CRISIL Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Modest FY24, strong Q1 FY25 start: FY24 consolidated revenue grew just 3.8% as global discretionary spending curbed the Research, Analytics and Solutions segment, but Q1 FY25 rebounded with 10.2% YoY revenue growth and ~16% YoY growth in both PBT and PAT.
• Ratings segment is the standout engine: Domestic ratings surged ~32.5% YoY in Q1 FY25, fueled by bond market momentum, large deals, and mid-corporate activity, while the Global Analytical Center also delivered strong growth from new engagements and S&P Global work delegation.
• GenAI is moving from experiment to product: A GenAI credit assessment solution was deployed for global clients, and GenAI capabilities are now embedded in CREDIT+ ICON and Fulkrum, creating draft credit reports and natural language query features.
• Capex cycle remains on hold: Despite ready balance sheets and ~75% capacity utilization, private sector capex is delayed by geopolitical uncertainty and tariff concerns, with management expecting the wait to last at least a couple more quarters.
• What to watch next quarter: Whether the Q1 FY25 revenue momentum sustains across all segments, any uptick in discretionary spending by global financial services clients, and the pace of bond market growth as rate cuts materialize.

Ratings Services: The Growth Engine

• Domestic ratings delivered a breakout quarter: Revenue grew ~32.5% YoY in Q1 FY25, supported by an uptick in the bond market during H2 2024, a few large deals, continued momentum in the mid-corporate space, and positive traction in both surveillance fees and new ratings revenues.
• Bond market growth turned muted entering 2025: After 12.5% YoY growth in 2024, corporate bond issuances grew only 3.9% YoY in Q1 FY25, with a significant uptick yet to materialize. Management expects rate cuts to provide a kicker, particularly through superior spreads for AA and AAA papers.
• Bank credit is slowing but stabilizing: Credit growth declined to 11% YoY as of February 2025 from 16.6% a year earlier, partly due to reduced lending to NBFCs after RBI raised risk weights. With the risk-weight rollback effective April 2025 and a more accommodative RBI stance, management expects credit growth of 12-13% in fiscal 2026.
• The rating portfolio is shifting upward: The median rating has moved from BB to BBB, while the skew toward AAA/AA persists because the bond market has hardly any demand for paper rated below AA.
• Global Analytical Center work for S&P Global is a growth priority: Management is focused on creating centers of expertise in analytics, research, data analytics support, technology transformation, and program management, aiming to win business by playing to Crisil's strengths. An aspirational revenue target was set at the AGM, though no forward-looking commitment was given.

Amish Mehta: "I would also add, I mean, I think somebody mentioned earlier, is this the best? I would say the best is yet to come. I am a firm believer that I think we are going to continue driving the opportunity."

Research, Analytics & Solutions: Navigating Discretionary Headwinds

• FY24 was a year of flat revenue and margin improvement: Segment revenues were marginally lower than the previous year due to curtailed discretionary spending by global customers and the conclusion of a few long-term projects. Margins improved by 2.4%, though the prior year included a one-off INR 29.4 crore gain from Argentinian Peso devaluation.
• Crisil Integral IQ bore the brunt of client caution: Muted performance in 2024 reflected deferred spending by global financial services clients, policy uncertainty from US and UK elections, and lingering caution among midsized US banks following the 2023 regional bank failures. Many clients adopted a wait-and-watch stance.
• The strategy is pivoting to growth areas: Management is focusing on private capital, GenAI, and data analytics, while also targeting midsized banks seeking offshoring solutions to manage costs and asset managers exploring operational transformation to improve cost-to-income ratios.
• Q1 FY25 showed early traction: Segment profit grew ~16% YoY, driven by a changing product mix and continued focus on margins. Discussions with customers turned positive, and the pipeline is strengthening.
• No forward-looking view is given for this division: Management declined to provide a specific outlook, stating only that opportunities exist across India data and research demand, global benchmarking, and Integral IQ, while acknowledging that discretionary spend slowdowns may have an impact.

Gurpreet Chhatwal: "I think we're pivoting our strategy to ensure that we focus on those areas and general trend which we are also seeing is people are looking at both offshoring and automation."

GenAI: From Exploration to Embedded Product

• A GenAI credit assessment solution is live with global clients: Deployed in 2024, the solution is integrated into CREDIT+ ICON, enabling credit analysts to generate draft summaries of credit reports from financial data and analysis reports. A natural language query feature has also been added to the Fulkrum business intelligence platform.
• GenAI is being used to create client-facing credit reports: In one global business, GenAI is already producing credit reports for clients, moving the technology from internal productivity to revenue-generating output.
• Management views GenAI as a dual opportunity: The focus is on both efficiency (deploying AI to enhance operational efficiency of internal processes) and effectiveness (investing in AI offerings to help clients in their AI journeys or AI-led products).
• Adoption is accelerating but still early-stage: Most companies remain in early stages of GenAI adoption, and Crisil continues to explore ways to enhance client offerings and internal productivity through the technology.

Capex & Credit Environment: Waiting for Clarity

• Private sector capex is delayed, not cancelled: Despite strong balance sheets, 12% CAGR earnings over FY19-25, and capacity utilization at ~75%, companies are holding back due to geopolitical uncertainty, tariff concerns, and past election cycles. Management believes funding will not be a constraint once demand and policy stability return.
• The delay extends at least a couple more quarters: Tariff conversations and current uncertainty are pushing the capex cycle out, with companies seeking clarity before committing. Corporates are more inclined toward brownfield expansion, acquisitions, and taking assets from NCLT rather than fresh greenfield projects.
• Banks have lending capacity for the recovery: The loan-to-deposit ratio rose because deposit growth trailed credit growth, but the gap is narrowing. With interest rates coming down and RBI infusing liquidity, management expects banks to achieve 12-13% credit growth in fiscal 2026 without the ratio rising much further.
• Rate cuts are expected to support bond market activity: Crisil expects at least two more repo rate cuts of 25 bps each in the rest of fiscal 2026, with the RBI having shifted its stance to accommodative. This should aid bond issuances, though geopolitical tensions and US tariff uncertainty remain an overhang.

Amish Mehta: "The moment I think companies see stability in demand and also they see stability in the environment and policymaking. Our belief with the current balance sheet capability, which is sitting there, funding should not be a constraint. And I think you will see capex coming back."

Brand Restructuring & Strategy

• A new brand identity was launched in January 2025: The four brands are now Crisil Ratings, Crisil Intelligence (formerly Market Intelligence and Analytics), Crisil Coalition Greenwich (formerly Global Benchmarking Analytics), and Crisil Integral IQ (formerly Global Research and Risk Solutions). The repositioning is about demonstrating interconnectedness, not changing P&L monitoring structure.
• Crisil Coalition Greenwich is driving Rest of World growth: The business saw good momentum in corporate and investment banking, with scaling product offerings and positive client engagement from large commercial banks, plus good growth in the US commercial and community banking space.
• Crisil Intelligence is monitoring the uncertain environment: The segment saw strong renewal rates in industry research and good growth in transport and clean energy consulting, but management is watching overall spends given the uncertain environment.
• Margin improvement is a stated priority across all businesses: The strategy is to grow profitably by getting more customers, achieving better premium pricing, and driving operational efficiency. Management declined to quantify pricing actions or volume growth in the rating business.

Amish Mehta: "Our new brand identity reinforces our position as a global insights-driven analytics organization and conveys a more progressive vision for our future."

Guidance & Commitments

Key Metrics