Icra Ltd (NSE: ICRA) Q4 2025 Earnings Call dated Jun. 02, 2025
Corporate Participants:
Unidentified Speaker
Ramnath Krishnan — Managing Director and Group CEO
L. Shivakumar — Executive Vice President – Business Development & Chief Business Officer
Venkatesh Viswanathan — Group Chief Financial Officer
Jayanta Chatterjee — Managing Director and Cheif Executive Officer
Analysts:
Unidentified Participant
Balaji Subramanian — Analyst
Ravi Purohit — Analyst
Rajiv Mehta — Analyst
Vishruti — Analyst
Advait Lath — Analyst
Rajesh Joshi — Analyst
Presentation:
operator
Good day and welcome to the ICRA Limited yearly FY 2025 investor and analyst Conference. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference call is being recorded. Joining us today from the management side we have Mr. Amnath Krishnan, Managing Director and Group C CEO, Icra Ltd. Mr. Venkatesh Vishwanathan, Group Chief Financial Officer Mr. L. Shivakumar, EVP Business Development and Chief Business Officer, Icra Ltd. And CEO, Icra ESG Ratings Mr. K. Ravi Chandran, Executive Vice President and Chief Rating Officer Mr. Jayanta Chatterjee, MD and CEO of ICRA Analytics Ltd. And Mr. Abhishek Dhafriya, Head of Group Strategy and Business Transformation to discuss the performance of the company followed by a Q and A session.
Before we begin today’s conference call, I would like to remind you that some of the statements made in today’s conference call may be forward looking in nature and may involve some risks and uncertainties. Please refer to slide number 22 of investor presentation for detailed disclaimer. ICRA or any of its subsidiaries or the directors or officers or employees of ICRA or its subsidiaries shall have no liability whatsoever for any loss howsoever arising from any forward looking statement or use of the investor presentation or its contents or otherwise arising in connection with this conference call. Now I would like to hand over the call to Mr.
Ramnath Krishnan, Managing Director and Group CEO IQRA to commence the proceedings. Thank you. And over to you sir.
Ramnath Krishnan — Managing Director and Group CEO
Thank you Operator and good afternoon everyone. Thank you for joining us today. It’s my pleasure to welcome you to ICRA’s earnings call for the fourth quarter of the last financial year and for the full financial year ending 31st March 2025. I’ll walk you through the highlights of our performance, key strategic developments and our outlook for the coming year. In the fourth quarter of the last financial year the group recorded a top line increase of 9.8% with the ratings Division showing a year on year growth of 15.1% in the research and analytics segment seeing a year on year on increase of 2.9%.
Despite making substantial investments in technology, people and infrastructure, we achieved a pat growth of 19.1% in the last quarter of the last financial year. In the full financial year, the ratings business delivered an impressive growth of 14.4% year on year whereas research and analytics recorded an increase of 8.3% year on year. Our overall top line increased by 11.6% year on year at a group level leading to a PAT growth of 12.5%. Our ratings segment delivered healthy margin expansion driven by strong top line growth and improved operating leverage in research and analytics. While the business witnessed growth across its core verticals, the planned conclusion of ESG services tempered overall momentum.
Additionally, an increased contribution from the non global businesses has resulted in some change in the margin profile in the risk and analytics vertical. We however remain focused on scaling high value solutions, deepening client relationships and driving sustainable growth through innovation and analytical excellence. I’m pleased to advise that the Board has recommended a dividend of 60 rupees per share subject to shareholders approval. Now moving ahead, we continue to strengthen our strategic positioning through key partnerships. Our alliance with BitSight, a global leader in cyber risk management, enables us to bring advanced cybersecurity solutions to Indian enterprises. Additionally, our partnerships with FTSE Russell marks our entry into domestic fixed income space allowing us to co develop customized indices tailored to the Indian market, further reinforcing our role as a trusted provider of data driven insights.
Alongside this, we have broadened our product portfolio with several impactful additions to our analytics and research suite. These include customized research infra360, a data analytics tool for the INVIT and read space and a landmark Implementation of SEBI’s Prevention of Market Abuse framework across all asset management companies in India. These additions not only reinforce our leadership in the mutual funds and risk analytics space, but also reflect our commitment to delivering technology driven solutions to our clients in our global business. While we saw healthy growth in the core analytical support services, overall momentum was moderated by the planned exit from ESG related assignments.
That said, we are actively adapting to the shift towards AI and automation, supporting clients in business transformation initiatives, modernizing legacy systems and embedding new technologies to drive efficiency and seamless change. ICRA ESG, a subsidiary of ICRA Ltd. Which received its license in April 2024, published five ESG ratings across key sectors in its first year of operation. While this was covered in our earlier update, we remain encouraged by the initial traction and response from our stakeholders coming to The Macroeconomic Outlook India’s GDP growth improved in the second half of last financial year. This improvement has largely been driven by pick up in government capital expenditure, improved rural demand aided by healthy crop output and a healthy growth in services exports, even as the performance of merchandise exports has been weak amid sluggish global demand and enhanced uncertainty around tariff related developments towards the end of the last financial year.
While FY26 has begun with heightened uncertainty around global trade policies, the outlook for domestic drivers of growth including private consumption and government investment appears largely resilient given the personal tax relief, monetary easing, expectations of an above normal monsoon and lower food inflation and healthy growth in budgeted capital expenditure. The outlook for merchandise and IT exports and private capital expenditure, especially in export oriented sectors, appears muted although relative tariff scenario will evolve as the year progresses. Based on the latest information available and our estimates, ICHRA forecast GDP growth to dip slightly to 6.2% in the coming financial in this financial year FY26 from 6.5% estimated for the previous financial year.
Credit Environment Last financial year saw a moderation in economic activity due to election related uncertainty, softer consumption and global geopolitical headwinds. These factors along with a high base effect led to a slower credit growth. Bond issuances grew by 7.2% versus 17.2% in the previous year while bank credit eased 10.9% impacted by tighter liquidity and higher risk weights on NBFC exposures. CEP issuances however rose 14% as firms opted for short term funding and securitization volumes expanded by 25% led by strong demand from NBFCs and private banks. Looking ahead with lower inflation, print expected rate cuts has gained significance.
The consumption and government infrastructure investment story remains intact and with strong demand. Credit market should find support and bond issuances should benefit from rate cuts as these have quickest transmission. Moving on to performance of our credit ratings, FY25 marked the fourth consecutive year of improving credit profiles with Ichra’s rating upgrades consistently outnumbering downgrades during this period by at least 2 to 1. Although the credit ratio of ICHRA assigned rating, defined as the ratio of the number of entities upgraded to that downgraded, moderated to 2 in FY25 from a peak of 3 in FY22, it continues to remain healthy.
Research and analytics we continue to see strong traction across market data and risk management with robust demand for our offerings. Looking ahead, risk analytics is poised for growth driven by ongoing regulatory focus in banks and NBFCs, we see strong momentum in credit flow automation, model governance, early warning systems, expected credit loss and stress testing. Demand for high quality customized research is rising among investors. Expanding our global knowledge services business continues to retrieve attention. Deepening partnerships in indices and CyberSecurity and advancing AI led automation will be our key growth drivers. Looking ahead. Thank you very much for your attention.
operator
Should we begin with the question and answer session, sir?
Ramnath Krishnan — Managing Director and Group CEO
Yes, please.
Questions and Answers:
operator
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take our first question from the line of Balaji from iifl. Please go ahead.
Balaji Subramanian
Good afternoon. Thanks for a good set of numbers. I have a couple of questions. So the first one is on the industry revenue growth which we saw in FY25. And based on the numbers which we have seen for your listed peers as well as unlisted peers, it does appear that FY25 at around 16 odd percent revenue growth for the industry was the best in a long time. And this is despite the fact that as you rightly mentioned in your opening remarks, both bond issuances and bank credit growth saw slowdown. So what explains this kind of a divergence between what is happening at the macro level and what we have seen as far as the industry’s numbers are concerned? The second question would be on your own rating revenue growth, while 14.4% for the full year is pretty impressive, it’s still a little below the 16 odd percent that we saw for the industry.
So any reason for that and you know, what are your steps to kind of, you know, gain market share going forward?
L. Shivakumar
Yeah, Balaji, thanks. This is Shivkumar here. First, I’ll respond to your first question which is a divergence between the macro credit numbers and industry growth. Generally speaking, A I cannot comment on the performance of our competitors, so I’ll try to explain this divergence vis a vis our own numbers. While both bond issuances as well as bank credit growth moderated relative to what we saw in the last two years, we must remember that both bond issuances as well as bank credit grew on a very high base. The two years before FY25, they had grown quite significantly.
So while this seems like a moderation, it’s still a growth on a high base. That’s point number one. Secondly, in the two years preceding FY25, since the credit market growth was very strong, we did do quite well in terms of adding to our fresh revenue base which helps in terms of surveillance in the subsequent years, FY25 being one. So broadly speaking, the way I would harmonize these numbers is that it was a growth on a high base and the nature of our business is such that it has, as you know, very well, fresh rating fee as well as surveillance.
So we kind of benefited that way. Your second question was divergence vis a vis competition. But as I mentioned, I cannot comment on others performance because we have no idea of their specific revenue composition, etc. As far as our own performance is concerned, we did do quite well in the segments in which we have been focused on, which we mentioned even in our earlier investor meets that we are focused on growth segments like infrastructure, bfsi. We continue with that strategy. At the same time we also are very mindful that we do not go below a certain threshold pricing because it is important for us to ensure that our due diligence standards are maintained.
So our strategy pretty much was similar to what we did in the previous two years previous to FY25 and that’s what has helped us in the growth this year.
Balaji Subramanian
Balaji, that is quite helpful. I have a quick follow up if I may on the EBITDA a bit margins for the rating segment. So we are now almost inching towards the pre IL and FS crisis levels of margin. But that said, you know, it does appear that there is still a fair bit of headroom in terms of margin expansion. So any thoughts on that?
Venkatesh Viswanathan
So we don’t. Balaji is Venkatesh. We don’t specifically comment upon that. But having said that, this business rating business is essential. If you see if we are able to achieve the top line what we have been achieving in the past, I think consistently the operating leverage should kick in and we should be able to expand. So it’s largely a function of the revenue growth. If you are able to maintain that, definitely I am sure we will be in a position to show decent expansion in margins as well.
Balaji Subramanian
Thank you. That’s all from my side and all the best.
operator
Before we take the next question, would like to remind participants to press star N1 to ask a question. Next question is from the line of Vishruti from Thinkwise Wealth Managers llp. Please go ahead. Vishruti, please unmute your phone and go ahead with your question please. Since there is no response, we will move on to the next question from the line of Ravi Purohit from securities Investment Management. Please go ahead.
Ravi Purohit
Yeah, hi. Thanks for taking my question. A couple of questions. One is on the non rating business, there has been some plateauing of growth there on the sales side and if you remove the acquisition I think D2K then there’s probably a small drop in the overall revenue stream. So can you just kind of comment on what path is this business kind of likely to take? What are the initiatives, what are the steps that the company is kind of looking at? Because I think our long term intention has been to kind of grow and focus on the non rating business as well.
That was one. And the second question was that in the last three years there has been a lot of tech investments that we have made in our business and I think we had called out this in the last few con calls as well that the investments are significant and necessary from the future point of view and that they will be around for a couple of years. So are we towards the fag end of those expenses? Do we see benefits out of those or is that process still an ongoing process? So those are my two questions.
Ramnath Krishnan
Thank you. Hi Ramnath Krishnan here. The research and analytics business has actually grown by 8% in the financial year. That has actually gone by, which includes D2K as well. So what has remained relatively more modest in terms of growth is our knowledge services business. And that as we said earlier, that is on account of discontinuation of some of the ESG related offerings which we had in fact expected before the start of the last financial year. So the other businesses, market data, risk management, D2K, all of them have actually shown have delivered growth and respectable growth which is what had an aggregate level given the fact that the knowledge services business is a fairly chunky business, has resulted in a growth of actually 8%.
So this continues to be an area of focus for us growing the non ratings business. And if you look at the composition at a group level, our intent was to have a more balanced revenue stream and at the present time in the financial year that has actually gone by. The breakdown between our ratings business ratings revenues and the non ratings revenues is roughly about 60 40, which is significantly better balanced than where we were, let’s say a couple of years ago. Moving on to your next question. As far as IT spends are concerned, yes, we’ve actually split this into.
One of the reasons why we are also in a position to deliver better operating margins as you’re able to see is a result of the IT investments IT interventions that we have been investing in over the last few years now, are we still on this journey and then do we have some more years to go? We’re still on the journey for surely. But obviously the spends in terms of absolute quantums will slowly start tapering off.
Ravi Purohit
Right, so just going back to the first question, right? In the sense, what are the avenues of growth that we are looking at to grow our non rating business? Right. We derive some business from Moody’s, there are some acquisitions that we’ve made. How should, as a long term investor, I visualize the growth path for non ratings business? What is it that, what is our strengths? What are the areas that we are focusing on? What are the areas that we can actually get business from? So ratings is a fairly simple animal to understand because it’s a fairly straightforward business.
But non ratings is where we have absolutely no idea in the sense where how do we go about identifying what business to kind of pitch for what is the right to win that we have in that business. Can it grow? If it can grow, how big can it be over a period of time? So if you could just spend some more time guiding us to the path which we should kind of focus on or look forward to in the future for the non ratings business, sure.
Ramnath Krishnan
Can it grow? The answer is absolutely yes. We won’t be actually investing in it if we didn’t have that confidence. Our strength actually lies in the risk analytics space. So that is where we will remain focused. Our target customer base is essentially the BFSI space as far as the domestic business is concerned, domestic risk analytics products are concerned. So that is one area of growth. What is our right to win? I mean, obviously you need to have products that are actually fit for purpose, which is why we have been investing in terms of product enhancements quite a bit over the last year or so to make them absolutely comparable to what’s available in the industry or what’s best in class.
And that is what gives us the right to win. And these efforts, these spends that we have been incurring obviously have resulted in the desired outcomes in this year and we expect that to continue going forward as well. So as far as the knowledge services business is concerned, naturally we are actually looking at avenues outside of Moody’s that we can actually penetrate. But again that will be in areas similar to where we are engaged at the present time.
L. Shivakumar
So just to add Ravi here, I think when we look at the analytics business, we look at from two different perspective. One is the global business, which is the knowledge services. That has been. If you. Again, if we look at the past one year we had the impact of the ESG business tapering off, but if we exclude that we had seen some growth there also. So there will be some volume growth which will continue to happen in this depending upon how the projects are given from Modi’s. So that piece, there will be some growth. It’s not that it’s going to taper off, but yes, it will have its own set of challenges considering there’s a lot of automation which kicks in on a periodic basis.
But that’s something which is quite specific to the industry as a whole. So that’s the one on the global business, on the non other business that we have, I think in the near term the thought process is to grow this and at least make this 50 50. On the analytical side, that’s how we are actually looking at from a sizing perspective to the non ratings, non KS business to be similar in size to the KS business over the next three to four years. I think that’s how we are seeing it.
Ravi Purohit
Please excuse my ignorance. So I’m just trying to visualize, can you provide a use case of a non ratings business that you are doing for an overseas client, for example, or modis, for example, what exactly would you do? When we look at, let’s say an IT company or a consulting IT company or some kpo, what they essentially will do is they will be, you know, working on some industry research or some company research or some annual report analytics or some data feeding into, you know, something that needs to be done in the overseas operation. What is it that we do right as a ratings company which has very, very strong database on research and analytical skills, what is it? If you could provide a few use cases that will be helpful for us to understand and appreciate the kind of business that we do under non ratings?
Jayanta Chatterjee
Yeah. So Ravi, I’ll just explain that part of it. This is Jayantha Chatterjee here. So as you mentioned, you know, if ICRA analytics were to go into the global market and look for business, what is the kind of use cases that we are looking at? So over the Last more than 20 years what we have been doing with Moody’s has been largely in the area of data analytics, in the area of data management and business transformation. And these are the areas in which there is going to be significant work even in the non Moody’s clients.
Specifically, we think from the BFSI segment there could be a lot of business which would come in the area of data management and also in the area of data analytics. And those are the things that we are now going to look at beyond Moody’s. This is right now at a stage where we are just going into this area because we have been servicing Moody’s for a very long time. Not that we are post esg. We are not looking at expanding our share there. We are constantly looking at how we can service more and more of Moody’s requirements in this area and even going beyond data management, data analytics, business transformation and technology services into areas of research, ratings, finalizations and things like that which would come up.
So those would be further penetration into Moody’s. But if we are looking at non Moody’s specifically which you were asking, then it would be in the areas which I mentioned. As far as overall trajectory of ICRA analytics is concerned or the non ratings business is concerned. As you know, forward looking statements are not given by us. But as far as the risk and analytics business is concerned, it has got three components. This is the non KS part of ICRA analytics. So there is market data, there is risk management and there is D2K. Each of these are also businesses which have grown very well during FY25 and that is what has contributed to the overall growth.
And market data itself has come in with security level valuations which we are providing to the mutual fund industry in India. And the valuation data is also now something which is sought by global clients as well. And that is something that we provide to the to a lot of the global clients who are now seeking that data from us. We also have started our journey on customized research which was mentioned by RAM and that has grown very well. This is something which is required by the industry, especially in the companies which are going for IPOs and QIPs and even in other investors, large investors who look at research.
And that is something which is expected to grow quite fast as we go along in the risk management domain. Credit risk is something which is our core expertise and we have got products which service the banking segment. The core product is IRS 3.0 which services the internal risk rating system for banks. And we have been adding bank customers as we go along in FY25 and we also are currently working on a large number of assignments. Expected credit loss is another area where we have built a tool which is quite state of the art and that is also something where we see a lot of demand.
As you know, the regulatory landscape in India has also been looking at areas like model governance. In FY25 RBI came out with guidelines on model governance and model validations. That has become one area of growth for ICRA analytics and the risk management space as well. D2K is an established provider of services and their early warning systems are something which are greatly in demand in the industry. We see a lot of demand from NBFCs and banks for this product asset classification, loan origination system, loan management system. These are the things which D2K provides and that dovetails very well with our risk management solutions.
So overall, if you see D2K is working in the areas of credit monitoring, regulatory report reporting and data management, all three of which we see as good levers for growth in future. So broadly, these are the areas where we think that growth will come from and we are in a growth phase and expansion mode. These businesses will only grow as we move along. I hope that addresses your question.
Ravi Purohit
Thanks a lot and I’ll get back in the queue and all the best.
operator
Thank you. Thank you. We’ll take our next question from from the line of Rajiv Mehta from ES Securities. Please go ahead.
Rajiv Mehta
Hi, good evening. Congrats on good results. So my first question is, has there been any change in our market share into focus segments of ratings like BFSI infra, say in particular bond ratings for BFSI segment or say infrastructure segment or maybe for rating of securitization transaction where we were traditionally very strong, have we sort of kind of gained some bit or lost some bit market share.
L. Shivakumar
Broadly speaking, in all these focus segments, infra, BFSI and within that securitization? If you look at the overall position we have maintained, we have, we have gained a bit in the last year. We did acquire or re onboarded few large companies including some groups where we gained an entry. So that way, yes, we have maintained in most segments and within certain segments we’ve also increased our coverage.
Rajiv Mehta
Okay. And I mean can we further kind of quantify this maybe in terms of actively related clients for icra, I mean where they are right now versus you know, what the number was a year back. Has there been net growth in the actively related corporates? What has been the extent of net growth in the customer base?
L. Shivakumar
We don’t put out the market share numbers as such, but as I mentioned, we have in most segments we maintained our position and in certain segments, particularly the large corporate groups, we have actually increased our presence. Yes. So that’s the broad position, particularly in debt market segment our position continues to be strong where we are one of the preferred rating agencies that continues.
Ramnath Krishnan
Just to elaborate further to what Shiv has just said, I mean, whilst we track the market share closely, we are also extremely mindful of focusing on the profitable segments. And which also might mean that sometimes we deliberately might choose to stay away from large value transactions but that are not particularly high yielding. So our focus essentially is on profitable segments and consistently improving our pricing thresholds.
Rajiv Mehta
And sir, you spoke about trying to push pricing thresholds. I mean, is there any metric through which we can track it or which can share with us, you know, how that is kind of progressed for us through the year, maybe in terms of, say, average fee per mandate? Yeah. Is there a measure of it, how we have progressed so far in that and where we can reach?
Ramnath Krishnan
No, we have a measure slowly, but that’s obviously not something that we can, you know, share. And one way of looking at it is for us to, you know, we are in a position, one of the reasons behind, one of the many reasons behind actually us being in a position to demonstrate consistent improvement in margins, particularly in the last three years in the ratings business, is as a result of this, besides, of course, improved efficiencies through technology and so on and so forth.
Rajiv Mehta
Okay, okay. And on this knowledge services, now that you have completely, you know, the impact of esg, you know, project, I’m assuming here that the full impact is behind us and incrementally, then one can look for incremental growth given the fact that now the base itself is, will not be grow. So in that sense, I think in one of the answers it was elaborated that we are still looking out for more penetration opportunities in the and looking beyond, even in newer areas. What about non Moody’s? I think I remember you saying that we were engaging with some sales accelerators to acquire clients.
Even outside the Moody’s universe, has there been any breakthrough in engaging or getting into clients and other institutions besides Moody?
Jayanta Chatterjee
So, Rajiv Jayanta Chatterjee here again. So basically what you’re saying is right. We had started the process of engaging with sales accelerators and global consultants to drive this business. As you know, it’s a long process. Coupled with the fact that we have hit a kind of a situation where the global uncertainty led by tariffs, you know, announcements have seen a situation where overall the discretionary spend in the banking segment itself is also seeing some reconsideration. So given this, obviously, you know, the closure of new business does take its own time, but I can tell you that, yeah, these conversations are accelerating and they are taking shape and they have moved ahead from the time when we had mentioned it.
But it’s on the right track in that direction.
Rajiv Mehta
Understood. Just one thing, I mean, sequentially, when I look at the growth of research and analytics. Now there is an uptick Q on Q. I know. I mean generally we can’t look, we shouldn’t look at the Q and Q number. But given the fact that the ESG project headwind is behind us, can one look at a more healthier growth in the knowledge services piece, your overall research and analytics piece going ahead with this problem behind us. I know you don’t give out any quantifiable guidance, but directionally would that happen?
L. Shivakumar
So Rajiv, I think you said it right. We don’t give a guidance on this and our expectation is that obviously we get projects from Odyssey and grow this business. So if we get a couple of projects, something like esg, I’m sure the growth trajectory will continue. To answer your question, I think we don’t give a guidance. But you rightly pointed out the impact for the ESG is something which has tapered off in Q3. That’s why you’re seeing a sequential growth in Q3 versus Q4. And we had outlined this in our press release also we saw some good volume growth in the ongoing bu sub that we do for the analytics business.
So there has which was offset by the loss of ESG business.
Rajiv Mehta
Okay, thank you and best of. I’ll come back in with you.
operator
Thank you. We’ll take our next question from the line of Vishruti from Thinkwise Wealth Managers llp. Please go ahead.
Vishruti
Yeah, my question. Can I audible.
operator
Yes, please go ahead.
Vishruti
Yeah. My question was that the working capital days have significantly increased. So like what is the reason behind such a significant increase?
L. Shivakumar
The question is working capital is have increased, right? That’s the question, right?
Vishruti
Yes.
L. Shivakumar
I think it is largely, you know, a position of, you know, I would say it’s nothing specific. It’s just that year end and timing, there’s nothing specific to call out for this. For us on this. It’s just a normal increase which would have subsequent and it’s largely linked to timing. I would say nothing specific to call out.
Vishruti
Yeah. And add one more question.
L. Shivakumar
Yep.
Vishruti
So can you all help us with the geographic concentration of the customers like segment wise breakup, if any.
L. Shivakumar
So you’re saying the geographic segmentation is it?
Vishruti
Yeah.
L. Shivakumar
So that we will actually at this point in time we have not disclosed but the detailed annual report which will come out. I think that in that you will find whatever disclosure with respect to segmentals are there, you will be able to figure out.
Vishruti
All right, thank you.
L. Shivakumar
Having said that, the previous year segment would also give you whatever information and profile would not have changed significantly.
operator
Does that Answer your question, Vishruthi.
Vishruti
Yes, thank you.
operator
Ladies and gentlemen. To ask a question please press star and one on your phone. Now we have a question from the line of Ravi Purohit from securities Investment Management. Please go ahead.
Ravi Purohit
Yeah, hi. Thanks for allowing me the second question. So my question this time is on capital allocation, right? So we have more than thousand crore cash on the balance sheet. Ours is not a business that requires either physical assets or very significantly large working capital requirements.
Rajiv Mehta
Right.
Ravi Purohit
And it generates a fairly decent amount of cash every year. We did increase our payout ratio a little bit in the last few years. But is there any thought process because the cash lying there earns about 3, 4%, 5% post tax and then it just kind of keeps getting accumulated. Right. So it does not really add value either to the promoters nor to shareholders. Right. So if there is any thought that you could share with us, it will be helpful.
L. Shivakumar
Ravi, just to answer that question. Yes, I think the cash requirement, I think we do annual or quarterly review. We also, as you pointed out the last two to three years, wherever we have found out that in terms of we have a certain amount of excess balance, we have tried to return to the shareholders and we have declared special dividend over the last two years, even the normal dividend, if you see from 27 we have moved to 60 per share. Having said that, I think what we try to do is we try to strike a fair balance between what we want to retain and there are some expectations in terms of how we want to invest this money internally so that we are very much conscious of.
And if at some point in time again if we feel that there is a opportunity for us to reallocate back as a dividend, we’ll be happy to do it. So from our philosophy perspective we are concerned, we are aligned to the fact that any money that is not required by us for the next three to four years, we are happy to relook at it and see if distribution makes more sense.
Ravi Purohit
So are you saying that you have certain things in mind? Meaning are you looking to acquire companies as much as like 500 crores, thousand crore worth of acquisitions or I wouldn’t.
L. Shivakumar
Be able to specifically comment upon acquisition because that’s an upsi. What I did mention was that we have, you know, proposals that we are looking at either investing whether it could be organically or inorganically, it could be both. So they are under consideration and it’s an ongoing activity that we do. We keep on evaluating options and let’s say by six or eight months, if we find nothing is making sense. We will definitely look at, you know, either increasing the payout ratio or in some other way returning the cash to shareholders.
Ravi Purohit
Okay.
Rajiv Mehta
Okay.
Ravi Purohit
Thank you and all the best.
operator
Thank you. Take our next question from the line of Advait Lad from Nippon India Mutual Fund. Please go ahead.
Advait Lath
Hello sir, I’m audible.
operator
Yes, please go ahead.
Advait Lath
Yeah, congrats on a great set of numbers. Sir, just wanted to ask, has there been a regulatory push or some kind of regulatory support that is able, that is helping us increase the TAM of the ratings market in India and what is the shade there? If you can provide some guidance there. Not guidance, but some kind of color there.
L. Shivakumar
Didn’t get your question entirely. You said tam is it the total understanding market?
Advait Lath
So just want to see if there’s some kind of rating for the rating segment specifically. Has there been some regulation or some regulatory push for companies to come and borrow from the market vis a vis other channels?
Ramnath Krishnan
No, that.
L. Shivakumar
See already you have provisions from SEBI and RBI for highly rated companies, especially AA and above to borrow certain portion from the bond market. You know, in case there was any slippage on that front, penalty was to be paid by the respective companies. At the same time, you know, those companies were also representing to regulator because sometimes it’s possible that, you know, they would get a good rate from the bankers compared to capital market and because of that they end up borrowing through, you know, suboptimal kind of borrowing. So in response to that, SEBI has refined these guidelines.
But having said that, their agenda is to guide the highly rated companies to borrow from the capital market. So that is continuing. Those kind of regulatory support is continuing. It was just refined in the recent past that the only big change which.
L. Shivakumar
Has happened in recent times.
Advait Lath
Right, sir, thank you. And just another question which is to do with employee costs. Do you see because of competitive intensity employee costs rising or is there some kind of color you can provide there?
Ramnath Krishnan
So the. You must understand that, I mean ours is a fairly people intensive, you know, kind of a business and significant proportion of our cost is actually employee cost. Yes. Will there be, you know, some increase that we are likely to see? You know, Certainly, yes. But generally speaking, I mean it will be sort of, you know, pegged to, you know, inflation.
Advait Lath
Right. There’s no structural kind of shift we are seeing in employee cost base.
Ramnath Krishnan
We dealt with that almost about two or three years ago.
Advait Lath
Right. So no further kind of in our view. Right?
L. Shivakumar
No.
operator
Advait. Does that answer your question?
Advait Lath
Yeah, that’s it. Thank you.
operator
Thank you. We’ll take our next question from the line of Rajesh Joshi from Chris Capital. Please go ahead.
Rajesh Joshi
Yeah, Am I audible?
operator
Yes, but there’s some disturbance. Can you use your handset mode please?
Rajesh Joshi
Yeah. Is this better? Am I already now?
operator
Yes, yes, please go ahead.
Rajesh Joshi
Yeah, so thank you for the opportunity. So there has been a noticeable jump in margins, especially for the rating business. In Q4 before, I think margins have been close to 45 odd percent. So what has been driving this margin expansion and is this sustainable going forward? That would be my question.
L. Shivakumar
Yeah, I think whenever we talk about margins we look at a full year. So we will not specifically ask you to look at Q4 as a particular quarter and make a judgment on the margins. Yes, the margins. As Ram had mentioned earlier, we have seen a consistent growth in margin and that’s largely because of the revenue growth that we have seen over the last two to three years and plus the operating leverage that has kicked in because of the technology investment. But it’s largely a revenue driven business. If you are able to continue to deliver that kind of revenue growth, I’m sure margins can expand.
Rajesh Joshi
All right, thank you sir.
operator
Thank you. We’ll take a follow up question from the line of Vishruti from Think Wise Wealth Managers llp. Please go ahead.
Vishruti
Yeah, even though the bond market didn’t grow so well, the margin from ICRA were pretty good. So what justifies the differentiation or the improvement in margins and the contribution of revenue from this segment?
L. Shivakumar
Sorry, I didn’t understand the question. Can you repeat the question?
operator
Use your handset mode please.
Ramnath Krishnan
Sure.
Vishruti
So my question is even. Even though the bond market didn’t do so well, the margin that came in from the NAFTA percent by the company sounded pretty good. So what was the differentiator that led to better margins?
Ramnath Krishnan
As I said earlier, we have been looking at actually operating efficiencies quite closely over the last few years and partly through tech intervention and partly through process improvements that on the one side, fairly disciplined cost management and of course improved pricing framework which gives us transactions which essentially are quite high yielding and remunerative. So it’s a mix of both actually. Both delivers on the revenue side and on the cost side. You know, I think both are working well together and that is what is actually contributing to improvement in margins. And that’s been fairly consistent over the last two or three years.
Vishruti
Oh, so there’s been an increase in prices.
Ramnath Krishnan
Sorry, increase in what?
Vishruti
Increase in prices.
Ramnath Krishnan
So we keep revisiting our pricing framework to. As I said, there are certain segments we deliberately choose to stay away from. There are certain segments which receive a lot of attention. And naturally, pricing framework is something that’s actually revisited periodically by us, which is very similar to what every other business does anyway. So ours is not an exception.
Vishruti
Okay, thank you.
operator
Thank you, ladies and gentlemen. To ask a question, please press star and one on each your phone. Now, as there are no further questions, this brings to an end of the call. Ladies and gentlemen, on behalf of ICRA Management, that concludes this conference call. I thank all the participants for joining us. Thank you once again.