CARE Ratings Limited ($CARERATING)

Ladies and gentlemen, good day, and welcome to the CARE Ratings Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mehul Pandya, MD and Group CEO, CARE Ratings Limited. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of the entire CareEdge family, I extend a warm welcome to our quarter 4 and FY '26 Annual Investor Analyst call. I'm joined today by my colleagues, Revati, our ED and Head of Business Development plus CEO, CareEdge Global; Smita, our Head, Rating Criteria and Regulatory Affairs; Jinesh, our Group CFO; Swati, CEO, CareEdge Advisory; Abhisheik, CEO, CareEdge Analytics; and Saurav, CEO, CareEdge Africa. My colleague and our Chief Rating Officer, Sachin, is on leave and unable to join this call. I trust each of you has had the opportunity to review our results. I would like to take you through the key highlights, the strategic context and our outlook before we open the floor for questions. Before I turn to what has been a landmark year for CareEdge , I want to say something that comes from the heart. To every investor, analyst and stakeholder on this call, sincere thanks. As I reflect where CareEdge has come from and where we stand today, I'm acutely aware that none of this would have been possible without the trust you have placed in us. That trust is the most valuable asset on our balance sheet, and we do not take it lightly. Let me start by talking about the macroeconomic side. The Indian economy delivered a strong performance in FY '26, reaffirming its status as one of the world's fastest-growing major economies despite global headwinds. Real GDP growth is estimated at 1.6% in FY '26, powered by robust private consumption, accelerated infrastructure spending and sustained services sector momentum. A favorable monsoon supported agricultural output and rural demand, while manufacturing and construction added further momentum. [indiscernible] retail inflation for FY '26 was 2.1% compared to 4.6% in FY '25. The supportive growth inflation dynamic provided room for the RBI to ease policy rate by a cumulative 100 basis points, taking the policy rate to 5.25% by the end of FY '26. Fiscally, the government maintained its consolidation path while keeping capital expenditure at the center of its expenditure strategy. Looking ahead, sustained reforms, domestic consumption and investment momentum are expected to support India's progression towards becoming the third largest economy over the next decade. Structurally, Make in India and PLI schemes are channeling investment into productive manufacturing capacity, building the foundation for the Viksit Bharat [indiscernible]. However, the ongoing conflict in West Asia and uncertainty around its resolution has introduced meaningful headwinds to the Indian economy. Disruptions to global energy supply chains are expected to keep oil prices at elevated levels. Given India's high energy import dependence, the economy faces pressures through multiple channels. High frequency indicators such as core sector output and IIP growth in March '26 have pointed to some softening in the momentum. Corporate bond issuances declined by 3.2% for the full year FY '26 and by 11.3% in Q4 FY '26. Commercial paper issuances were marginally lower in Q4, though the full year showed a 7.2% decrease. Bank credit offtake, however, accelerated strongly, growing at 15.1% in FY '26 versus 11% in the previous year, providing a meaningful offset to the softness in the bond market. Looking ahead to FY '27, we project India's real GDP growth to moderate to around 6.7%, assuming global crude oil prices average at around $90 per barrel for the full year. This represents a downward revision from our pre-conflict baseline of 7.2%. The dual challenge of a potentially weaker monsoon amid a rising El Nino probability and widening current account pressures from higher energy imports warrants careful monitoring. Within this environment, the demand for credible, independent credit risk opinions does not diminish. It grows. Lenders, investors and regulators seek sharper analytical anchors precisely when certainty is scarce. This structural dynamic is at the heart of our franchise value and FY '26 has reinforced it. As CareEdge enters FY '27, it does so on the back of strong foundations built through innovation, disciplined execution and a steadfast commitment to its core values of independence, credibility and stakeholder trust. Let me now turn to our business performance. FY '26 marks a milestone year for CareEdge. We delivered broad-based growth across our businesses with improvements in revenue, profitability and margins, reflecting both operating leverage and disciplined execution. Our core ratings franchise continued to scale while non-ratings and international businesses contributed meaningfully to the growth. Importantly, this performance was achieved while maintaining our focus on analytical rigor, independence and quality-led growth, reinforcing the strength of our franchise and the trust we continue to enjoy among issuers, investors and regulators. I'm happy to share that the Board of Directors has recommended a final dividend of INR 14 per share at a face value of INR 10, which will take the total dividend declared for the year to INR 22 per share. Talking about our stand-alone business. During FY '26, our stand-alone domestic ratings business recorded income from operations of INR 387.72 crores, representing a year-on-year growth of 15%, supported by sustained momentum in initial rating assignment across the debt markets. Operating profit stood at INR 187.39 crores, reflecting a Y-o-Y increase of 21%, with operating margin at 48%, driven by operating leverage and disciplined execution. Profit after tax reached its highest level to date at INR 174.39 crores, registering a growth of 18% over the previous year with PAT margin at 39%. At the consolidated level, revenue from operations for FY '26 stood at INR 473.07 crores, marking full year growth of 18% Performance was supported by healthy growth across domestic and overseas ratings businesses alongside contribution from the non-ratings verticals. Operating profit amounted to INR 197.39 crores, reflecting a growth of 27% with operating margin at 42%, indicating meaningful scale benefits across the group. Consolidated profit after tax reached an all-time high of INR 173.69 crores, reflecting a year-on-year growth of 24% over FY '25 with PAT margin of 33%. For FY '26, the ratings segment delivered revenue of INR 423.05 crores, growing 17% on a year-on-year basis, while the non-rating segment crossed INR 50 crores in revenue, growing 19% Y-o-Y, underlining the progress we have made in building complementary businesses alongside our core ratings franchise. I want to pause here and give this moment of context because the journey over the last four years tells a story that goes well beyond any single year's number. Four years ago, several of our subsidiaries were loss-making. Our non-ratings presence was nascent and the path to improving consolidated profitability was far from straightforward. Today, consolidated profit after tax stands at INR 173.69 crores, a significant growth in this year alone and a step change in absolute profitability over the four-year period. That transformation has been driven by sustained growth in our core ratings franchise, the turnaround of our previously loss-making subsidiaries and the disciplined scaling of new business lines. I want to particularly acknowledge KEPL, which achieved breakeven during FY '26, completing a meaningful turnaround from the losses of the prior year. The EdgeAvira.ai platform anchored on the philosophy of AI Inside, AI by the Side has gained market traction. CredEdge, IntelEdge and Kalypto our AI-powered credit infrastructure, intelligent credit monitoring and risk analytics platforms are now live with clients. The journey from loss to profitability reflects patient investment, product discipline and a team that has remained committed through a demanding phase and so has been the story with CareEdge advisory as well, which has consistently delivered profits now. The company's subsidiaries reported encouraging progress across the board. CareEdge Global IFSC has done very well in the first full year of operations. My colleague, Revati shall elaborate on that. Our international rating subsidiaries, CareEdge Africa and CareEdge Nepal continue to retain leadership positions in their respective markets with over 100 rated clients USD 4 billion of debt rated in Africa and the highest market share in Nepal by number of instruments rated. CareEdge ESG ratings showed a significant traction in FY '26, and again, Revati shall cover in greater detail. PaRRVA, the past return and risk verification agency conceptualized by SEBI and built in close collaboration with CareEdge and the National Stock Exchange completed its pilot launch in December 2025 and went live commercially in May 2026. ReInvitEdge our structured analytics and benchmarking platform, expanded its scope during the year to cover InvIT, reflecting our ability to expand existing capabilities to evolving market structures while remaining anchored in our core analytical strength. I would like to share something that reflects a meaningful shift in how CareEdge operates, and it is something we have been tracking quite closely as an organization, and that is on the technology front. Today, around 60% of our people are actively using enterprise AI tools as a part of their daily work. That is not a target we are chasing. That is where we stand today. In terms of how we are approaching this, I would say our efforts are organized around five areas. We are investing in structured learning so that our people are genuinely equipped, not just exposed to these capabilities. We are deploying AI agents on repetitive tasks so that our analysts can direct their energy towards what truly matters, judgment, context and insight. We are embedding AI into workflows in a step-by-step manner, not disruptively but deliberately. And we have an internal innovation lab as several of our best ideas have emerged from our own team. The fifth area, and I would say this is the one that matters most for an organization like ours is responsible AI. Every AI application we use must be explainable, auditable and regulatory ready. In the Ratings business, we can only stand behind what we fully understand. That is a nonnegotiable aspect for us. Backed by strong security infrastructure, including Zero Trust architecture, API security and full DPDP compliance, our approach is simple one, wide adoption with strong controls. That is the combination we believe will meaningfully strengthen our analytical quality and our operating efficiency, and that is the trajectory we would like to sustain going forward. Our ratings quality metrics continue to reinforce our standing. Our one-year Stability Rates in the investment grade category for the five-year period 2022 to 2026 are consistently at or above industry averages. Our teams in ratings, economics and industry research published over 400 reports during the year, a significant increase. We hosted 31 sector-specific webinars and participated in over 300 speaker and industry forums, a significant increase once again. And so has been the increase in our media presence. I appreciate the continued engagement of our investors and analysts, and I thank my colleagues and the entire CareEdge team for their commitment and hard work through the year. I would now request my colleagues to give a brief update on the respective domains. We will start with Revati giving an update on the domestic Ratings business, CareEdge Global and CareEdge ESG, followed by Smita on ratings quality and performance and then Swati and Abhisheik on CareEdge Advisory and CareEdge Analytics, respectively. Over to you, Revati.

Thank you, Mehul, and good afternoon to all listeners. We are glad to report one more year of consistent growth in our stand-alone as well as overseas rating operations in FY '26. All the rating entities within the group have shown a strong performance with CareEdge Global IFSC Limited recording its first full year of operations in FY '26. During the year, CareEdge Global completed ratings on 45 sovereigns, positioning us amongst the top 10 global rating agencies by way of country coverage. CareEdge Global has been ahead of the curve in our sovereign credit assessment with other global rating agencies' actions in the past 18 months, aligning with our ratings for 21 countries, a validation of the rigor and robustness of our methodology. CareEdge Global has still rated USD 8.5 billion worth of corporate debt with ratings assigned to 30-plus issuers, including some overseas clients and covering 10-plus sectors. Some of the rated debt issuances have also got listed and have marquee investors, institutions, banks, reflecting increasing acceptance of our offerings. We also took several important regulatory and structural steps. RBI accredition for CareEdge Global was expanded to include nonresident corporates outside IFSC framework and risk weight recognition is now aligned with other global credit rating agencies. We received the final ESG ratings license from ISCA, further strengthening our regulatory footprint at GIFT City. As a part of our outreach efforts, we have conducted four webinars and published reports on topical subjects as well launched a publication cycle [SCR], which deals with thematic topics. Moving to CareEdge ESG rating, which has completed 19 new ratings during the year and has made a 58% market share amongst Category 1 ESG rating providers. We are now enlisted with ICMA to offer third-party review services. While this market remains relatively nascent domestically, we continue to view ESG ratings as a long-term opportunity that will evolve as regulatory clarity and market adoption deepen. We are also proud to have launched PaRRVA, a novel concept in increasing transparency and providing a validated performance to the investor community. This initiative has been conceptualized by SEBI and our role is to refine and define methodology for calculation of returns and dissemination of the validated reports through our website, careparrva.com. We are supported by an oversight committee, which has participation from market participants to help us design the methodology and operational processes. Our clients here would be registered investment advisers, research analysts and algo providers. Moving to the domestic rating business. We continue to be aligned with our quality-led growth strategy. And in that context, we onboarded over 300 clients in the single A and above category in FY '26. While the amount rated in the securitization market degrew in FY '26, we have increased our volume of debt rated. In our quest to improve efficiencies by use of technology, we have our CRM software module, which has gone live in the current year. The module has digitized the entire process flow for the business team, and we expect the same to add value to the team in the current year. We continue to focus on outreach with sectoral knowledge sharing sessions organized with lenders, investors. Our podcast series titled InsightEdge has gained good traction and has been well received by stakeholders. That's it from my end, and thank you so much. Over to you, Smita.

Thank you. Good afternoon, everyone. I'll now take you through our ratings performance. In line with the reported numbers, our rating performance has continued to be robust. Our stability rate, as you can see in our presentation, has consistently improved across almost all investment-grade ratings. Also, the stability rate is higher when compared to the industry average in all the rating categories, underscoring the stability, reliability and strength of our rating performance. Another reinforcement of our strong rating performance is in our default metrics as available on our website for the one, two and three-year cohorts across rating categories over the past five-year period. In all the cohorts, our reported short-term cumulative default rate for the top three rating categories that is AAA, AA and A are the best in the industry. Importantly, with this, we are well placed with respect to the recent RBI circular on capital [indiscernible]. The centerpiece of RBI's revised guidelines is the requirement for banks to align the risk weight of their corporate exposures with the actual rating performance of the chosen credit rating agencies based on prescribed benchmarks. Our observed default rates are well within the RBI prescribed benchmark and this positions our ratings favorably for use by all the relevant stakeholders. Overall, this robust performance validates the quality-led growth strategy that we have been pursuing. As touched upon by Mehul in the opening remarks, we have continuously driven our team to stay focused in our thought leadership and have conducted around 30 webinars and released over 100 opinion pieces during FY '26. These initiatives have been widely covered by leading media houses, enhancing our visibility and credibility. Beyond publication, our roundtables and conferences have further strengthened our reputation as trusted thought leaders. Also, technology and process enhancement remain central to our efficiency strategy. Multiple projects have been implemented to enhance the quality of analysis, publications and outreach, enhancing our execution efficiency. Thus, our consistent rating performance, industry thought leadership and technology-driven efficiency together highlight our strong quality focus, reinforcing trust with stakeholders. Over to you, Swati.

Yes. Thank you, Smita. Good afternoon, everyone. This is Swati here, CEO for the Advisory division at CareEdge Advisory and Analytics Private Limited. As you are aware, CareEdge Advisory offers services in the area of sustainability, research and corporate advisory. And for the fiscal year 2026, we have continued our growth trajectory and delivered growth across all business segments. Our sustainability services practice witnessed strong momentum driven by a higher number of sustainability and ESG assignments. And in addition, our green bond and sustainable finance third-party review services gained enough traction amongst issuers and investors. We have penetrated new sectors and also new areas of consulting within this domain. And we continue to expand our product suite in line with emerging regulations and global best practices. Our industry research business continues to be driven from demand from the capital markets, increased traction from institutional investors and growing customer demand for high-quality sectoral and analytical insights. Our corporate advisory and EV business also displayed good growth driven by enhanced capabilities, client relationships, empanelments and sector coverage. Overall, our growth continues to be anchored in quality execution, domain expertise, actionable insights and stronger market outreach, positioning us well for sustained long-term growth. Yes, Abhisheik?

Hello. This is Abhisheik, CEO for CareEdge Analytics. CareEdge Analytics has transformed itself into a fintech and AI enterprise within the CareEdge Group. Combined with strong domain knowledge with AI native technology implementations, we are able to solve mission-critical challenges across lending, monitoring and regulatory compliance for financial institutions. Our offerings are structured around three product families, which is CredEdge, IntelEdge, Kalypto and all are aligned to the core philosophy of AI Inside and AI by the Side. At the center of this ecosystem is EdgeAvira.AI, which is a unified AI platform powering intelligent copilots, Gen AI native workflows, reusable LLMs, which can orchestrate any journey for financial institutions, and all our products are built on top of this EdgeAvira.AI platform. Our platform has gained strong traction across India and SaaS markets, driving new customer acquisitions in international geographies, successful enterprise implementations and growing recurring revenue streams. In parallel, our consulting practice grows -- continues to grow to deepen client relationships across risk consulting, AI implementations and data management services. We've sharpened our focus on execution, product adoptions and operational efficiencies. CareEdge Analytics has significantly improved margins and established a strong foundation for scale.

Thank you Abhisheik and we can now open the line for questions.

[Operator Instructions] The first question from the line of Balaji Subramanian from IIFL Capital.

Congrats on a great set of numbers. My first question would be some bit of color on what has driven the rating revenue growth across the board. I can see your numbers are good, so are data share figures, but if you look at the macro data, while there has been some improvement over the last three, four years, but the kind of acceleration that we have seen in the last two, three years has been quite phenomenal. So especially in your case, what has been driving this? Is it a rising contribution from surveillance income? And some sense on how bank loan rating related revenue and bond market rating has kind of played out in terms of contributing to your revenue growth. So some sort of quantitative flavor on what has driven the growth would be extremely helpful. After that, I will ask my follow-up.

Okay. Thanks, Balaji. Revati would you like to answer.

Yes Mehul. Thank you, Balaji, for this question. If you look at the lay of the land, typically, the bond market was a bit slower this year in FY '26. It started on a very good note in Q1, but it dipped later on. The bank loan rating market was buoyant with 16.1% growth in bank credit to the segment that we look at as rating agencies. And therefore, this market was good as compared to last year. Last year, the same segment showed about 11.5% kind of growth rate. So definitely, the bank loan market and while there was no growth in the bond market, there was a small deceleration in the bond market in the current year. That has helped the entire rating segment. As far as blend of income is concerned, both the surveillance as well as the initial rating revenue continue to add to our growth in the current year. We have been saying in the past that as far as the incremental ratings go, we have got a good market share, and we continue to enjoy that good market share as we go along as we build our surveillance book to a sizable and a meaningful trajectory in the years ahead. So that's it from me, Balaji.

But the general impression was that usually when bond market shares well, that is when the rating agencies do better because there is a premium pricing that you can enjoy unlike, say, bank loan rating, which is fairly commoditized. So has this dynamic changed in recent times? I'll be a little bit curious about that.

So your observation is right, Balaji. Typically, the yields in the bond market as far as rating fees are concerned are better than in the bank loan market, and they continue to be in that same trajectory. But having said that, there is a significant portion of rating revenue because as you know, this is an annuity business. So a significant portion of rating revenue also comes from the surveillance revenue for all rating agencies. So in that sense, the incremental impact of the new business that will have to be seen in the light of the kind of nature of business, which is also an annuity business.

Got it. My second question would be on the outlook. While I know that you don't provide guidance, but whatever macro challenges that are emerging because of the geopolitical situation, has there been any on the ground weakness as far as rating activity has been concerned. Maybe it is early days, but is there any -- some bit of a pause in terms of corporates going aggressive on CapEx? Has there been a significant change in the sentiment for the worst?

I'll just first answer, then Revati you can add to this. See, Balaji, as you are pointing it out, this is still an evolving impact that we need to keep on observing -- at this juncture, nobody actually has any prognosis on how long the conflict could be continuing, which are finally the significantly impacted sectors [indiscernible] preliminary analysis, there would be a certain impact. But how it would play out in the overall corporate domain and how it could be impacting the overall borrowing programs of the corporates that remains to be seen. Nobody has any complete answers to that. I think one good aspect of India's corporate credit quality has been the fact that over the years, the deleveraging, which had taken place has ensured that the cash flow impact which could be there on many of the corporates is not something that could be leading to significant, I would say, credit quality issues all of a sudden in the near future. That's something which can play out to the benefit of India's corporate sector. And the other aspect also has been that the overall asset quality feature of the Indian banks, that is also at a relatively healthy layer. So a combination of these two would indicate that at least from the perspective of the ability to withstand the headwinds, we are at really on a relative basis or comparative basis, we are at a good position. But if this thing prolongs for a foreseeable future on which nobody has any control or like that, any conjecture at this juncture, it will be too premature. It's like a space where we'll have to keep on observing and our credit quality, our credit ratio also for H2 that has moderated over H1 of FY '26, which is also a reflection in terms of like the upgrade to downgrade ratio that has got moderated. So I think how it will play out in H1 of FY '27 and how the overall credit quality of the different sectors will play out, it's an evolving game. And neither we or nobody else could be having a very concrete answer on how it would be impacting the borrowing programs, whether the corporates would put a pause on capital expenditure plans, whether there could be a greater focus for [pump priming] of the economy from the government side as we have seen during the COVID times. At this juncture, there are no answers to those questions. Revati you would like to add anything?

No, I think you've covered it well.

[Operator Instructions] We will take the next question from the line of Rajiv Mehta from Yes Securities.

Congrats on very good set of numbers. So I have a few questions, but I'll ask two questions right now and then I rejoin. Firstly, in this whole 15% domestic rating revenue growth in last year, of course, there's a big element of surveillance [fee] growth. But can we get to know what is the growth purely in the initial rating fee in FY '26? Because what I think what ma'am is trying to understand is that if there is any moderation at all, it will reflect firstly in the initial rating fee growth and then it will reflect in the overall growth in the coming year. So can we -- is this understanding correct? And can we have the growth in the initial rating fee revenue?

Rajiv, Revati can take up on the overall IR fees [indiscernible] fees on this. Let me just first point out that -- the structure of the rating industry also works in the fashion that in the period where there could be certain headwinds and like that, the working capital requirements of the corporates also tend to increase. That would mean that recording to higher bank debt for funding the working capital requirements would also be there because the bank debt from a working capital perspective also needs to be rated -- that just provides some cushion as far as the industry's prospects are concerned. And to that extent, we have to just wait and watch how it plays out. Revati you like to add more to this.

Yes. So Rajiv, we don't really be able to kind of comment on what proportion is initial and what proportion is surveillance because some of the clientele that we have, we've also mentioned earlier also within -- they have a fixed fees for the year. And it's very difficult to bifurcate as initial or surveillance. So it's a very difficult question for us to answer. And unfortunately, we'll not be able to answer this with any quantitative data.

Got it, ma'am. But you generally speak about the incremental market share in the initial rating market. I want that comment. And second is if you can also share the number of rated corporate, the base, how that has grown through the year.

Yes. So in terms of the rated corporates, we have about 5,200-plus rated entities in our portfolio now. In terms of the market share by count or by debt, we continue to hold about a 24%, 25% market share in the incremental business, which is there, both by count as well as the volume of debt rated. But that is only I'm talking about the incremental debt, which has come for ratings in the current year.

We will take the next question from the line of Priyank Chheda from Vallum Capital.

So, ma'am I would like to know what would have been revenue growth for India ratings [indiscernible] look it in the way of via banks [indiscernible] and say big corporates or may be large corporates and big corporates. Just to appreciate the fact that we had a strategy laid down for the [indiscernible] to be accelerated via mid-corporates so just data point or some references on the India rating [indiscernible].

I don't understand the question. Can you please -- are you talking about India ratings as an entity -- India ratings and research as an entity or what are you … are you talking India's rating industry.

I will rephrase this question. My questions is on India ratings, revenue [indiscernible] if you can bifurcate this …

Got it. Domestic ratings revenue [indiscernible]

[indiscernible] bifurcate this, yes – if you can bifurcate between bank and [indiscernible] what has been remaining contribution and the growth as well as say large corporates and mid corporates revenue contribution in the growth?

Sorry Priyank we will not be able to give those bifurcations, the aggregate level of rating revenue which is there in the public domain but this kind of sector wise bifurcation is not possible for us to be given.

Sure. So let me try again. The essential point that I wanted to ask even we had a strategy laid down to gain market share in mid corporates, we had a strategy laid down to increase the sales efforts in the mid corporate segment, should that be enough for us to claim assurity or may be a fair judgment around growing India ratings faster than the industry.

Okay. So I presume that you are referring to growing the domestic ratings business faster than the industry, right?

Correct.

Yes. Okay. So I think we have been quite clear in our strategy on this. And largely speaking, we have been growing at a pace which is faster than the overall ratings industry growth. I mean that remains our stated position with some aberrations here or there across some quarters like that because this is not a business where you can always be expecting every single quarter to be a replica of the previous quarter or a corresponding quarter of the previous year because the macro dynamics and how the different sectors on which you could be having exposure, they could change from different year-to-year. It can potentially change. And even the borrowing patterns of the different industries that can also undergo a change. So from that perspective, it could be -- it has to be seen in that context, right? But our stated position remains that we'll continue to outpace the overall industry growth. And we would like to stick to that.

And second question on the non-ratings part, sir this segment as a revenue contribution has hovered and remained around 10% of the total revenues, somewhere down the line we had our vision to get this revenue contribution to 20% of the total revenue, which means that this segment has to accelerate the revenue growth significantly higher than the ratings revenue growth. Now what we have observed is over the last medium term in the recent past, this non-rating revenue growth has decelerated in terms of growth. What has been the reason for that and what are your thoughts around scaling this back to 20%. What should be the timeline that we should think of it?

I appreciate the directness. It's important to separate three distinct businesses within what we call as the non-rating segment because they have very different and characteristically different growth profiles and very different challenges attached to each. CareEdge Analytics was a loss-making vertical for us for several years. And as we invested in building the product platform during this year, we have started getting traction on the same. As my colleague, Abhisheik alluded to, the EdgeAvira.AI pitch, which covers IntelEdge, Kalypto, CredEdge products, the platform has now achieved market adoption and the business has reached the overall CareEdge Analytics business has reached closer to the breakeven in FY '26. That is the foundation for us. The next phase is scaling the revenue from a stable base and which takes time in the bank and financial institution technology-led market. In this case, sales cycles are long, implementation is generally complex and the client stickiness is high, which means that it takes time to win. But once we win the client, the revenue is recurring and durable. So we are in that growth phase journey now. Turning to CareEdge Advisory, which is the another vertical of KEPL that has been growing profitably with good margin. The industry research, ESG advisory, green bond third-party reviews and the other advisory tools which they are offering -- service offering, they have been growing at a fairly decent pace. Now that business because it is scaling steadily also is in margin positive, positive margin accretive, right? In an overall sense, it has given a good contribution at the overall level and also ensure that at an overall entity level, we have achieved the breakeven. Now limitation in case of CareEdge Advisory is not structural is that the individual ticket sizes is once again, a highly competitive consulting kind of a business are smaller. And building a meaningful revenue base, it requires building a relatively large client portfolio over a period of time. And that also requires that you keep on building your expertise driven by human infrastructure to commensurate and make you ready for exploiting the right opportunities. You have to be ready for that. And we are doing that thing systematically. The third aspect of the non-ratings business is CareEdge ESG, ESG ratings, and that is operating in a market that is still nascent in the country. While unlike credit rating, which are regulation driven, ESG ratings are currently market-driven and largely voluntary. So the issuer and the investor adoption is building, but it is not yet at an inflection point. We have established a leadership position with the 58% share among the category 1 ERP providers, but converting that position into significant revenue at a scale, it will require some regulatory or market catalytic interventions, which could still be developing. Irrespective of that, what we believe is that we are well positioned as and when this kind of catalyst [indiscernible] So in an overall mix, when we are looking at the contribution of the -- and the growth of the non-ratings segment has grown by 19% faster than the group average. But the reason that the percentage share has also not moved dramatically is also because of the fact that the ratings business itself has grown very strongly at 17% at a very high base, which is a good problem to have at a company level, at a group level. The slower core business would have otherwise made the overall mix slightly more dramatic, but that is not how we would like to get there. We'd like to keep on growing the ratings as well as the non-ratings businesses at a healthy pace. So I think in an overall sense, we have reached a phase where our non-ratings businesses and especially from the analytics and the advisory fees, we have reached a phase where we can now look for an increased acceleration in the coming quarters and the years. Because the most challenging pace of getting it back to profitability from a significant loss level. And we had losses in this entity to the extent of around INR 24-odd crores, INR 24 crores to INR 25 crores four years back. And our primary focus has been and which is something which I have been repeatedly been stating in my investor call was to concentrate and arrest those losses. The fact that we have done that successfully gives us now the confidence of scaling it further. So this is what we are looking forward to in this vertical.

Appreciate, sir. Just last thing on the dividend payout observation, which has remained flat. Now I'm just referring back to last year's conversation wherein you were looking out for certain acquisitions, but may not be fitting into the valuation metrics. No further investment are required in the ratings, non-ratings, builders. Since we are into cash flow generation business which we are the cash [indiscernible] circulating on the balance ridden and it deteriorates the return ratios and the [indiscernible] of our industry has announced a significant buyback and returning back this cash to the rightful owners. Why we would have not even announced a buyback or kept the dividend payout as flat as last year?

Okay. See, it is a fair and direct question, and I'll answer it in the same spirt, dividend, we have largely been consistently dividend paying company. And this year, we have increased it also, but having said that, I appreciate your concern as far as inorganic acquisition is concerned and in the absence of an inorganic acquisition, what the capital allocation would mean. Let me just focus on why the inorganic acquisition has not gone ahead so far. We have been and shall remain actively involved in evaluating the inorganic opportunities. The absence of a transaction till date, it is not because of any inaction. It is the result of applying a disciplined filter consistently in our assessment. Let me explain slightly what this kind of filter looks like. We are looking for three things simultaneously: strategic fit with our core domain, which is credit risk, analytics and consulting services. A target that is either in an adjacent product area we cannot build quickly enough organically or a geography where a foothold matters and a valuation that reflects intrinsic value, not any kind of a speculative premium. Finding all the three aspects in one opportunity and particularly in a market where valuations, you will appreciate you are a market player in a market where valuations in the fintech and analytics space have remained elevated has been genuinely difficult. We have also been working through a natural sequencing, and I'll be candid in terms of admitting that. Before pursuing inorganic growth, we needed to stabilize and turn around the subsidiaries which we were already owning, taking up something at a valuation and if it would have been a loss-making and another turnaround for it to be required, it would have taken a significant management bandwidth. KEPL has now achieved breakeven. Our CareEdge Global IFSC has gone from a concept to a globally recognized rating agency in just 18 months. So that internal housing order work was a prerequisite for any responsible external expansion that we could have thought of. Now that our existing portfolio is performing, we are in a much better position to absorb and integrate any acquisition without distraction. So the pipeline of conversations is live. I shall not set a deadline for transaction because a forced acquisition at the wrong price or of the wrong asset would destroy more value than it creates. We have seen that pattern often in this space to be disciplined about it. So in a nutshell, what I can tell you is this, when the right opportunity presents itself at the right valuation and with clear analytical synergies, we shall act decisively. The capital is available. Our intent is clear and the discipline that I'm talking about is not an excuse. It is the reason why our existing investments, they are performing. So we shall remain committed in terms of creating shareholders' value through our organic and possible inorganic opportunities as and when we find the right fit.

We will take the next question from the line of Deepak Ajmera from IGE India.

Congratulation, on good set of numbers. My question is on the overseas rating, whether it is Africa, Nepal, what is growth prospectus there because we see good potential from the CARE rating side because of India rating agency present there? And what's your outlook apart from the domestic rating?

So I think it will be best for Revati to take up this question, Revati.

Yes. Thank you, Mehul. So there are three overseas businesses that we have broadly. One is CARE Ratings Nepal. Second is CARE Ratings Africa and third is CareEdge Global IFSC Limited. CARE Ratings Nepal is the market leader. We became the market leader last year. We continue to be the market leader in the business this year also. And as the country progresses, we will be a very deeply entrenched player into that market. So we see -- it's a profitable operation, which is -- which will run very, very efficiently. In CARE Ratings Africa, we got last year a license to expand into South Africa. And we also have got rating licenses in two other geographies in the current year. So we continue to expand our reach in the African domain. And again, that business has a very good and steady growth rate along with profitable operations. As far as CareEdge Global IFSC is concerned, this is a new business. As I stated earlier, this is the first full year of operations. Within the first full year of operations, we've added about 30-plus clients across 10-plus sectors, and we've rated about $8.5 billion worth of debt. Being in the nascent stage of operations, it will require some time to get into the profitable operations zone. But we are fully committed to expanding these operations beyond the market that we currently operate, and we are very confident that we will be able to achieve that in the ensuing years…

I'd also like to take Saurav online to add to this. Saurabh, can you give your comments?

Yes. Thank you. Actually, my name is Saurav Chatterjee. I'm heading CARE Ratings Africa. So we have established ourselves as a dominant rating agency in Mauritius. And in the last year, we have seen a double-digit growth, and we have crossed 100 clients in Mauritius. We are expanding into various parts of Africa where there is a demand for local currency bond market. So that is a key play. Like ma'am Revati mentioned, we have got a license in South Africa last year. And we have also got a license from the Capital Market and Securities Authority of Tanzania. We also have it from Kenya. So we are seeing to develop these markets, while there are a lot of growth potential in the capital market side and the bank debt side, which are untapped, and we are trying to work with the regulators, investors and various stakeholders like we have done in Mauritius with the backing from our Indian business.

We will take the next question from the line of Varun from Bandhan Life.

Congrats on a good set of numbers. My first question is on the Ratings business. How do you see outlook for Ratings business over near to medium term? And also historically, CARE had the higher share of revenue coming from BLR, close to 65% of total ratings revenue what I recollect. How would this number have changed over the last two to three years? And if activity in capital markets further slows down, do you think we are relatively better placed as BLR will continue to have its momentum...

Revati.

Yes. Thank you, Varun, for the question. We do not disclose our share between capital markets and bank loan ratings. So that's a question I'll be unable to answer. However, if you look at the growth trajectory for the credit rating industry per se, and this is a thing that we've always shared that we believe in the India growth story. And if you believe that we will be the largest, highest growing economy in the globe, then in that case, the requirement for credit in the ecosystem will only grow. And it is in that context that we remain optimistic on the growth of the credit rating industry. And as a key participant in that industry, we also are optimistic on the growth trajectory that we would have in the future years. But putting a number to it is a very difficult situation because as you rightly understand that there are business cycles, and we are very much aligned to those business cycles that emanate from an economy perspective.

Okay. My second question is on the non-rating side. Can you share the ballpark revenue breakup between analytics and advisory -- and on the analytics side, if you can share more color on as to how business has progressed in terms of client traction, profitability and strategic relevance? And where do you believe we have clear right to win versus products that are there in the market today? And also, do you see analytics segment within overall non-rating fees becoming a meaningful contributor to our growth going forward versus, let's say, ESG or advisory or we are still some distance away from seeing meaningful traction in the analytics.

Revati, continue to answer this.

So we really don't put out numbers differently for Advisory and Analytics division separately because we -- it's the same company. So the number for the company was already shared by Mehul earlier. This year, we've crossed the revenue of INR 50 crores in this company. In terms of what's going to be the future levers for growth for analytics, I would ask Abhisheik to answer this, followed by what are the levers that you see in advisory to start with.

So from an analytics standpoint, as I mentioned, our platform EdgeAvira.AI gained traction with the clients. Existing clients have started giving us more business for the products and services that they want from us. And because of that goodwill that has got created, other clients have joined in that space. So our traction in the markets that we operate has started to increase. And because of that, our revenue numbers are going up. Additional revenue from existing clients continue to be on the upside. And as you -- as Mehul said earlier that our business is where we're acquiring a new client is tough, but then once you get into it, then the annuity revenue continues to happen for us. So that's where our revenue is growing. We keep on adding one or two clients in each geography year-on-year and then the annuity revenue just takes the ball up for us…

Would you like to put whatever – something Swati.

Yes, Mehul. So on the advisory business, as you are aware, we run three major verticals, sustainability, industry research and structured solutions around corporates. And I would say that all the segments are showing good growth. And as Mehul earlier outlined, that is for an advisory business, it's very important that you gain credentials, you gain the right kind of customers and you are able to kind of showcase your capabilities. So we are -- our growth is primarily driven by the fact that over the last three, four years that the kind of work that we put out in terms of our delivery, in terms of gaining the outreach and making the customers and the market aware that we are a credible entity in the advisory business has kind of paid off the efforts. So specifically, if you look at it, our sustainability business has shown very good growth and has shown very good kind of clientele as well as performance. We are now also into climate risk. We are now also into -- we are one of the leaders in the local market in the third-party review segment. And we have some 80-plus sustainability reports out there in the market. And in terms of the clientele also, we are working with the top 250 plus the top 500 market cap companies, both in the BFSI space as well as in the corporate space. We also work with a lot of private equity funds, et cetera. in terms of -- as an advisory business, obviously, the kind of insights that we gain from working with assignments gives us further levers to kind of offer new services and new solutions, which are backed by analytical insights. Yes. So that's it from my side.

Got it. And one last question on -- again, on capital allocation. Keeping the inorganic opportunities aside, what would you highlight as the biggest constraint in increasing or maintaining the dividend payout because this year's payout is still much lower than what we paid out in FY '23 and FY '24, which was much challenging period for the organization from where we stand today. So what is the biggest constraint...

I don't think there is any constraint to be put in that perspective, right? But I think the FY '23 and those years, they would also not be -- they will also not be the right comparable things because in FY '23 and there was also a component in terms of the special dividend component also was there to commemorate our 30 years of operation. So that cannot be counted as a sort of a normal dividend payout scenario, right? So we have generally been consistent and we have tried to increase and at the same time, remaining completely mindful of the overall capital allocation to play out for the shareholder value creation. We remain committed for that. And as I stated in my earlier answer to one of the questions pertaining on the inorganic side -- so we are having the cash on the balance sheet, which is giving us the confidence in terms of striking at the right format in terms of any meaningful deal coming at the right valuation. So I think it will be a matter of time if we get this thing and decisively as I put it, and we remain committed for that.

We will take the next question from the line of Rahul Bandari from Unifi Capital.

Congratulations on the good set of numbers. So my question is regarding the pricing in the industry. So within the credit rating segment, where is CARE in terms of pricing compared to other players, both in bank ratings and bonds separately? And how do you see this gap improving?

I wish we would be aware about the competitors' pricing all across because this is a space where you just have to be at it in terms of constant improvements as far as your pricing are concerned, but it's very difficult, I mean, generally to ascertain from the clients also what would be the pricing level of the competition. You just have to be at it. And consistently growing the franchise, growing your presence across the segments and as a full service rating agency, we have been able to do that. I think that's a testimony to the way in which we have been operating and the results are showing for that. And continuously improving the pricing at an overall level, that remains the KRA for our business head and Revati and her entire team. So that's being closely monitored at the board level, and they have been successfully been able to do that, right? So Revati, would you like to add anything more to this?

No, I think you adequately covered.

And secondly, on the initiatives that are being taken to gain market share in the new issuances segment. So what are these initiatives? And how are we able to gain market share?

Overall competitive levers that could be available to us, first is the focus on the high-value segments that could be there in the economy. So our strategy remains in terms of deepening our presence in the segments where the ratings carry the most weight that is the investor preference driven high debt weighted sectors right? As you would have seen in our investor presentation, our stability rates for the AAA, AA kind of categories, which are generally the categories which capital markets that has been very strong and one of the strongest in the industry. So that quality track record is one of the most powerful business tools available to us to use to our advantage. The second aspect is in terms of full spectrum coverage also. So as we have been highlighting in the past in the annual call that we have reorganized our business development function into a verticalized sector-focused structure so as to ensure that no segment of the market is undercovered, be it BFSI, be it corporate, be it infra or mid-corporate, each receives a dedicated coverage by our business team with measurable targets. And we are also -- another aspect also has been the fact that we are the only credit rating agency with a full suite, which now includes domestic ratings, global scale ratings, ESG ratings and overseas ratings in the different geographies. So that breadth of operation is also offering a genuine competitive advantage to us. And plus now we are also into the space of PaRRVA -- while as a concept, it is not related to credit rating, but what -- why it matters is that, that is connecting us to a totally new trader of capital markets. And in this process, it strengthens our place in the overall spectrum. And of course, one added lever which has come to our advantage now and which is a new growth vector for us is our sovereign and global scale offering. So as Revati mentioned, we are among the top 10 global rating agencies as measured by sovereign country coverage with 45 sovereign rated, more than $8 billion of debt rated within 18 months of operation. And this is a segment that has no precedent in our history, and it is growing fast. It's a question of combining all these levers to our advantage and keep on hosting for the growth opportunities.

We will take the next question from the line of Nihal Shah from Prudent Corporate Advisory.

Congratulation on the good set of number … so my question was regarding the subsidiaries where you've managed to get some 11%, 12% of EBITDA margins in this year, if I'm not wrong. How do we see the subsidiaries performing in the coming years as well? Do we see further scope of margin expansion here?

Let's look at the things from ratings versus the non-rating subsidiaries. So rating subsidiary, CareEdge Africa is a profitable venture. CareEdge Nepal is a profitable venture and continues to -- both of them continue to operate at healthy margins. And we have CareEdge Global. Now CareEdge Global is in a very nascent stage. I mean FY '26 was the first full year of operations, and we have done quite well within the first full year of operations. Admittedly, there is a loss, and that is expectedly so that in a new line -- vertical line that you are entering especially when you are new in competition. Of course, in the initial incubation stage, there could be losses. But having said that, I think the traction that we have gained that is giving us a lot of confidence and to reach the top 10 global rating agencies in terms of the sovereign rating coverage that is in itself is a testimony to the high-caliber team that we have aggregated over there. So from a margin perspective, I think the ratings businesses, they have been doing fairly well. Now turning to the non-rating subsidiaries. So KEPL has just turned profitable, right, in this year. So this is a complete turnaround story, which was -- it was a loss-making entity last year. And this year, it has posted profit, right? And within KEPL also both these verticals, analytics and advisory, they have different product space of service offerings so as to operate at different kind of margin levels. I think what it would be important to understand is that, number one, that the service offerings, which we are -- which we have consolidated over the last few years and which is giving us the results now should be delivering better margins in KEPL as a whole going forward because it is just unprofitable now, and we should be seeing greater contribution coming from that. And the last, in the non-rating piece is CARE ESG rating. Now CARE ESG ratings, as I mentioned, the kind of challenges with which we are operating over there. But despite that, it is largely voluntary kind of an assessment which corporates have to take. Having said that, to gain the kind of market leadership, which we mentioned, going further in terms of acceleration of the operations and like that, I think in the future years, we should be looking at a positive contribution coming from that also, which is currently loss-making. So I don't think this is in a broader spectrum how the various subsidiaries and the ratings and the non-ratings place could be playing out.

Ladies and gentlemen, due to time constraint, we will take the last question from the line of [indiscernible].

Congratulations on a good set of numbers. If you could -- that's a slightly related question on pricing versus volume growth. If you could touch upon just the pricing and volume direction for initial ratings and maintenance across bank loans, bonds and structured instruments? And how do you see the overall growth for ratings playing out in the coming two, three years?

Revati, please take this question.

See, pricing is a function of competition, market and all. We are the second largest rating agency in India. So obviously, we're doing something which is right on every front. Having said that, it's very difficult for us to understand what is the pricing which is given by competition to juxtapose that against us. So it's a very difficult thing, as alluded by Mehul also earlier.

If you can just touch upon your sequential movements or your period-to-period movements and how it is…

So, honestly the endeavor always is that on a sequential basis, on a period-to-period basis, we should improve on the pricing, and that's also the KRA given to the entire team. And our entire endeavor is to move in that direction. So in some periods, we are very successful in some periods, we are moderately successful. So that's how I would put it.

So actually, the question was that what has been the position in the current period on this front and particularly with regards to pricing and volumes for initial ratings and maintenance across bank loans, bonds and structured instruments? And how do you see it in the coming two, three years? What has it been for now? And how do you see it playing out going ahead?

So as of now, we are favorably placed in terms of the traction that we are getting on a year-to-year basis. But it's very difficult to tag pricing with the amount of debt rated because I think that's where you're getting to because it's not really -- there is no one-to-one relation that you can find across the industry on the volume of debt rated and the pricing because it's a lot more intricate and the revenue has a part of surveillance has a part of initial. So it's a lot more intricate to kind of define and decipher in that fashion. But suffice to say, this is a top priority for us to be present in terms of gaining a good market share, both on the volume of debt rated as well as keep the pricing going upwards.

Yes. And finally, we keep seeing that our outreach activities, particularly the knowledge sharing and individual interactions and all those things, media quotes have scaled up substantially in the past quarter and year. If you can just highlight or provide some flavor on how this helps in our overall marketing endeavor? And what kind of does it -- what kind of correlation it would have with, let's say, year-on-year growth in volumes for us and our overall business that we can get?

This is an analytical knowledge-based industry. In a knowledge-based industry, you adjust by how you are disseminating that knowledge for the absorption and consumption of the stakeholders. Outreach is necessary from that context. It is not a kind of can say, headline grabbing activity, which is required to be done. It is an intrinsic activity as a part of the basic functioning. Unless and until your stakeholders, your prospects, the different opinion makers in the market, unless and until they see you coming out with any kind of a credible assessment or a prognosis on the various factors, macroeconomic industry, so on and so forth, including on the credit outlook and like that. So from that perspective, your positioning as far as the overall industry is concerned, that will not be gaining traction and for which outreach activity becomes an intrinsic part of our functioning. So that is the way in which we have been giving a lot of focus on this and kudos to the team, the way in which they have taken up this aspect. And I think the quarter -- the last quarter or a year is not an aberration. -- it has been a consistent focus, which is delivering the results. And that results in terms of the future prospects, the different opinion makers, the investors gaining confidence in our capabilities of understanding the sectors, our capability in terms of understanding structures, our capabilities in terms of having the right say -- prognosis as far as how the different sectors are moving in the economy, how the stresses could be emanating in different sectors. So these are the ways in which you establish your knowledge leadership and that results ultimately to the overall business momentum. So it's a combination of the pull and push strategies which are there, but the business push is given by the business team. The analytical team with this kind of outreach and with knowledge dissemination, that is the way in which the positioning of a particular rating agency happens across the spectrum and gives the overall flip to the entire apple. So please look at it from that angle.

Sure. And just one last question that we have all these multiple verticals that we spoke of, the various geographies as well as PaRRVA and the IPO grading and analytics. Can we highlight like over the next three to five-year period, any two or three verticals over here, which can become meaningfully large, like at least 5% to 10% of revenues or higher of the rating base that we already have currently?

It will not be possible in terms of highlighting, singling out any particular verticals. But what I can say, again, it has to be looked from ratings and the non-rating business perspective. Ratings business generally across the globe, they would always be regulated businesses. And different geographies, depending upon how the debt markets play out in those geographies would be having a different dimension attached to the kind of growth, which could be emating. So if we are operating in a particular geography, which is fast growing, the debt markets are growing very fast in that case, the traction that comes from that operations in that geography is much faster. As compared to that, some other markets could potentially be slow. And in certain aspects, let's say, drawing our example from Mauritius, when we started, I mean the debt market -- debt capital market was practically nonexistent. So it -- also meant that we first educate the participants over there and then try to build up. And today, we are at a space where not only is the debt market improved significantly with our intervention, it has also resisted into the fact that we have almost near center market share in terms of operations over there. So that's the way in which this aspect will play out. In case of the non-rating business, again, it's a question in terms of how you keep on identifying the opportunities, how you keep on positioning your product and service offering, how you have the early wins and the satisfied customers getting translated to your future incremental businesses coming from those clients. So things are contingent on that. So both the verticals, the ratings and the non-ratings, they have different dimensions. And I think the teams are fully cognizant and ready for exploiting the opportunities as we keep on growing this vertical.

Thank you very much -- ladies and gentlemen, we will take that as the last question. And with that concludes the question-and-answer session. I now hand the conference to Mr. Mehul Pandya, MD and Group CEO, CARE Ratings Limited for the closing comments. Thank you, and over to you, sir.

To conclude FY '26 was a year of strong quality-led performance for CareEdge with broad-based growth across businesses while remaining firmly anchored in analytical rigor, independence and discipline. As we look ahead, our focus remains on building on this momentum, deepening our technology and AI capabilities to further enhance analytical depth, efficiency and scalability. Further, growing our international franchise and expanding the relevance of our non-ratings businesses through consistent delivery and client trust shall be our focus. None of this progress that we have made would have been possible without the commitment and professionalism of our team whose judgment and integrity continue to be our greatest strength. We remain committed of creating sustainable long-term value for our shareholders by consistently reinforcing trust, capability and the institutional strength of the CareEdge franchise. With this, I would like to thank everyone for joining this call today. I hope we've been able to address your queries. For any further information, kindly get in touch with us or with Strategic Growth Advisors, our Investor Relations advisers. Thank you.

Thank you, members of the management. On behalf of CARE Ratings Limited, we conclude this conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.