CARE effect: Rating agency stocks on a roll

R. Yegya Narayanan Updated - December 07, 2021 at 01:11 AM.

Call it the CARE effect! As Credit Analysis & Research Ltd (CARE) has called an EGM on March 11 to approve the proposal to increase the FII investment limit in its equity in the wake of the move by some institutional investors to cash out their stake, all three listed credit rating agency stocks are on a roll, making substantial gains in the market.

Their share performance came on a day when the market itself was bleeding, with the BSE Sensex shedding about 175 points. However, they pared some of their gains with about 90 minutes of trading left for the day today.

IDBI Bank has communicated to CARE that it along with four other shareholders, who together own more than 45 per cent stake in CARE, were in the process of identifying a buyer for a potential sale of 1,11,29,492 shares in it. Acting swiftly, CARE’s board of directors has approved raising the FII limit in the company to 74 per cent. The company has now called for an EGM to seek shareholders’ nod for the proposal.

In an explanatory note to the EGM notice, CARE said as on January 31, 2014, FIIs held 13.65 per cent stake in its equity, Qualified Foreign Investors (corporate) held 1.54 per cent stake and NRIs held 0.46 per cent share. The current FII investment limit in the shares and each series of convertible debentures was 24 per cent, which now CARE seeks to increase to 74 per cent. This was done “to improve marketability, increase liquidity and to facilitate price discovery” of its shares, which would “enhance the image of the company”, the notice said.

The proposal has had an electrifying impact not only on CARE’s shares but investor attention was drawn to two other listed rating agency stocks — Crisil and ICRA —with all the three stocks gaining substantially before shedding some of their gains.

CARE shares were trading at Rs 785, a gain of Rs 17.65. The stock had touched a high of Rs 810 on the BSE. ICRA shares jumped to a high of Rs 1,583.65 before moving down to Rs 1,560.10, a gain of Rs 12.50. But Crisil was more stable, up by Rs 48.05 to Rs 1,140 (share face value Re 1). It had hit a high of Rs 1,180 on the BSE.

That all the three rating agencies are good dividend payers could also have worked in their favour. 

Published on February 13, 2014 09:15