care ratings ltd Management discussions


Built on a solid foundation set last year, your Companys transformational journey continued in FY23. With active efforts made in all operations on all fronts, we delivered better output for our clients and enhanced our brand value across channels. There were challenges rising inflation, geopolitical uncertainty, fear of Covids resurgence just to name a few. However, commendable actions taken by the Government of India and the sheer dedication of our personnel ensured we stayed on track for growth.

"The best way to predict the future is to create it." - Peter Drucker

On Growth Track

Even though the business environment remained a tad uncertain due to inflation and volatile global markets, your Company continued to make progress and ensure high-quality results.

The mantra for your company was "Quality-led Growth".

This was the outcome of the intense deliberations by the leadership team after the new CEO took over in July, 2022.

A thorough and well-thought-out strategy to push the four identified pillars of growth -- Group Approach, Technology, Talent and Branding helped your Company navigate through all the tough times. Group Approach: Building further on the continued efforts of the past few years, your Company has seen growth on multiple fronts in FY23 and this has been made possible by the combined efforts of CareEdge as a Group. Whether it is the rating business, advisory, risk solutions or our services outside India, your Company has positioned itself as one of the leading brands in the market. We have paid special attention to bringing in the right talent for the Group to further improve our services as a whole and cement our image as a knowledge hub.

Technology: CareEdge has moved to a new data centre to ensure improved uptime, security, performance, efficiency and stability and a new disaster recovery centre. For higher levels of security and privacy, your Company has actively invested in technological upgrades and implemented a cloud-based security gateway/Webproxy.

Talent: Your Company has made it a priority to recruit the best-suited talent for specific positions. The past year has witnessed a wave of fresh leaders at CareEdge, as we have placed significant emphasis on empowering skilled individuals with a variety of backgrounds and experiences. This approach enables us to find the right match for each role, whether we are seeking seasoned experts to lead the way or cultivating promising new talent to shape a brighter future for the Company. Rebranding: After our branding overhaul, which was received very well by all stakeholders and the media, your Company put further stress on enhancing the outreach programmes in FY23 and cemented its position as one of the leading knowledge hubs in the market.

"The only way to do great work is to love what you do." - Steve Jobs

Ratings

While CARE Ratings continues to be one of the leading credit rating agencies in India, the transformation journey for the core rating business continued in the form of: a) Quality-led prognostic analytics; b) Focused outreach; c) Continuous focus on tech-led interventions; and d) Improving the product offerings/segments. As on March 31, 2023, we have active ratings on approximately 4,500 companies. After muted growth at an industry level in the past two years, the rating industry saw good traction in FY23, backed by good growth in bank credit. Your Company positioned itself well to grab this opportunity. As a result, we continued to add a good number of new companies to our rated portfolio.

The growth was well spread out in all the key sectors, including corporate and infrastructure, banking and financial services space as well as mid-corporates. The rated debt in each of the segments grew by 8%, 26% and 13% respectively.

Your Company continues to maintain its leadership position in rating the Financial and Infrastructure sector. This year, we organised over 20 webinars with strong panels and high levels of participation. Our opinion pieces have received significant coverage across various media platforms, demonstrating their high quality. Additionally, we successfully launched our new monthly publication ‘Foresights this year and have already released seven editions. Our stakeholders have responded positively to the publication.

Insightful inputs from various teams, combined with the able support of our IT team, allowed us to achieve greater efficiency through automation and simplification of our processes. We successfully automated many of our processes and simplified others, resulting in significant efficiency gains.

Looking towards the future, we are confident in our ability to maintain our good performance. In the current year, our primary focus will be on enhancing the quality of our connections with customers, investors and other market participants. We believe that this will be a key factor in consolidating our strong position in the Indian debt markets, which we have established through our consistent performance and dedication to meeting our clients needs. To achieve this goal, we plan to increase our engagement with our stakeholders by providing regular updates on our products and services, sharing market insights and listening closely to their feedback. We also plan to leverage our technological capabilities to enhance the customer experience and provide seamless access to our offerings.

Additionally, we will continue to collaborate closely with our IT team and other departments to identify opportunities for process optimisation and automation, which will enable us to operate more efficiently and effectively. Overall, we remain committed to delivering value to our clients and stakeholders and are excited to build on our past successes to achieve even greater results in the future.

The overall rating revenue for the company stood at

Rs 248.84 crore for FY23 as against Rs 218.60 crore in FY22. The rating revenue has grown by ~ 14% during FY23 as compared to FY22 aided by strong performance in the initial rating revenue.

CARE Ratings (Africa) Private Limited

CARE Ratings (Africa) Private Limited (CRAF) continued its impressive performance during the financial year under review. The Company assigned ratings to more than 50 corporates of Mauritius including renowned Corporates like The Mauritius Commercial Bank Ltd., Swan Life, MUA, Bank One, CIEL, ENL, CIM Financial Services Ltd., Ascencia, Medine group, One & Only Villas, SBM Factors and Alteo.

In FY23, CRAF assigned ratings to bank facilities and bond issues aggregating to around MUR 90 billion (MUR 75 billion in FY22). CRAF also assigned credit ratings to almost 20% higher debt in FY23 as compared to

FY22. There has been an increase in awareness about the concept of Credit Rating among Banks and Corporates and a clear understanding of the benefits of such Ratings. CRAFs total revenue grew by 27% in FY23.

CARE Ratings Nepal Limited

Being a credit rating agency, CRNLs business depends on the overall size of the rateable universe, which is directly impacted by the regulatory framework, financial market and economic growth in Nepal. The long-term prospect of credit rating business in Nepal remains positive as the market is still growing.

The near-term outlook, however, remains impacted by the slow pace of economic recovery, owing in part to the muted government spending so far this fiscal.

Demand across various sectors is declining and amid tightened regulatory supervision, growth in lendable funds of Banks and Financial Institutions (BFI) remains meagre. The growth trend in inward remittance provides some relief to the economy. Furthermore, a more stable government could go a long way towards improving the pace of economic growth going forward.

However, with increasing competition coupled with the low credit appetite of BFIs, business growth in the near term is likely to see some moderation.

During the period under review, the growth registered by CARE Nepal was 8.25% in rating revenue which was mainly due to the increase in surveillance revenue and better execution of initial cases. The growth in business was supported by CRNLs efforts to improve awareness about credit rating among various stakeholders by organising various training sessions and seminars.

CRNLs total revenue grew by 15% in FY23.

CARE Advisory Research and Training Limited

CARE Advisory Research and Training Limited (CART) offers services in the field of transaction advisory, project advisory (feasibility studies like Techno-Economic Viability (TEV) studies), corporate advisory (valuation and financial modelling, counterparty credit risk assessment, peer benchmarking studies), risk advisory services (design of credit risk exposure frameworks, setting up of exposure limits, vetting of the rating model) and policy advisory (with multi-lateral agencies on design of framework and process for bond issuance including structure and credit enhancement measures in ASEAN countries). During FY2022-23, CART worked with many public sector banks, financial institutions, various Government authorities, public sector corporations as well as private sector corporations. During the year, CART executed around 45 Advisory and Techno-economic Viability (TEV) assignments. CART has also worked for multilateral organisations like ADB, World Bank.

CART also undertook Grading services (MFI Grading, AIF Grading, Code of Conduct Assessment Grading for MFIs, NGO Grading and LPG Grading) for various entities and completed 37 grading assignments during

FY2022-23. During FY2022-23, CART also provided Counterparty Risk Assessments for 260 entities. Research Division: CART services a variety of industry and sector research needs of its domestic and multinational clients with credible, high-quality research and analysis spanning from the economy to various facets of industries including a global perspective in a few instances. During FY2022-23, CART undertook 35 industry research assignments for clients to assist them in filing Draft Red Herring Prospectus. Further, CART also provides industry research, industry research outlook and industry risk scores on 80+ sectors. ESG Division: CART offers customised and value add ESG services to corporate and financial institutions. Our services range from ESG assessments to ESG advisory solutions. CART is empanelled with the Association of Mutual Funds in India (AMFI) as an ESG rating provider for AMCs. Following are some of the accomplishments of your organisation during FY23:

ESG Assessment: CART has completed an assessment of over 900 listed Indian entities basis publicly available disclosures, along with deep dive into ESG performance metrics for the top Indian corporates. Entire ESG data analytics for over 900+ companies along with ESG metrics and raw data is made available on our data analytics platform called "SIRIUS". This platform is built with a vision of providing seamless access to data and analytics to financial institutions on financial and non-financial performance of corporates including industry research. Also, CART has successfully completed six ESG grading assignments.

ESG Advisory: CART has also made significant inroads in expanding our ESG advisory and consulting services to corporates and institutions. CART developed significant in-house capacity to assist our clients in achieving goals during their ESG journey. CART has worked with some of the leading industry players to help them define ESG strategies, policies and metrics and developed an ESG reporting framework which has helped these organizations to stay ahead of the curve when it comes to ESG compliance. This year, with a diverse set of capabilities your organizations ESG footprint has been expanded to corporates, financial institutions and fund houses. Your organization has also worked with some of the leading international investors in guiding their ESG strategies for their investment decisions in India. During the year, the division has been able to source around 24 mandates pertaining to advisory services. Your company has also expanded its footprint to other international geographies and has successfully completed its first grading assignment for a Mauritius-based entity.

In FY23, total revenue increased to Rs 8.02 crore from Rs 7.41 crore in FY22.

CARE Risk Solutions Private Limited

CARE Risk Solutions Private Limited (CRSPL) has more than 15 years of experience in risk and compliance and has expanded its operations to over 10 countries. In the past year, the company has re-engineered its strategy, built new offerings and strengthened its delivery teams, resulting in improved deliveries across different geographies. As a result of these efforts, CRSPL has also improved its billability ratio, employee productivity and collection.

To further expand its global presence, CRSPL is now expanding to some overseas markets. The company has reinvented its product strategy to upgrade its products with the latest technology and ensure they comply with the RBIs current regulatory framework. CRSPL is focused on enhancing its complete range of Risk offerings, including the new versions of Credit Risk, ALM and FTP. These products are in the advanced stage of development and will be ready for release in FY24.

CRSPL is also creating a centre of excellence around Data, Analytics and AI. Its goal is to bring smart and scalable data platforms to the market. Additionally,

CRSPL is developing its expertise in Liferay DXC Portal to improve its digital and customer experience offerings.

In the current fiscal year, CRSPL intends to improve its social and digital media presence and participate in domestic and select international events. CART is also planning to organise a CIO Roundtable conference for business development.

In FY23, total revenue was Rs 9.89 crore.

"The greatest glory in living lies not in never falling, but in rising every time we fall." - Nelson Mandela

Technologically Sound

Your Company made substantial technological changes in FY23. Your Company has implemented Disaster Recovery (DR) for business-critical applications and to help analysts make superior decisions, we have implemented within the rating workflow system financial system reading capabilities using AI and ML. We are currently migrating our Finance ERP to Oracle Fusion on the cloud, which would allow better functionality and reporting.

Your Company has also built a new website for the

Group -- rich with content and a user-friendly interface. The subsidiary websites are being worked on and will be rolled out soon.

"Believe you can and youre halfway there." -

Theodore Roosevelt

For the People, Of the People

At CareEdge, our dedication to creating a thriving work environment and providing our employees with the best opportunities is a driving force for our team. We have consistently focused on attracting top-tier talent across all levels of the organization, from executive hires to mid-level and entry-level positions. In the fiscal year 2023, we prioritized recognizing and rewarding the hard work and dedication of our employees, as their contributions are integral to our success.

To cultivate a healthier workplace culture, we have implemented various initiatives, including regular social events and informative webinars for our employees. Our human resources policies undergo continuous updates to ensure alignment with industry best practices. As of March

31, 2023, we had a dedicated team of 517 employees and we are committed to fostering a positive and supportive work environment as we enter the fiscal year 2024.

"The future depends on what you do today."

- Mahatma Gandhi

Brand Power: Stronger than Ever

FY23 was the year for CareEdges rediscovery as a brand known for its stellar analytics and knowledge power. With a new vision and ambition, Your Company aimed to create an immersive and engaging experience for our stakeholders. We leveraged our knowledge repository through regular feedback and analysis to provide our customers with a more creative and meaningful experience.

Our philosophy, rooted in our core pillars of Group Impetus, People, Technology and Branding, guided our efforts to enhance every touchpoint. We were committed to improving our digital presence, publications, knowledge partnerships, knowledge-sharing forums, media tractions, opinion pieces and CSR initiatives, all of which were a testament to our brands impact. All of these have yielded tangible results and continue to reap rewards.

At CareEdge, we recognised the importance of staying ahead of the curve in terms of technology and innovation and we made significant investments in these areas to provide our customers with the best possible experience. We also focused on creating more value for our people in sync with our belief that it is they who form the backbone of the organisation. Your

Company invested in their development and created a culture that prioritised collaboration and diversity.

Through our efforts, Your Company made a difference in the lives of our stakeholders and further cemented the bond of trust between the stakeholders. As we move forward, Your Company remains committed to our brand philosophy and will continue to leverage our knowledge and expertise to make a positive impact.

"Be the change you wish to see in the world."

- Mahatma Gandhi

Developments on the Regulatory Front

CareEdge Ratings has been actively engaging with the regulators on various regulatory aspects. In FY23, SEBI issued various circulars including a firewall between Credit Rating Agencies (CRAs) and their affiliates, standardisation of industry classification and credit ratings supported by credit enhancement. The RBI also issued a guidance note on bank loan credit enhanced

(CE) ratings and related FAQs during the year. This apart, SEBI also issued an Operational Circular for CRAs in January 2023 superseding its earlier circulars. The various measures initiated by the regulator(s) are aimed at enhancing the standards of the credit rating industry.

CareEdge Ratings has put in place robust systems and processes such that it is in compliance with all the regulatory requirements. Your company is committed to maintaining the highest standards to ensure regulatory compliance.

"Success is not final, failure is not fatal: It is the courage to continue that counts."

- Win-ston Churchill

Opportunities

Despite major volatility in the global economy amid fears of recession and the continuing war between Russia and Ukraine, the Indian economy has been able to hold its ground in the year gone by. Soaring inflation has been a pain point, but the quick thinking on RBIs part to curb its rise and bring it under control has ensured that businesses and the economy as a whole do not suffer.

The Indian economy grew by 7.2% in FY23. While the manufacturing sector faced challenges from high commodity prices, the rebound in the services sector supported GDP growth in FY23. We project GDP growth to moderate to around 6% in FY24 due to the waning of domestic pent-up demand and weakness in external demand.

Threats

The main threats to operations are identified and mitigation measures are put in place. Some of these are elaborated below:

Operational Risks

Operational risks encompass people, process, fraud and technology risks. These have all been addressed by your company with appropriate measures.

Mitigants

• Talent is harnessed with continuous training for enhancing skills and creating a healthy environment for everyone so that we attract and retain the right talent.

The Ratings Operations manual provides a rigorous

SOP to be adhered to while executing an assignment with periodic audits to ensure compliance.

Our comprehensive Code of Conduct addresses issues of fraud and maintenance of confidentiality is ingrained in every employee at the time of joining the organisation and buttressed through the year in various sessions organised by the senior Group Heads.

CARE Ratings has in place a comprehensive IT security policy to address risks involving significant security breaches and breakdowns in computer systems and network infrastructure. We employ security systems, including firewalls and intrusion detection systems, conduct periodic penetration testing for the identification and assessment of potential vulnerabilities and use encryption technology for transmitting and storing critical data.

Business Risk

The state of the economy poses a business risk, particularly in terms of economic growth. When the economy experiences negative or low growth, it leads to reduced investment activities, which, in turn, impacts the growth of the ratable universe. For instance, in the previous year, there was a notable period of decreased output growth in the economy. Consequently, this downturn had a detrimental effect on investment levels and subsequently hindered the growth of bank credit to the industrial and service sectors.

Mitigants

Your Company have adopted a Group approach that involves diversifying our business ventures, separating them from the ratings business. By expanding into other sectors, the Group can mitigate the impact of external factors on our overall operations.

In addition to economic risks, there are various business risks we encounter. These include competition within the industry, challenges in accessing relevant information, uncooperative issuers, reputation risk and potential non-payment of fees by clients. With six rating agencies operating in the market, acquiring and retaining clients while maintaining competitive fee structures can be demanding.

The availability of information directly affects the quality of our ratings. In cases such as the INC ratings, where limited public information is available, we face difficulties in conducting thorough assessments. Moreover, non-payment of fees presents a significant challenge, as income from surveillance activities forms a crucial component of our rating revenue.

Your Companys well-thought-out rating criteria/ methodologies have led to even stronger acceptability of our ratings, which is very critical from a long-term perspective. The regulatory environment is ever-changing with a strong emphasis on processes and timely outcomes. Businesses are also becoming more complex and the cycles are also becoming shorter and more volatile. This is slowly but steadily resulting in the movement towards established rating agencies having strong analytical capabilities and being supported by robust processes. With three decades of presence in the credit markets, CARE Ratings is well poised to take benefit from the same.

To address reputation concerns associated with our ratings, the superior business performance posted by your company in FY23 was mainly attributable to the "Quality-led Growth" strategy pursued by the company.

Focused efforts were taken during the year to deepen our relationship with our existing clients with targeted efforts to onboard clients from high-growth sectors.

The shift in your companys strategy was also well-timed to capitalise on the improvement in the operating environment. Deleveraged balance sheets of corporates, strong balance sheets of banks, steady improvement in capacity utilisation, governments push on infrastructure creation, schemes such as PLI etc will continue to drive credit growth in the coming years notwithstanding temporary aberrations induced by external factors. The company with its "Quality-led Growth" strategy is well poised to capture the long-term growth potential of

India and have an even-bigger share in the market.

Market Intelligence Risk

Market Intelligence risk encompasses our capacity to accurately anticipate and identify the deteriorating ability of companies to meet their debt obligations, thereby providing early warning signals. Effectively managing this risk is crucial as any default, particularly in the case of market instruments such as bonds, can have a significant impact on individual investors and potentially tarnish the reputation of our firm.

Mitigants

We are working towards strengthening our market intelligence systems to ensure that we are ahead of the curve.

Market Risk (Investment)

We run the risk of our investment portfolio being affected by changes in interest rates as we do have a sizeable investment portfolio.

Mitigants

Here, we do have a very conservative investment policy, which concentrates more on preserving the shareholders assets by balancing risk with returns.

Compliance and Other Related Risks

Compliance and other related risks arise due to the regulatory structure in which we operate.

Mitigants

CARE Ratings software interface maps the entire workflow in the rating process, affixing the responsibility of various stakeholders and capturing timelines of key activities. The interface also sends out periodic alerts to supervisors on deviations and gives comprehensive

MIS reports for monitoring.

We also have an internal audit department to look into this on an ongoing basis, including monitoring compliance with various internal and external guidelines. Also, the legal risk arising from companies not being satisfied with our ratings is possible and we do try and ensure that all our processes are robust so that we are ringfenced well in every respect. As such, all legal and regulatory risks which could potentially impact the company are monitored closely by the compliance and legal functions with the aim to mitigate them in coordination with the other functions/ departments. Further, periodic audits are undertaken to validate the compliance controls in the organization to ensure the robustness of the designed controls.

We are committed to strengthening our systems and processescontinuouslyintunewithmarketrequirements and our own studies to critically study past instances and identify root causes of sharp rating transitions.

It may also be noted that a major portion of CARE Ratings rating business is driven by regulatory requirements or requires accreditation, recognition or approval from government authorities. CARE Ratings is recognised by RBI as an eligible credit rating agency for Basel-II implementation in India and commercial paper is mandatorily rated in India. In the event of changes to these regulations or norms, there may be a decrease in the demand for ratings. Implementation of the Internal Rating Based (IRB) approach by RBI may make rating non-mandatory by those banks for whom the IRB approach is approved by RBI.

The new transformative agenda, which emphasises the Group approach, will help to mitigate to an extent any threat to the rating business.

Governance and Oversight

In your Companys Board of Directors, the majority are independent Directors who bring with them rich experience in finance, economics, regulatory affairs and the insurance industry. This ensures the provision of cutting-edge guidance to the management to take some innovative decisions.

Internal Control Systems and their Adequacy

CARE Ratings has implemented an internal control framework to ensure all assets are safeguarded and protected against loss from unauthorised use or disposition and transactions are authorised, recorded and reported correctly. The framework includes internal controls over financial reporting, which ensures the integrity of the financial statements of the Company and reduces the possibility of fraud.

The Internal Audit and Criteria Team issues well-documented operating procedures and authorisations with adequate built-in controls. These are carried out at the beginning of any activity and all through the process to keep track of any major changes. As part of the audits, they also review the design of key processes, from the point of view of the adequacy of controls. The Companys statutory auditors have audited the financial statements and issued a report on your Companys internal control over financial reporting as defined in Section 143 of the Companies Act, 2013 (the ‘Act). The said report is annexed to the independent auditors report.

Financial Performance

The table below gives salient features of the performance of CareEdge Group at the consolidated level.

(Rs in Crore)

For the year ended

Growth

Details

March 31, 2023 March 31, 2022 (in %)
Revenue from operations 278.99 247.63 12.67%
Other income 37.94 27.19 39.52%

Total Income (A)

316.93 274.82 15.32%

Expenses

Employee costs 133.94 126.41 5.96%
Depreciation, amortization & impairment 16.24 7.92 105.00%
Finance costs 1.00 0.46 117.75%
Other costs 40.00 41.40 (3.38%)

Total Expenses (B)

191.18 176.19 8.51%

Profit Before Tax (A-B)

125.75 98.63 27.50%
Taxes 40.29 21.80 84.81%

Profit After Tax

85.46 76.83 11.24%

The table below gives some important ratios for the CareEdge Group of companies.

Ratios

FY2022-23 FY2021-22
Debtors Turnover (in times) 12.97 14.48
Current Ratio (in times) 10.19 11.01
Inventory Turnover NA NA
Interest Coverage Ratio NA NA
Debt Equity Ratio NA NA
Operating Profit Margin (%) 37.65% 32.23%
PAT Margin (%) 26.96% 27.96%
Return on Net worth (%) 12.43% 11.60%

Trade Receivable increased from Rs 16.64 crore to Rs 21.51 crore whereas revenue increased from Rs 247.63 crore to Rs 278.99 crore thereby resulting in a decrease in Debtors Turnover ratio from 14.48 to 12.97 times.

Current Assets decreased in current year as non-current investments were to be transferred to current investments based on period of maturity.

The Groups Property, Plant, Equipment and Intangible assets at the end of the year were as follows.

(Rs in Crore)

Details

March 31, 2023 March 31, 2022 Growth%
Property, plant, equipment etc 137.79 123.21 11.83%
Less accumulated depreciation 24.80 27.38 (9.43%)
Less Impairment on intangible assets 5.71 0.21 N.M.
Net Block 107.28 95.62 12.20%
Depreciation as % Total income 3.32% 2.80% 18.65%
Accumulated depreciation as % gross block 18.00% 22.22% (19.00%)

Net block of the group increased by 12.20% from Rs 95.62 crore to Rs 107.28 crore due to additions in FY23.

The Groups investment and treasury position as of the end of the year and comparable figures for the previous year are presented below.

(Rs in Crore)

Details

As of March 31, 2023 As of March 31, 2022 Growth %

Non-Current Investments

Investments in Equity instruments (Unquoted) 24.93 24.93 -
Investment in Tax Free Bonds 18.98 19.07 (0.47%)

(A) Total

43.91 44.00 (0.20%)

Current Investments & Treasury

Investment in Mutual Funds & Bonds (Quoted) 30.06 - N.M.
Cash and Bank Balances 7.27 17.63 (58.78%)
Fixed Deposits 537.12 516.96 3.90%

(B) Total

574.45 534.59 7.46%

Grand Total (A) + (B)

618.36 578.59 6.87%

Total investments for the group were higher at Rs 618.36 crore, of this Rs 537.12 crore were in fixed deposits, Rs 30.06 in liquid mutual funds and Rs 18.98 crore in tax free bonds.

The Groups trade receivables are presented below:

(Rs in Crore)

Details

At March 31, 2023 At March 31, 2022 Growth %
Ratings & other services (Net) 16.45 13.64 20.59%
Non-Ratings 5.07 3.00 68.85%

Total

21.52 16.64 29.32%

The table below gives salient features of the performance of CareEdge at the Standalone level.

(Rs in Crore)

For the year ended

Growth

Details

March 31, 2023 March 31, 2022 (in %)
Revenue from operations 248.84 219.27 13.48%
Other income 37.10 28.36 30.83%

Total Income (A)

285.94 247.63 15.47%

Expenses

Employee costs 104.03 106.76 (2.56%)
Depreciation, amortization & impairment 13.77 6.99 97.04%
Finance costs 0.70 0.40 76.44%
Other costs 29.30 26.50 10.58%

Total Expenses (B)

147.80 140.65 5.09%

Profit Before Tax (A-B)

138.14 106.98 29.12%
Taxes 34.34 22.51 52.56%

Profit After Tax

103.80 84.47 22.88%

The table below gives some important ratios for the CareEdge Standalone level.

Ratios

FY2022-23 FY2021-22
Debtors Turnover (in times) 15.25 16.12
Current Ratio (in times) 12.39 13.29
Inventory Turnover NA NA
Interest Coverage Ratio NA NA
Debt Equity Ratio NA NA
Operating Profit Margin (%) 46.42% 39.22%
PAT Margin (%) 36.30% 34.11%
Return on Net worth (%) 14.94% 12.99%

Trade Receivable Increased from 13.60 crore to 16.32 crore whereas revenue increased from Rs 219.27 crore to Rs 248.84 crore whereby resulting in a decrease in Debtors Turnover ratio from 16.12 to 15.25 times.

Current Assets decreased in current year as non-current investments were required to be transferred to current investment based on period of maturity.

Operating profit margin and net profit margin were higher at 46.42% and 36.30%

The Standalone Property, Plant, Equipment and Intangible assets at the end of the year were as follows.

(Rs in Crore)

Details

March 31, 2023 March 31, 2022 Growth%
Property, plant, equipment etc 116.69 99.35 17.46%
Less accumulated depreciation 21.86 17.40 25.63%
Less Impairment on intangible assets 3.98 - N.M.
Net Block 90.85 81.95 10.86%
Depreciation as % Total income 2.82% 2.82% (0.19%)
Accumulated depreciation as % gross block 18.73% 17.52% 6.95%

Net block of the Company increased by 10.86 % from Rs 81.95 crore to Rs 90.85 crore due to additions in FY23.

The Standalone investment and treasury position as of the end of the year and comparable figures for the previous year are presented below.

(Rs in Crore)

Details

As at March 31, 2023 As at March 31, 2022 Growth %

Non-Current Investments

Investments in Equity instruments (Unquoted) 93.21 51.44 81.19%
Investment in Tax Free Bonds 18.98 19.07 (0.47%)

(A) Total

112.19 70.51 59.11%

Current Investments & Treasury

Investment in Mutual Funds & Bonds (Quoted) 30.06 - N.M.
Cash and Bank Balances 5.15 4.03 27.72%
Fixed Deposits 499.87 508.18 (1.64%)

(B) Total

535.08 512.21 4.46%

Grand Total (A) + (B)

647.27 582.72 11.08%

Total investments of the Company were higher at Rs 647.27 crore, of this Rs 499.87 crore were in fixed deposits, Rs 30.06 in liquid mutual funds and Rs 18.98 crore in tax free bonds.

Standalone trade receivables are presented below:

(Rs in Crore)

Details

At March 31, 2023 At March 31, 2022 Growth %
Ratings & other services (Net) 16.32 13.61 19.97%
Non-Ratings - - -

Total

16.32 13.61 19.97%

"Strive not to be a success, but rather to be of value." - Albert Einstein

Our View on FY24

The domestic economy has continued to show signs of resilience towards the beginning of FY24 despite uncertainties on the global front. The latest developments surrounding the banking sector crisis in the West, although contained, have added to the challenges of the global economy. Even while the Indian economy remains relatively better placed, these developments on the global front remain the key watch-outs going ahead.

While high inflation was the pain point in FY23, domestic inflationary pressures are expected to ease this year. A favourable base, waning pent-up demand and robust Rabi harvest are expected to support the moderation in retail inflation. This easing in retail inflation is a positive for rural consumption which has been slow to recover. However, weather-related uncertainties and the possibility of a rebound in global crude oil prices pose upside risks to inflation.

The external scenario remains challenging with merchandise exports remaining pressured amid slowing global demand. However, moderation in imports on account of lower commodity prices has helped ease the pressure on the trade deficit. On the current account front, Indias services exports and remittances have shown an upbeat trend and are likely to support the moderation in the current account deficit to 1.6% of GDP in FY24 from the estimated 2.1% in FY23. On the capital account front, subdued global investment sentiment amid slowing growth is likely to weigh on the foreign investment flows. Broadly, an improvement in the external sector parameters is expected to bode well for the rupee. Moreover, the rupee could also benefit on the back of easing dollar strength as the US Federal Reserve eyes a pause in its current rate hike cycle.

Overall, the domestic economic growth is projected to moderate to around 6% in FY24 following a 7.2% growth in FY23. Lower commodity prices are expected to bode well for the manufacturing sector output. However, challenges on the external front due to weakness in global demand could keep exports under pressure. Thus, an uncertain global scenario and its spillovers on the domestic economy are likely to weigh on the overall growth.

Details pertaining to remuneration as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

1) The percentage increase in remuneration of each Director, Chief Financial Officer and Company Secretary during the financial year 2022-23, ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2022-23 and the comparison of remuneration of each Key Managerial Personnel (KMP) against the performance of the Company are as under:

Sr. No. Name of the Director/ KMP & Designation

% increase/ (decrease) in Remuneration in the financial year 2022-23 Ratio of Remuneration of each Director/ to median remuneration of employees

1. Mr. Najib Shah Non-Executive Independent Director

26.92% 1.47:1

2. Mr. V. Chandrasekaran Non-Executive Independent Director

58.33% 1.69:1

3. Mr. Adesh Kumar Gupta Non-Executive Independent Director

27.59% 1.64:1

4. Ms. Sonal Gunvant Desai Non-Executive Independent Director

10.34% 1.42:1

5. Dr. M Mathisekaran Non-Executive Independent Director

35.00% 1.20:1

6. Mr. Ananth Narayan Gopalakrishnan Non-Executive Independent Director (upto September 5, 2022)

(34.48%) 0.84:1

7. Ms. Shubhangi Soman Non-Executive Non-Independent Director (upto November 24, 2022)

NA NA

8. Mr. Gurumoorthy Mahalingam Non-Executive Independent Director (w.e.f. November 21, 2022)

NA NA

9. Mr. Sobhag Mal Jain Non-Executive Non-Independent Director (w.e.f. January 28, 2023)

NA NA

10. Mr. Ajay Mahajan Managing Director & CEO (upto May 31, 2022)

(87.37%) 10.38:1

11. Mr. Mehul Pandya Managing Director & CEO (w.e.f. July 29, 2022)

107.20%# 31.46:1

12. Ms. Nehal Shah Company Secretary & Compliance Officer

* 10.78:1

13 Mr. Jinesh Shah Chief Financial Officer

* 7.71:1

*Remuneration received in FY 2022-23 is not comparable with remuneration received in FY 2021-22 as it was for part of the year and hence not stated

#While calculating percentage increase, Remuneration from April 1, 2022 to March 31, 2023 is also considered he being KMP of the Company

Please refer Corporate Governance Report for details of remuneration paid/ to be paid to the Directors for FY2022-23.

2) The percentage increase in the median remuneration of employees in the Financial Year 2022-23:

The median remuneration of employees of the Company during the financial year 2022-23 was Rs 11,25,012/-. The percentage increase in the median remuneration of employees in the financial year is 27% compared to last financial year 2021-22.

3) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

Average increase in remuneration for FY2023 over FY2022 was 9.92% for employees, excluding the KMPs. In comparison, the average increase in remuneration of KMPs during the same period was 10.24%.

4) The number of permanent employees on the rolls of the Company:

As of March 31, 2023, there were 517 full time employees compared with 491 last year with around 81% of the staff management professionally qualified in the areas of management, CA, CS, legal, economics, engineering etc. holding professional or post graduate degrees.

5) Affirmation that the remuneration is as per the remuneration policy of the Company:

It is hereby affirmed that the remuneration paid is as per the Companys Remuneration Policy for Directors, Key

Managerial Personnel and Senior Management.