Thursday, September 23, 2010

Company Update: CRISIL; Putting cash to good use - acquires Pipal Research; UNDER REVIEW

CRISIL

Reco: UNDER REVIEW

CMP: Rs6,169

Target Price: UR

Putting cash to good use - acquires Pipal Research

·      CRISIL to by Pipal Research, for a sum of USD12.75mn. The acquisition is at 1.6-3.2x EV/ Sales (assuming 50-100%  stake), which is lower than 2.2x it gave for Irevna in 2005

·      Looking at CRISIL's history of acquiring smaller companies and then quick scale up it will be able to scale up Pipal's business significantly leveraging their existing capabilities

·      The acquisition of Pipal alongwith recent buy back program, we expect CRISIL's ROEs to improve, which till date were not optimized due to high cash on book

·      At CMP of Rs6,169, the stock trades at 26.6x CY10E EPS of Rs232 and 21.7x CY11E EPS of Rs284. We will review our numbers and rating after having more details on Pipal

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The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.
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