition of Coalition and its
subsidiaries, Coalition Development Limited, U.K., Coalition
Development Singapore Pte. Limited, Coalition Development Systems
(India) Private Limited and Mercator Info-Services India Private
Limited became the wholly owned subsidiaries of the Company. As on
December 31, 2012, the Company had four Indian and seven overseas
wholly owned subsidiaries.
The Ministry of Corporate Affairs, Government of India, has granted a
general exemption under Section 212 (8) of the Companies Act, 1956,
from the requirement to attach detailed financial statements of each
subsidiary. The Board of Directors has passed a resolution on October
17, 2012, for not attaching individual annual reports of its subsidiary
companies to its Annual Report. In compliance with the exemption
granted, a statement containing brief financial details of these
companies is included in the Annual Report. The annual accounts of the
subsidiary companies and the related information will be made available
to shareholders who seek such information.
G. JOINT VENTURE-INDIA INDEX SERVICES AND PRODUCTS LIMITED
India Index Services and Products Limited (IISL), CRISIL''s 49:51 joint
venture with the National Stock Exchange of India Limited, provides a
variety of indices and index-related services and products to capital
markets.
In 2012, IISL licensed indices to various asset managers in India
including insurance companies and asset management companies, to
facilitate the launch of index funds, exchange-traded funds and
insurance products and the issue of debentures with returns linked to
the CNX Nifty Index. IISL also concluded licensing agreements for the
issue of structured products linked to the CNX Nifty Index outside
India. In response to market requirements, IISL also launched a few
strategy indices during the year
- CNX Nifty Dividend Index, CNX Alpha Index, CNX High Beta Index and
CNX Low Volatility Index.
H. DIRECTORS
In accordance with the Articles of Association of the Company and the
provisions of the Companies Act, 1956, Mr. B. V. Bhargava and Mr. H. N.
Sinor retire by rotation and being eligible, seek re-appointment.
I. AUDITORS
The Statutory Auditors, S. R. Batliboi & Co, Chartered Accountants,
hold office up to the ensuing Annual General Meeting and being
eligible, offer themself for re-appointment. The Board recommends
their re-appointment.
J. MANAGEMENT''S DISCUSSION AND ANALYSIS REPORT
The Management''s Discussion and Analysis Report for the year under
review, as stipulated under Clause 49 of the Listing Agreement with the
Stock Exchanges in India, is annexed to this report.
K. 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 SEBI. The report on corporate governance as
stipulated under Clause 49 of the Listing Agreement 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 Clause 49 is annexed to this report.
L. OTHERS
L.1 PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY
ABSORPTION, AND FOREIGN EXCHANGE EARNINGS AND EXPENDITURE
The particulars regarding foreign exchange earnings and expenditure
appear as separate items in the notes to the Accounts. Since the
Company does not own any manufacturing facility, the other particulars
relating to conservation of energy and technology absorption stipulated
in the Companies (Disclosure of Particulars in the Report of the Board
of Directors) Rules, 1988 are not applicable.
L.2. PARTICULARS OF EMPLOYEES
During the year, 33 employees received remuneration of Rs. 6 million or
more per annum. In accordance with the provisions of Section 217(2A) of
the Companies Act, 1956 and the rules framed thereunder, the names and
other particulars of employees are set out in the annexure to the
Director''s Report. In terms of the provisions of Section 219(1)(b)(iv)
of the Companies Act, 1956, the Directors'' Report is being sent to the
shareholders without this annexure. Shareholders interested in
obtaining a copy of the annexure may write to the Company Secretary at
CRISIL''s registered office.
L.3. DIRECTORS'' RESPONSIBILITY STATEMENT AS REQUIRED UNDER THE
PROVISIONS CONTAINED IN SECTION 217(2AA) OF THE COMPANIES ACT, 1956
Your Directors hereby confirm that:
(i) In the preparation of the annual accounts for financial year 2012,
the applicable accounting standards have been followed.
(ii) The Directors 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 December 31, 2012 and of the profit of the Company
for the year ended on that date.
(iii) The Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities.
(iv) The Directors have prepared the annual accounts for financial year
2012 on a ''going concern'' basis.
Employee Stock Option Schemes
The Company has two employee stock option schemes. The Employee Stock
Option Scheme 2011 (ESOS 2011) was approved by the shareholders vide a
special resolution passed through postal ballot on February 4, 2011.
The Employee Stock Option Scheme 2012 (ESOS 2012) was approved by the
shareholders vide a special resolution passed through postal ballot on
April 10, 2012.
Summary Information on ESOS 2011 and ESOS 2012 of the Company is
provided as Annexure to this Report. The information is being provided
in compliance with Clause 12 of the Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, as amended.
Acknowledgements
The Board of Directors wishes to thank the employees of CRISIL for
their exemplary dedication and the excellence they have displayed in
conducting the operations of CRISIL. The Board also wishes to place on
record its sincere appreciation of the faith reposed in the
professional integrity of CRISIL by customers and investors who have
patronised its services. The Board acknowledges the splendid support
provided by market intermediaries. The affiliation with Standard and
Poor''s has been a source of great strength. The Board of Directors also
wishes to place on record its gratitude for the faith reposed in CRISIL
by the Securities and Exchange Board of India, the Reserve Bank of
India, the Government of India, and the state governments. The role
played by the media in highlighting the good work done by CRISIL is
deeply appreciated.
For and on behalf of the
Board of Directors of CRISIL Limited
Douglas Peterson Chairman
Mumbai, February 14, 2013
Dec 31, 2010
The Directors are pleased to present the 24th Annual report of CRISIL
Limited, along with the audited accounts for the year ended December
31, 2010.
PERFORMANCE
A summary of the Companys financial performance in 2010 is given below:
(Rupees Lakh)
Year ended Year ended
December 31, 2010 December 31, 2009
Total income for the year was 60,233.44 46,445.36
Profit before depreciation
and taxes was 26,918.21 20,422.09
Deducting depreciation of 2,020.85 1,387.93
Profit before tax was 24,897.36 19,034.16
Deducting taxes of 5,321.90 4,000.44
Profit after tax was 19,575.46 15,033.72
The proposed appropriations are:
Dividend 14,417.96 7,225.00
Corporate Dividend Tax 2,387.67 1,227.89
General Reserve 1,957.54 1,503.37
Balance carried forward is 23,553.37 22,741.09
DIVIDEND
The Directors recommend, for approval of the members at the Annual
General Meeting to be held on April 15, 2011, payment of final dividend
of Rs. 25 per share for the year under review. During the year, the
Company paid first, second and third interim dividends of Rs. 25 per
share each. The Company also paid a special dividend of Rs. 100 per
share. The total dividend for the year works out to Rs. 200 per share
as against rs.100 per share in 2009.
BUYBACK OF EQUITY SHARES
The Board of Directors, at its meeting held on September 9, 2010,
approved the buyback of equity shares of the Company for a total
consideration not exceeding Rs. 80 crore and at a price not exceeding
Rs. 6500 per equity share of Rs.10 each from the open market through
the stock exchanges. The Company received shareholders approval
through postal ballot for the buyback on October 18, 2010 and issued a
public announcement on October 20, 2010.
The buyback commenced on November 3, 2010 and closed on November 10,
2010. The Company bought back 128,156 equity shares at an average price
of Rs. 6199.87 per equity share.
The paid-up equity share capital of the Company (pre and post buyback
of shares) is as follows:- share capital of the company (Pre and Post
Buyback)
Sr no. Particulars No.of shares Share capital
(rupees)
1. Paid up Equity Share Capital
(Pre Buyback) 72,25,000 7,22,50,000
2. Total Equity Shares bought back 1,28,156 12,81,560
3. Paid up Equity Share Capital
(Post Buyback) 70,96,844 7,09,68,440
REVIEW OF OPERATIONS
a. RATINGS
Highlights
- Over 5500 bank loan ratings (BLR) outstanding, the largest number of
BLR in India; 2434 new ratings assigned during the year
- crossed milestone of 17,500 small and medium enterprises (SME)
ratings; 7800 new SME ratings assigned in 2010
- Launched CRISIL Real Estate Star (CREST) Rating, a first-of-its-kind
service for retail investors in the real estate sector
- Expanded operations at Global Analytical Centre (GAC) to support
Standard & Poors (S&P)
Business environment
The business environment remained steady for Ratings for the better
part of 2010, except for the last quarter of the year, when liquidity
constraints led to a sharp increase in interest rates and impacted
fresh debt issuances. Indias corporate bond market was active during
the year, with interest rates at the short and long-term ends remaining
attractive, and the investment climate turning positive. Issuances of
commercial paper (CP) gathered momentum, with volumes growing by 50 per
cent over the previous year. There were also bond issuances from
entities rated A and BBB by CRISIL, a positive trend for indias
corporate bond market. Bank loan ratings maintained steady growth. the
number of SME ratings continued to grow rapidly, backed by increasing
acceptance by banks.
S&Ps demand for support from GAC continued to grow steadily in line
with S&Ps focus on deeper analysis, and quicker response to market,
and on improving data accuracy and enhancing support for its products.
The bond markets are expected to remain subdued in the initial period
of 2011 as liquidity conditions are expected to remain tight with the
monetary policy focusing on controlling inflationary pressures.
However, the long term prospects remain strong with substantial demand
for funds from infrastructure companies and the need for the financial
sector to tap the bond market for funding the Indian economys growth.
CP issuances are also expected to increase, driven by the introduction
of base rates in the banking sector. the BLR market is likely to remain
steady in 2011, as banks become increasingly compliant with Basel II
requirements. The demand for SME ratings is expected to remain robust
in 2011.
GACs operations are expected to maintain their growth momentum in
2011, fuelled by recovery in the global credit markets and S&Ps
continuing focus on extending its leadership in the global financial
information, data and, analytics businesses.
Operations
CRISIL ratings maintained its market leadership in 2010, backed by a
steady performance in BLRs and strong growth in SME ratings. During the
year, CRISIL assigned 2434 new BLRs and 7800 SME ratings. To manage the
increasing volume of business, processes and work flows were upgraded
to maintain quality of output and timeliness of delivery. Analytical
teams received additional training to keep them abreast of global and
local developments. These measures have ensured that CRISIL is current
on all its ratings and rating publications, despite significantly
increased volumes.
In 2010, CRISIL Ratings assigned Indias first-ever ratings for
securitisation of toll-road receivables, and multiple-asset
securitisation of microfinance institution (MFI) loans. These set the
trend for a number of similar transactions.
CRISIL Real Estate Star (CREST) Ratings, a first-of-its-kind service
for Indias fast-growing real estate sector, provides a city-specific
all-round assessment of real estate projects, and helps buyers
benchmark and identify quality projects within a city. The product has
received an encouraging response from all stakeholdersÃdevelopers,
buyers, investors, and bankers. CRISIL has already evaluated 29
projects across 10 cities.
CRISIL continued to conduct regular outreach programmes for the benefit
of investors and market participants. Around 150 seminars, including
the CRISIL Leadership series for BLR customers, and MSME CEO
conferences for SMEs, were conducted across the country; these seminars
helped extend crisiLs reach to more than 8500 companies and bankers
across the country.
CRISIL also published Indias first-ever comprehensive report on the
performance of all outstanding structured finance transactions. CRISIL
Ratings commentaries, including those on the introduction of base
rate, floating savings rate, capital provision for real estate assets,
capital infusion by Government of India (Gol) in public sector banks,
impact of 3G license on telecom companies, and Gois fertiliser policy
changes, received extensive media coverage.
GAC continued to be an active partner in S&Ps initiatives to adapt to
the evolving regulatory environment, and penetrated the commercial
fixed income data and analytics segment. With the revival of the global
economy, the demand for S&Ps ratings and McGraw-Hill Financials
data/information services is expected to grow. This will translate into
increasing requirements for GAC support. GAC is well positioned to
strengthen its relationship with S&P, and maintain its growth
trajectory.
B. RESEARCH
B.1. GLOBAL RESEARCH & ANALYTICS
B.1.a. IREVNA
Highlights
- Expanded geographic presence with sales offce in Sydney and research
centre in China
- Ranked # 1 firm in the world in financial services research, risk
management and actuarial services, corporate fnance support and
financial services analytics by the Black Book of Outsourcing - a
Datamonitor company.
Business environment
The slowdown in the global financial markets in 2008-09 had a positive
impact on the global analytics and research industry, with customers
looking increasingly to research providers such as Irevna as a
strategic means of restructuring their businesses. Demand for Irevnas
services remained buoyant through 2010, driving robust growth in
business volumes. Investments in new services such as actuarial and
risk analytics, and in expanding Irevnas global footprint, have
yielded positive results.
The demand for knowledge services is expected to remain buoyant, as
global players look for ways to grow their revenues and become more
efficient. The Irevna-Pipal Research combine is the leader in this
market, and has a proven track record of helping clients increase their
revenues, provide deeper and faster analysis to the market, and improve
returns on investment (ROI). This will help us beneft from the growing
demand for our services.
Operations
Irevna continued to lead the global knowledge services industry, adding
22 new clients in 2010, significantly growing all client accounts, and
firmly establishing actuarial and risk analytics as growth verticals.
Irevnas international research centres in Buenos Aires (Argentina) and
Wroclaw (Poland), together with those in Mumbai and Chennai, facilitate
round-the-clock servicing of client requirements, bridging talent gaps,
and providing multi-lingual capabilities. Irevnas new research centre
in China will help enhance these capabilities, particularly in the
Mandarin language, and extend the reach of its services further.
B.2. INDIA RESEARCH
Highlights
- Released 65 CRISIL Independent Equity Research (IER) reports during
2010, providing investors with high-quality research on listed Indian
companies. Received a mandate from the National Stock Exchange to
provide company reports on entities listed on the exchange
- Received a prestigious mandate from Employees Provident Fund
Organisation (EPFO) to assist in selecting, and monitoring the
performance of fund managers
- Launched the new, enhanced website, www.crisilresearch.com, to
deliver near-real-time industry research to customers
Business Environment
The favourable domestic economic environment and increasing investments
in 2010 revived demand for CRISIL Researchs offerings. A number of
companies that were raising funds approached CRISIL Research for
valuation reports and sector studies to aid in their decision-making.
Opportunities in the wealth management space also increased because of
a shift in the industrys business model, from products to value-based
advice.
Operations
CRISIL Research continued to build on its powerful value proposition of
providing macro and micro integrated research. It also intensifed
efforts to reach out to the corporate sector with industry studies and
customised research offerings. The revamped website
www.crisilresearch.com gives customers near-real-time access to
research. the website enables clients to track and forecast the
performance of 50 industries, using CRISIL Research data and analysis,
and the clients own assumptions about key variables.
Market participants, including listed companies, drove strong demand
for CRISILs Independent Equity Research (IER): On a cumulative basis
81 reports have been published, including 20 sponsored by the National
Stock Exchange Investor Protection Fund Trust (NSE IPFT). CRISIL also
received a mandate from NSE IPFT to provide company reports on the
entities listed on the exchange. Investors can access the equity
research and company reports sponsored by NSE IPFT at www.crisil.com
and www.nse- india.com.
CRISIL FundServices has been re-appointed by EPFO, to assist in
selecting fund managers and monitoring their performance, for a
three-year period. CRISIL FundServices also worked closely with the
Indian mutual fund industry to help it transition to revised valuation
norms for money market instruments.
C. ADVISORY
CRISIL carries out its infrastructure advisory and risk solutions
businesses through its subsidiary, CRISIL Risk and infrastructure
solutions Limited (CRIS).
C.1. CRISIL INFRASTRUCTURE ADVISORY BUSINESS
Highlights
- Assisted the Ministry of Rural Development, Government of India
(GoI), in a unique and innovative public-private-partnership project to
provide urban services in rural areas (PURA); the pilot project
promises to be the first of many such endeavours
- Helped the Ministry of Non-Conventional Energy, GoI, design the
framework for exchange of renewable energy purchase obligations, and a
platform for trading in renewable energy certificates
- Received a renewed mandate from the World Bank to conduct training
programmes in enhancing the regulatory reform capabilities of member
regulators of the East Asia Pacific Infrastructure regulators forum
(EAPIRF)
Business environment
Activity levels in the urban and energy sector-the two key areas for
CRISs advisory business showed contrasting trends in 2010. The energy
sector saw significant investments in conventional energy projects by
the public and private sectors, strong policy and regulatory
initiatives in the renewable energy sector, and downstream activity to
deploy natural gas available in the country. The urban sector, however,
witnessed a slowdown in investments and activity in 2010, particularly
in the second half, as the first phase of Jawaharlal Nehru National
Urban Renewal Mission (JNNURM) reached maturity.
The outlook for 2011 suggests continued activity in the energy sector,
and a revival of deferred projects in the urban sector. State
governments are also expected to undertake infrastructure development
projects.
Operations
Revenues in the infrastructure advisory business were constrained by
the slowdown in urban sector projects investments, although an
investment revival in the energy sector mitigated the impact of the
slowdown. To broad-base revenue, CRISs advisory business has set up a
team to exclusively pursue opportunities in the transport and logistics
sector. the business will also focus on growing its presence in the
mineral and social infrastructure sectors.
The strong domain expertise that CRIS brings to the table is likely to
help it beneft from the renewed developer and private equity interest
in conventional energy projects. CRISs growing credentials in
renewable energy, transportation and logistics, and oil, gas, and
minerals will add to our range of operations in the private sector.
CRISIL international operations remain strongly focused on Africa,
backed by a slew of assignments in Namibia, Mozambique and South
Africa. The World Banks renewal of the mandate to CRIS to assist the
East Asia Pacific Infrastructure Regulators Forum (EAPIRF) to enhance
the regulatory reform capabilities of member regulators, is a strong
testimonial to criss credentials as an enabler of regulatory
efficiency.
CRIS made significant progress in 2010 in streamlining operations with
respect to staffing, and improving the quality of its deliverables and
collection processes. CRIS expects to carry this momentum forward into
2011, and benefit from improvements in knowledge management to better
harness our capabilities and experience.
C.2. CRISIL RISK SOLUTIONS (CRS)
Highlights
- Won key accounts in the public and private banking sector - portfolio
of customers now includes 9 of indias top 10 banks
- entered the global arena, winning two prestigious mandates including
a reputed multilateral development institution in South East Asia
- Developed a loan origination system to enable automation of a banks
credit appraisal process as an important module in its internal rating
platform
Business environment
Over the past five years, most banks have invested considerable
resources in their processes, especially those pertaining to credit
risk, as part of their initiative to comply with Basel II. Most banks
and financial institutions have now developed strong practices with
regard to credit risk, and the Standardised Approaches of Basel II, and
have, therefore, begun to shift their focus to strengthening other
processes, such as those that relate to Advanced Approaches.
CRS believes that banks and financial institutions will, over the medium
term, continue to invest in systems and processes, and move from a
compliance-based approach in risk management to a best- practices-based
approach. CRSs services are, therefore, likely to be in increasing
demand.
Operations
CRS remained focused on both consulting and software solutions, and
concluded multiple assignments in both.
CRS added vital enhancements to all its products such as Risk
Assessment Model (RAM), Capital Assessment Model (CAM), CRISIL
Operational Risk Evaluator (CORE) and Credit Capital (CC). CRS aims to
expand its product coverage and increase its product usability. Various
enhancements have helped strengthen the product positioning as a
comprehensive end-to-end solution encompassing both risk measurement as
well as associated process management.
Intensified business development initiatives in countries such as
Mauritius, Sri Lanka and Bangladesh, have also begun to yield results.
The business successfully renewed its ISO9001:2008 certification.
D. COLLABORATION WITH S&P
The various business verticals of CRISIL and S&P collaborated
extensively.
Key initiatives included a joint seminar by CRISIL Ratings and S&P on
The New Normal: The changing face of Financial Markets. More than 100
invitees, including media and investors, attended the event.
CRISIL and S&P jointly released the Standard & Poors Indices Vs Active
(SPIVA) report for Indias mutual funds industry. this report, a
bi-annual publication, compares the performance of indices and active
funds.
CRISIL Infrastructure Advisory collaborated with S&P to co-sponsor the
World Bank-Singapore- infrastructure finance summit. this summit was
organised by the world Bank, the singapore Ministry of finance and the
Monetary Authority of Singapore in association with the financial times
and the world Bank-AseAn infrastructure finance network.
Additionally, CRISIL Risk Solutions worked closely with S&P to market
its products and services in several geographies, including the Middle
East and Asia Pacifc.
As part of the collaborative efforts, C-CER published 11
reports/articles on Asia-Pacifc economies for S&P.
E. CRISIL CENTRE FOR ECONOMIC RESEARCH (C-CER)
CÃCER continued to focus on research on macro economics in India and
the Asia Pacific, consistently building crisiLs franchise in the
Indian media and positioning the company as the foremost analytics-
based voice on the economy in the region.
C-CER published two special reports during the yearÃSkilling India:
The Billion People Challenge, and India: Raising the Growth Bar. It
also introduced two new productsÃCRISIL EcoMonitor and South Asia
economic outlook. c-cer continues to work with the Egyptian institute
of Directors (EloD), and Hawakmah, the Institute for Corporate
Governance (a subsidiary of the Dubai International Financial Centre)
for creation of an Environmental, Social & Governance (ESG) Index in
their respective regions.
F. HUMAN RESOURCES
crisiLs Human resources team continued to focus on attracting,
retaining, and growing talent. in 2010, 1083 employees were hired, up
from 579 hired in 2009. the total headcount in CRISIL increased to 2805
as on December 31, 2010 from 2164 a year previously.
Highlights of CRISILs talent Attraction Initiatives
- strengthened the senior management team
- Maintained strong presence on campusesÃ42 business schools were
visited during the year and job offers were extended to 186 students
- Increased the number of seats on offer at the CRISIL Certified
Analyst Programme (CCAP), which entered its fourth year, with 47
interns from the programme joining during the year.
- Inducted all 17 interns from the frst batch of the Irevna Certified
Analyst Programme (ICAP)
Retaining talent
CRISIL followed a structured approach towards people development, by
understanding the functional and behavioural competencies required for
each role, and then devising a comprehensive training plan to address
gaps in skill sets.
More than 1100 training sessions were conducted organisation-wide,
during the year, aggregating 77,752 man-hours of training. These
trainings ranged from technical subjects to functional and behavioural
skill-building programmes. to increase employee engagement, the
rewards and recognition programme, crisiL AWARDS Celebrating Winning
Performances was revamped, expanding the scope of the awards,
increasing the transparency of the process, and providing greater
visibility to award winners.
CRISILs brand-building and thought leadership initiative, the CRISIL
Young Thought Leader (CYTL) competition, received 153 responses from
students of 62 business colleges and graduate schools.
During the year, 93 employees received remuneration of Rs. 2.4 million
or more per annum. In accordance with the provisions of Section 217(2A)
of the Companies Act, 1956 and the rules framed thereunder, the names
and other particulars of employees are set out in the annexure to the
Directors Report. In terms of the provisions of Section 219(1) (b)
(iv) of the Companies Act, 1956, the Directors Report is being sent to
the shareholders without this annexure. Shareholders interested in
obtaining a copy of the annexure may write to the Company Secretary at
CRISILs registered offce.
G. SUBSIDIARIES
CRISIL has been granted an exemption by the Ministry of Corporate
Affairs from attaching individual annual reports of its subsidiary
companies to its annual report. A statement containing brief financial
details of these companies is included in the annual report. the annual
accounts of the subsidiary companies and the related information will
be made available to shareholders who seek such information.
H. ACQUISITION OF PIPAL RESEARCH
CRISIL signed agreements on September 22, 2010 for the acquisition of
the assets of Pipal Research corporation (PRC) including 100% of the
share capital of Pipal research Analytics and information Services
India Private Limited. After completion of all conditions precedent,
the transaction was completed with effect from December 3, 2010.
I. JOINT VENTURE - INDIA INDEX SERVICES AND PRODUCTS LIMITED
India Index Services and Products Limited (IISL), CRISILs 49:51 joint
venture with National Stock Exchange of India Limited (NSE), provides a
variety of indices and index-related services and products to the
capital markets. IISL has a licensing and marketing agreement with S&P,
the worlds leading provider of investible equity indices.
II CRISIL issued licenses to various clients such as Insurance
Companies, Asset Management Companies, etc. within India for
facilitating the launch of Index Funds, Exchange Traded Funds and
issuance of debentures that carry returns linked to the S&P CNX Nifty
Index. IISL also concluded licensing agreements for issuance of
structured products linked to the S&P CNX Nifty Index outside India.
J. DIRECtORS
In accordance with the articles of association of the Company and the
provisions of the Companies Act, 1957, Mr. BV Bhargava and Dr. Nachiket
Mor retire by rotation and being eligible, offer themselves for
reappointment.
K. AUDITORS
The Statutory Auditors, M/s. SR Batliboi & Co, Chartered Accountants,
hold offce up to the ensuing Annual General Meeting and the Board
recommends their reappointment.
L. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review, as
stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges in India, is presented in a separate section forming part of
the Annual report.
M. CORPORATE GOVERNANCE
The Company is committed to maintain the highest standards of corporate
governance and adhere to the corporate governance requirements set out
by SEBI.
The report on corporate governance as stipulated under Clause 49 of the
Listing Agreement 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 Clause
49, is attached to this report.
N. OTHERS
N.1 PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION
AND FOREIGN EXCHANGE EARNINGS AND EXPENDITURE
The particulars regarding foreign exchange earnings and expenditure
appear at Item No. 8 and 9 in the notes to the Accounts. since the
company does not own any manufacturing facility, the other particulars
relating to conservation of energy and technology absorption stipulated
in the Companies (Disclosure of Particulars in the report of the Board
of Directors) rules, 1988 are not applicable.
N.2. DIRECTORS RESPONSIBILITY STATEMENT AS REQUIRED UNDER THE
PROVISIONS CONTAINED IN SECTION 217(2AA) OF THE COMPANIES ACt, 1956
Your Directors hereby confirm that:
(i) In the preparation of the annual accounts, the applicable
accounting standards have been followed.
(ii) The Directors 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 or loss
of the company for that period.
(iii) The Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities.
(iv) The Directors have prepared the annual accounts on a going concern
basis.
Employees Stock Option Scheme
The shareholders of the Company by postal ballot on February 4, 2011
approved the Employees Stock option scheme for employees and whole-time
Directors of CRISIL and its subsidiaries.Acknowledgements
The Board of Directors wishes to thank the employees of CRISIL for
their exemplary dedication and the excellence they have displayed in
conducting the operations of CRISIL. The Board also wishes to place on
record its sincere appreciation of the faith reposed in the
professional integrity of CRISIL by customers and investors who have
patronised its services. The Board acknowledges the splendid support
provided by market intermediaries. The affliation with Standard and
Poors has been a source of great strength. the Board of Directors also
wishes to place on record its gratitude for the faith reposed in CRISIL
by the Securities and Exchange Board of India, the Reserve Bank of
India, the Government of India, and the state governments. The role
played by the media in highlighting the good work done by CRISIL is
deeply appreciated.
On behalf of the Board of Directors,
Deven Sharma
Mumbai, February 14, 2011 Chairman
Dec 31, 2009
The Directors are pleased to present the 23rd Annual Report of CRISIL
Limited, along with the audited accounts for the year ended December
31, 2009.
Performance
A summary of the CompanyÃs financial performance in 2009 is given
below:
(Rs. in Lakh)
Year Ended Year Ended
December 31, 2009 December 31, 2008
Total Income for the
year was 46,445.36 40,389.03
Profit before depreciation
and taxes was 20,422.09 18,696.71
Deducting depreciation of 1,387.93 1,184.38
Profit before tax was 19,034.16 17,512.33
Deducting taxes of 4,000.44 3,774.52
Profit after tax was 15,033.72 13,737.81
The proposed
appropriations are:
Dividend 7,225.00 5,057.50
Corporate Dividend Tax 1,227.89 859.52
General Reserve 1,503.37 1,373.78
Balance carried forward is 22,741.09 17,663.64
Dividend
The Directors recommend, for approval of the members at the Annual
General Meeting to be held on April 16, 2010, payment of final dividend
of 250 per cent (Rs. 25 per share) for the year under review. During
the year, the Company paid first, second and third interim dividends of
250 per cent each. The total dividend for the year works out to 1000
per cent (Rs.1 00 per share) as against 700 per cent (Rs.70 per share)
in 2008.
Review of Operations
A. RATINGS
Highlights
- Assigned over 7400 new ratings in 2009 including 2268 Bank Loan
Ratings (BLRs), and 5178 Small and Medium Enterprise (SME) Ratings
- Launched a first-of-its-kind publication, IndiaÃs Top 50 Microfinance
Institutions, profiling the leading microfinance institutions in India
- Assigned IndiaÃs first-ever rating for securitisation of microfinance
receivables
- Introduced CreditAlerts to provide insights to market participants on
trends in specific sectors
- Extended operations at Global Analytical Centre (GAC) to 24/6 to
provide real-time support to Standard & PoorÃs (S&P) during US market
hours; operations at GAC have grown considerably during the year
Business Environment
The business environment for ratings continued to remain positive in
2009. The corporate bond market revived marginally on account of a
slowdown in overseas funding and limited opportunities for raising
equity. BLRs continued to show robust growth in the year. With an
increasing acceptance from bankers, SME ratings also grew rapidly.
GAC continues to provide a range of analytical and data services to
S&P. GACÃs trend of increasing collaborations with S&P across
businesses, has continued in 2009 despite the global economic slowdown.
The environment is expected to remain buoyant in 2010 as well with
corporates likely to resume some of their deferred capital expenditure
programmes. Infrastructure companies are also expected to turn to the
bond markets for funds. The BLR market is likely to remain strong in
2010, as banks strive to become Basel II compliant. The demand for SME
ratings is, likewise, expected to remain robust in 2010.
GACÃs operations are expected to continue the growth momentum in 2010
as well with the recovery in global credit markets fuelling the need
for additional support.
Operations
CRISIL Ratings maintained its market leadership in 2009 backed by a
strong growth in BLRs (2268 ratings assigned as against 845 in 2008)
and SME ratings (5178 ratings assigned as against 2518 ratings assigned
in 2008). CRISILÃs BLR teams were ramped up substantially. The business
development and delivery processes were augmented during the year to
keep pace with the sharp increase in BLR volumes. Strong quality
control measures have been set in place; this includes following a
focused, process- driven approach, use of quality checklists, and
training for analytical teams. While revenues from structured finance
and financial sector issuances were subdued for most of 2009, these
were made up for by a spurt of corporate sector bond issuances in the
year.
During the year, CRISIL Ratings assigned IndiaÃs frstÃever rating for
securitisation of microfinance receivables. It also launched a unique
publication, IndiaÃs Top 50 Microfinance Institutions. The inaugural
edition of the publication, profiling key players in the microfinance
space, was released by M r. Umesh Chandra Sarangi, Chairman, National
Bank for Agriculture and Rural Development (NABARD), the regulator for
microfinance institutions (MFIs) in India. The publication draws
heavily on CRISILÃs deep understanding of the sector, and has been
launched as part of CRISILÃs Financial Awareness Initiative for the
Indian market. The publication has been appreciated by regulators,
practitioners, lenders and donors.
CRISIL conducted regular outreach programmes for the benefit of
investors and market participants. Its commentaries, such as those on
bank asset quality, retail asset quality, outlook for banking and
insurance sector, and the credit quality of corporate India, received
extensive media coverage. Commentaries on the outlook for corporate
India and nonÃbanking finance companies also found mention in the
international media.
The CRISIL-CNBC Emerging India Awards 2009, received over 300,000
nominations from SMEs all over the country. CRISIL also evaluated more
than 162 nominations for the CNBC-Awaaz- CRISIL-CREDAI Real Estate
Awards 2009, a major event in the real estate sector.
CRISIL Ratings has enhanced the transparency in its rating processes by
strengthening its methodologies. It has intensified surveillance of
rated credits, and revamped its structured finance rationales to
provide more information and decision-making tools to investors. It has
also introduced CreditAlerts to highlight trends in specific sectors,
and the likely implications of these trends on the credit quality of
companies in that sector. CreditAlerts are shared extensively with
investors and the media, and are also available on the CRISIL website.
GAC, with its proven expertise in managing complex assignments,
initiated several new projects during the year, supporting S&PÃs focus
on deeper, sharper, and quicker analyses. GAC launched night shift
operations (six days a week) to provide real-time support to S&P during
US market hours. GAC has improved its operating effciencies through
process re-engineering and automation. With the global economy now
showing signs of revival, the demand for GACÃs high-end, in-depth
analytics, is expected to increase over the near term. GAC is well
positioned to strengthen its relationship with S&P, and maintain its
growth trajectory.
B. RESEARCH
B.1. IREVNA
Highlights
- Maintained leadership in high-end financial research and analytics
outsourcing, despite the global recession
- Acquired new clients, and expanded service offerings, in addition to
growing key accounts
- Widened its global business development footprint
Business Environment
The turmoil in the global financial markets impacted IrevnaÃs business
for most of the year. Most financial services firms (IrevnaÃs major
client base) were restructuring their businesses, reducing headcount
and focusing on surviving the crisis, constraining growth for
outsourcing. However, the last quarter of 2009 saw a remarkable
recovery in demand for IrevnaÃs services as the global financial
markets showed first signs of revival. This upturn is expected to
gather momentum in 2010.
2010 promises to be a year of growth for Irevna. Its investments in
seeding new services and expanding geographical reach will enable
Irevna to capture a large portion of growth in demand in the near term.
In the medium term, a shortage of talent in client markets is expected
to emerge as a key growth driver for IrevnaÃs business.
Operations
Irevna continues to be the global leader in offshore equity, credit and
derivatives research services for fnancial institutions. Despite the
unfavorable circumstances in the global financial sector, Irevna has
grown its key accounts, acquired several new strategic clients,
expanded service offerings and client segments, added clients in new
verticals, and widened its global business development footprint.
Irevna has continued to invest in its business and people. It expanded
the size of its business development team, and of its footprint to
include continental Europe. The delivery centre in Wroclaw, Poland,
established in 2009, has begun servicing client needs. The Buenos Aires
centre continues to service clients in the Western Hemisphere, and is
growing well. The delivery centre in Mumbai has also been expanded, and
now services all verticals. IrevnaÃs clients in Europe, the Americas,
Asia and Australia can now leverage the delivery centres in Chennai,
Mumbai, Buenos Aires and Wroclaw for round-the-clock services, six days
a week. Irevna has also launched a concerted effort to improve
operational efficiencies and enhance customer interactions and
experience. These efforts have been successful and have led to growth
in business.
B.2. CRISIL RESEARCH
Highlights
- Introduced CRISIL Independent Equity Research (CRISIL IER), a unique
initiative, providing investors with top-quality, independent research
on listed Indian companies
- Mandate secured from the Pension Fund Regulatory Development
Authority (PFRDA) of India to assist in framing the regulatory
framework for the New Pension Scheme
- Launched research reports on real estate, infrastructure and
logistics, and outlook on industrial capital expenditure (capex)
Business Environment
The global meltdown in the financial markets in 2008 continued to
present market challenges for CRISIL Research in 2009. Cost containment
was an area of focus for corporate India, directly impacting the market
for traditional research products. However, CRISIL Research responded
by communicating and delivering customised value propositions that
helped retain customers and attract new clients.
The uncertain market conditions have had a direct impact on the CRISIL
Equities and FundServices business. However, improving sentiment in the
second half of 2009 brought in opportunities especially for IPO grading
services of CRISIL Equities.
The business environment is expected to improve in 2010, backed by
growth in the Indian economy. CRISIL Research is positioned to serve
market requirements through both standard and customised offerings.
Operations
A landmark event in 2009 was the launch of a pioneering concept in
India, the Independent Equity Research (IER), in September 2009. M r.
C. B. Bhave, Chairman, Securities and Exchange Board of India (SEBI),
officiated as chief guest at the launch of IER. Through its high
quality and independent research, CRISIL IER provides gradings on
fundamentals and fair valuations for listed companies. Through IER
reports, CRISIL seeks to bridge the paucity of good-quality, unbiased
research on listed Indian companies, especially for mid- and small-cap
companies. Grading reports were released for 13 companies at the
launch, presenting an array of gradings, and a mix of large-, mid-, and
small-cap companies. Reports on more companies have been released,
subsequently, and have received encouraging response from stakeholders.
CRISIL Research has continued to build on its unique value proposition
of macro and micro integrated research. In 2009, CRISIL Research
intensified efforts to track and respond to customer feedback, and to
release special reports of topical interest. The transition of
research delivery from a physical mode to an online format continued
through 2009, to enhance customer experience. Key products à Industry
Information Service and Industry Risk Service à have continued to do
well, as refected in fresh subscriptions and renewals that they have
received from customers. The research series, titled Mid-size and
Emerging Segment Company Report (MESCOR), launched in late 2008,
appealed to financial sector clients with its timeliness and relevance.
Four new research reports à Indian Infrastructure, City Real(i)ty,
Indian Logistics Industry, and Outlook on Industrial Capex à were also
released during the year, and elicited an enthusiastic response from
the market.
A focused approach to customised research, combining macro and micro
perspectives has helped the business receive repeat assignments from
clients, and to establish new high-value relationships.
A number of companies have sought to raise funds through public
offerings in the second half of the year, driven by revival in the
Indian equity markets. This has helped the IPO gradings business gain
momentum.
CRISIL FundServices secured a prestigious mandate from the Pension Fund
Regulatory and Development Authority (PFRDA) through competitive
bidding, to assist PFRDA in framing regulations for the New Pension
Scheme. The business also continues to assist the Employeesà Provident
Fund Organisation (EPFO), IndiaÃs largest provident fund, in the
performance evaluation of fund managers. CRISIL FundServices also won a
number of assignments in the fixed income valuation space.
CRISIL FundServices continues to work closely with market regulator
SEBI and Association of Mutual Funds in India (AMFI) in several
initiatives including finalising the approach to value fixed income
securities.
CRISIL Research continues to reach out to corporates, banks and other
financial sector entities, through a combination of knowledge-sharing
platforms, tele-investor meets, webinars, one-on-one meetings, and
presentations at industry forum. CRISIL Research has sought to enhance
its franchise through the year, through commentaries and interviews in
the media, and speaking engagements at prominent seminars and
conferences. Two flagship events à the CNBC-Tv18-CRISIL Mutual Fund
Awards, and the annual Post-Budget India Outlook 2008 seminar Ã
continue to attract attention and media coverage.
C. ADVISORY
CRISILÃs infrastructure advisory and risk solutions businesses are
housed under a subsidiary - CRISIL Risk and Infrastructure Solutions
Limited (CRIS). A review of these two businesses is given below to
provide a consolidated view of all CRISIL businesses.
C.1. CRISIL INFRASTRUCTURE ADVISORY BUSINESS
Highlights
- Expanded its international footprint to South Africa, Mozambique,
Georgia, Bangladesh and East Asia-Pacific
- Won a large project relating to renewable energy in South Africa
- Worked with the Ministry of Home Affairs, Government of India, on a
Public Private Partnership (PPP) model to develop housing for IndiaÃs
paramilitary forces
Business Environment
In the first quarter of 2009, the continued impact of the global
financial crisis, and the general elections, resulted in a slowdown in
government-initiated infrastructure projects. In subsequent quarters,
however, there was a significant turnaround, with governments and donor
agencies announcing project decisions at their former pace, although
private sector activities revived only in the last quarter. Pricing
pressures continued in 2009, with players adopting aggressive pricing
strategies at competitive bids.
The outlook for 2010 suggests steady improvement in investor activity.
The governmentÃs emphasis on infrastructure and its ability to trigger
private investments are expected to contribute to growth in 2010.
Continued government support in the infrastructure space is expected to
catalyse growth of international business opportunities.
Operations
The infrastructure business has performed well under the challenging
business environment in 2009. Key growth areas, including the
investor-focused business, and the international practice, have
performed well. The international footprint has expanded to include
South Africa, Mozambique, Georgia, Bangladesh and East Asia-Pacifc. The
business obtained two new projects in Mauritius, and a large, renewable
energy project in
South Africa. The international business maintained stable revenues
through 2009, consolidating on the growth achieved in 2008.
The investor-focused business, where clients include infrastructure
developers and investors, made significant progress in 2009. It
developed strong relationships with private equity investors and
infrastructure developers. It also helped two energy developers acquire
projects, by providing independent valuation and commercial due
diligence services. The business expanded its client base among power
utilities and electricity regulators. It is working on landmark
projects, such as introducing competition in power distribution in
Mumbai, and in setting renewable energy purchase targets for power
utilities in India.
The advisory business increased its presence in the Public Private
Partnership (PPP) projects segment, by working on enabling frameworks
for PPPs, and in developing pilot projects in sectors such as water and
sanitation. It was invited to design a long-term solution in
infrastructure financing through the Ãtake out fnanceà route announced
by the Government of India. CRISIL Infrastructure Advisory is working
with the Ministry of Home Affairs in developing a PPP model for housing
for paramilitary forces in the country.
The business remains focused on increasing the ticket size of its
assignments. More than 50 per cent of new businesses obtained in 2009
have been large assignments. It also continued to showcase its
expertise through speaking engagements at seminars and workshops
through the year.
C.2. CRISIL RISK SOLUTIONS (CRS)
Highlights
- Executed a prestigious mandate to set up an enterprise risk framework
for a multilateral infrastructure finance company in Africa
- Developed the CRISIL Retail Scoring Solution (CRESS) software for
hosting retail scorecards and related functionalities, and to develop
proprietary risk-control maps for banking processes
Business Environment
With most banks becoming increasingly compliant with the Basel II
framework, they are now focused on strengthening their risk systems,
and moving towards advanced approaches in Basel II. Over the medium
term, CRS expects banks and financial institutions to move from a
compliance-based approach in risk management to a best-practices-based
approach. Risk management systems will increasingly aid in business
decisions and performance management.
Operations
CRS undertook many diverse and challenging assignments in the
consulting and solutions space in 2009. CRS products and consulting
services are being increasingly viewed together, as a comprehensive
end-to-end solution in risk management.
CRSÃs suite of proprietary software products, Basel II Capital
Assessment Model (CAM) and Risk Assessment Model (RAM) software,
continue to be the leading products in their segments. In the area of
operational risk, CRS developed a powerful value proposition around its
CRISIL Operational Risk Evaluator (CORE) software. The business remains
focused on setting up robust processes, and successfully renewed its
ISO9001:2008 certification.
Among key mandates awarded to CRS in 2009, were implementation of an
Integrated Risk Management System for a leading bank in India, creation
of a market risk module of CAM software for a foreign bank operating in
India, and review of risk practices and implementation of internal risk
rating systems for a leading financial institution.
In the consulting space, CRS concluded a prestigious mandate to set up
an enterprise risk framework for a multilateral infrastructure finance
company in Africa. CRS also worked closely with S&P to jointly complete
risk-related assignments in the Asia-Pacific region.
CRSÃs business development initiatives include sale of new products and
services to domestic clients in India, and marketing CRS offerings in
countries such as Sri Lanka, Bangladesh and Mauritius. CRS also
conducted outreach activities such as workshops and seminars on
improvement of risk management practices, including a successful
workshop in Mauritius.
D. COLLABORATION WITH STANDARD & POORÃS
CRISIL and its group companies continued its strong collaboration with
S&P. Key collaborative initiatives during the year included a
successful seminar, ÃUnlocking the potential of IndiaÃs credit
marketsÃ, held jointly with S&P and the National Stock Exchange (NSE).
CRISIL Infrastructure Advisory collaborated with S&P in its
infrastructure initiatives. It was part of an expert panel at a seminar
hosted by S&P on ÃDeveloping public sector finance as a new asset
classà at the 42nd annual meeting of Asian Development Bank at Bali,
Indonesia, in May 2009. As part of this collaboration, it also
contributed a thought leadership article and case studies to S&PÃs
publication, Building AsiaÃs Infrastructure, Building AsiaÃs Public
Finance that were released at the seminar.
CRISIL and S&P held several investor events, including the Mid-Year
Market Outlook road shows in India and Singapore. CRS worked with S&P
Risk Solutions in delivering solutions to clients in the Asia-Pacific
region. S&P and CRISIL also conducted a joint study based on the S&P
ESG India Index, exploring the link between corporate governance and
company performance. CRISIL presented a paper on the study, at the
ÃCapital Markets Forum: Responsible Investment in IndiaÃ, an event
organised by the NSE.
CRISILÃs market development and communications team continued to
support S&PÃs activities in South and Southeast Asia. Key initiatives
included media and investor outreach programmes in the region, and
included a range of activities to further strengthen S&PÃs thought
leadership in several domains.
E. THE CENTRE FOR ECONOMIC RESEARCH, CRISIL (C-CER)
CÃCERÃs activities in 2009 revolved around three key themes à India
Macroeconomics, S&P Asia-Pacific Macroeconomics and Projects. Through
the year, C-CER actively positioned CRISIL in the Indian and
international media, as the foremost analytics-based voice on the
Indian economy.
C-CER guided the quarterly updates on scoring and ranking of emerging
economies on the Ãinvestabilityà of their local currency bond markets
under International Finance CorporationÃs (IFCÃs) GEMLOC-II assignment
à a project managed by CRISIL Infrastructure Advisory. C-CER also
assisted CRISIL Infrastructure Advisory in conducting the training for
East Asia-Pacific Infrastructure Regulators Forum (EAPIRF) held in
vietnam.
C-CER also advised the Egyptian Institute of Directors (EIoD) and
Corporate Governance Institute (Hawakmah) of Dubai International
Financial Centre (DIFC) for creation of the ESG Index. In addition,
C-CER participated in a Confederation of Indian Industry (CII)
initiative to assess companies on their corporate social responsibility
performance, as a prelude to an awards presentation.
F. HUMAN RESOURCES
The Human Resources team maintained its focus on attracting, retaining
and growing the desired talent at CRISIL.
In 2009, 579 employees were hired as against 754 in 2008. On a
consolidated basis, the total headcount across the CRISIL group of
companies increased to 2164 as on December 31, 2009, up from 1956 in
2008.
Responding to the need to provide real-time services to global clients
in the off-shoring business, CRISIL introduced night shift operations
during 2009.
The flagship batch of the CRISIL Certified Analyst Programme (CCAP)
completed the two-year programme. This momentous occasion in CRISIL
history was marked by a convocation ceremony, presided over by M r. N.
vaghul (then Chairman of ICICI Bank Ltd.). All interns who successfully
completed the programme were offered placements with CRISIL. To further
augment the talent pool, CRISIL has successfully launched the third
batch of CCAP Programme.
The Irevna Certified Analyst Program (ICAP) was launched in association
with the Institute for Financial Management and Research (IFMR) in
2009. The programme will benefit graduate employees working with
Irevna, and will help widen and tailor their skill-sets to the needs of
the off-shoring business. The first batch of 17 analysts is currently
undergoing the 15-month programme.
CRISILÃs brand building and thought leadership initiative, the CRISIL
Young Thought Leader (CYTL) competition has continued to elicit a
positive response.
Employee Engagement
CRISIL remains committed to enhancing employee engagement, through
structured communications, rewards and competency enhancement agendas.
The communications plan launched in 2008 ensured a robust dialogue with
employees, and enabled the sharing of organisation-wide developments,
initiatives and updates. It also provides employees with opportunities
to interact with senior management through various fora. These include
the MD & CEOÃs quarterly townhalls, business-specific quarterly
townhalls by the respective business leaders, HR interactions with new
recruits, and the MD & CEOÃs regular interactions with a cross-section
of employees across groups.
The structured rewards and recognition programme continues to
acknowledge and applaud excellence in performance. The MD & CEOÃs
annual awards to honour outstanding contributions celebrated the spirit
of excellence best demonstrated by individuals during the year. Long
service awards were introduced to recognise the contributions of
employees completing 10-, 15-, and 20-year tenures with CRISIL. The
programme was further supplemented by introducing the global Standard &
PoorÃs Acknowledging and Celebrating Excellence (ACE) awards to provide
CRISIL employees with a global platform recognising superior
performances.
The training and development team has followed a structured approach
towards people development by understanding the desired competencies,
and following them with customised interventions. Business specific
trainings programs and interventions have helped create a strong
edifice of building a learning organisation. Leadership capability was
enhanced through initiatives such as intensive training and coaching
sessions. Over 1155 training programmes, and more than 72,395 man hours
of training were conducted. These training sessions ranged from
technical subjects to functional and behavioral skill- building
programmes. A learning centre was set up to monitor the progress and
reach of these trainings.
During the year, 80 employees received remuneration of Rs. 2.4 million
or more per annum. In accordance with the provisions of Section 217(2A)
of the Companies Act, 1956 and the rules framed thereunder, the names
and other particulars of employees are set out in the annexure to the
DirectorÃs Report. In terms of the provisions of Section 219(1) (b)
(iv) of the Companies Act, 1956, the Directorsà Report is being sent to
the shareholders excluding this annexure. Any shareholder interested in
obtaining a copy of the annexure may write to the Company Secretary at
CRISILÃs registered office.
G. INFORMATION TECHNOLOGY (IT)
CRISIL businesses have acquired the cutting edge in technology, and
used IT to gain more insight into how customers use their products, to
obtain real-time feedback from customers, generate operational
dashboards and tracking metrics, scale up business operations through
web-based tools, and to provide research products to customers.
Operational efficiency was enhanced by partnering with IT companies to
provide solutions to various business divisions. Through
rationalisation of service providers, significant cost savings were
achieved during the year.
During 2009, the IT group also managed several revenue-based projects
for the Risk, Funds and Advisory businesses.
H. FACILITIES
During the year, CRISIL consolidated all its operations in Mumbai. The
operations, spread across more than ten different locations in the
city, shifted to a single building at CRISIL House, Hiranandani, Powai.
CRISIL House is a 210,000 square-feet aesthetically designed,
environment-friendly building, with the latest equipment to ensure
comfortable and efficient operations for employees. As part of CRISILÃs
Corporate Social Responsibility agenda, CRISIL has designed the new
premises as a Ãgreen buildingÃ.
I. SUBSIDIARIES
CRISIL has been granted an exemption by the Ministry of Corporate
Affairs from attaching individual annual reports of its subsidiary
companies to its annual report. A statement containing brief financial
details of these companies is included in the annual report. The annual
accounts of the subsidiary companies and the related information will
be made available to shareholders who seek such information.
J. JOINT VENTURE - INDIA INDEX SERVICES AND PRODUCTS LIMITED
India Index Services and Products Limited (IISL), CRISILÃs 49:51 joint
venture with National Stock Exchange of India Limited (NSEIL), provides
a variety of indices and index-related services and products to the
capital markets. IISL has a marketing and licensing agreement with
Standard & PoorÃs (S&P), the worldÃs leading provider of investible
equity indices.
CRISL had a total income of Rs. 14.42 crores and net profit after tax
of Rs. 7.86 crore for the year ended March 31, 2009. It declared a
dividend of 50 per cent.
In 2009, IISL issued licenses to clients within India for issuing
debentures whose returns are based on the S&P CNX Nifty Index. IISL
also concluded licensing agreements for issue of structured products
based on the S&P CNX Nifty Index outside India. In addition, IISL
continues to enter into data sales agreements with global and Indian
clients.
In 2009, Barclays Global Investors, N.A., and Nomura Asset Management
Company launched Exchange-Traded Funds (ETFs) based on the S&P CNX
Nifty Index in USA and Japan, respectively. These ETFs provide
investors in these countries opportunities to gain exposure to the
Indian markets.
K. DIRECTORS
The Board appointed M r. Deven Sharma as Chairman of the Board of
Directors with effect from October 29, 2009. The Board of Directors
appointed Mr. Deven Sharma as an Additional Director with effect from
October 29, 2009. He holds the office upto the date of the ensuing
Annual General Meeting. Mr. Deven Sharma is the President of Standard &
PoorÃs, a division of The McGraw-Hill Companies. Mr. Deven SharmaÃs
appointment will help cement a closer and more direct association of
CRISIL with Standard & PoorÃs.
Mr. Ravinder Singhania was appointed as the alternate director to Mr.
Deven Sharma.
Mr. R. Ravimohan resigned as Chairman of the Board and Director of the
Company with effect from August 6, 2009 after serving the Company over
the last 15 years.
The Directors place on record their sincere appreciation of the
significant contributions made by Mr. R. Ravimohan as Managing Director
and CEO and subsequently, as Chairman of CRISIL Ltd.
In accordance with the Articles of Association of the Company and the
provisions of the Companies Act, 1956, Ms. Rama Bijapurkar and Mr. H.
N. Sinor retire by rotation and being eligible, offer themselves for
reappointment.
L. AUDITORS
The Statutory Auditors, M/s. S. R. Batliboi & Co., Chartered
Accountants, will retire at the ensuing Annual General Meeting and
request that their reappointment be considered.
M. OTHERS
M.1. PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY
ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND EXPENDITURE
The particulars regarding foreign exchange earnings and expenditure
appear at Item No. 8 and 9 in the Notes to the Accounts. Since the
Company does not own any manufacturing facility, the other particulars
relating to conservation of energy and technology absorption stipulated
in the Companies (Disclosure of Particulars in the Report of the Board
of Directors) Rules, 1988 are not applicable.
M.2. DIRECTORSÃ RESPONSIBILITY STATEMENT AS REQUIRED UNDER THE
PROVISIONS CONTAINED IN SECTION 217(2AA) OF THE COMPANIES ACT, 1956
Your Directors hereby confirm that:
(i) In the preparation of the annual accounts, the applicable
accounting standards have been followed.
(ii) The Directors 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 or
loss of the Company for that period.
(iii) The Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities.
(iv) The Directors have prepared the annual accounts on a going concern
basis.
Acknowledgements
The Board of Directors wish to thank the employees of CRISIL for their
exemplary dedication and the excellence they have displayed in
conducting the operations of CRISIL. They also wish to place on record
their sincere appreciation of the faith reposed in the professional
integrity of CRISIL by customers and investors who have patronised
their services. They acknowledge the splendid support provided by
market intermediaries. The affiliation with Standard & PoorÃs has been
a source of redoubtable strength. The Board of Directors also wish to
place on record their gratitude for the faith reposed in CRISIL by the
Securities and Exchange Board of India, the Reserve Bank of India, the
Government of India, and various state governments. The role played by
the media in highlighting the good work done by CRISIL is deeply
appreciated.
On behalf of the Board of Directors,
Deven Sharma
Place: Mumbai Chairman
Date: February 18, 2010