The Agency That Assigns Grades — Then Gets Graded Itself

The Gatekeepers of Rupee Sanity

Meet CARE Ratings — India’s second-largest credit rating agency, established in 1993. For over three decades, they’ve been the voice that whispers (or shouts) in the ears of bankers, investors, and regulatory bodies: “This company is AAA-safe,” or more commonly, “This company might just crater your portfolio.”

A credit rating agency is essentially a professional pessimist with a business model. A manufacturing company wants to issue bonds. A bank wants to lend. Investors want reassurance. CARE Ratings steps in, charges a fee, analyzes mountains of financial statements, and assigns a rating — which everyone then takes as gospel. If CARE slashes your rating from AA to A, your borrowing costs spike immediately. If they upgrade you to AAA, your bond sells faster. The entire financial system runs on their grading curve.

But here’s the twist: in a booming Indian economy where every startup thinks it’s the next unicorn and every old company still acts like the 1990s never ended, CARE Ratings is absolutely crucial. Fund raising activity through corporate bonds and commercial papers remains brisk. Bank credit offtake is accelerating. Industrial credit to large companies is on fire. And through it all, CARE stands at the gates, making sure nobody borrows money they can’t repay — while simultaneously making sure they get paid for the service.

Q3 FY26 delivered the goods: 16% consolidated revenue growth, 29% PAT growth, and a business model so reliable that even SEBI’s occasional warnings (one ₹1 crore penalty back in 2023 for IL&FS rating lapses) couldn’t dent investor enthusiasm. The company is aggressively expanding globally — Africa, Nepal, Mauritius — while building AI-powered subsidiaries like CARE Analytics and CARE ESG Ratings. This is not your grandfather’s rating agency anymore.

The Ratings Industrial Complex

CARE Ratings operates across two primary segments: Ratings and Non-Ratings. The split is roughly 89% ratings, 11% non-ratings (as of 9M FY26). Ratings is the old-school, cash-printing machine. Non-ratings is where ambition meets spreadsheets.

The Ratings Business (89% of revenue): A company wants to raise money through bonds or commercial paper. CARE analyzes their financials, management, industry trends, market share, and assigns a rating — AAA (safest) down to D (default imminent). The issuer pays the fee (typically ₹3–10 lakh per rating, sometimes more for large deals). CARE gets paid. Investors sleep peacefully (or at least less anxiously). Rating volumes in 9M FY26 remained “stable” per concall — corporate bond issuances were slightly lower YoY, but bank credit growth and commercial paper issuances were brisk. This is the core cash cow.

The Non-Ratings Business (11% of revenue, growing 21% YoY): Where CARE gets creative. Three wholly-owned subsidiaries (CARE Analytics & Advisory, CARE ESG Ratings, CareEdge Global IFSC) plus three international entities (CARE Ratings Africa, CARE Ratings Nepal, CARE Ratings South Africa). The non-ratings segment includes analytics consulting, ESG grading, sovereign ratings (a new bet), fintech solutions like “Cred Edge” and “Intel Edge” for internal rating models and fraud detection. It’s less proven, more aspirational, but growing faster than the core business.

The business model is elegant: issuer-pay (the company raising funds pays CARE for the rating). This creates a potential conflict of interest that regulators obsess over, but it also ensures CARE gets paid when debt markets are active. In a slow lending environment, ratings volume dries up. In a boom, CARE mints money. Q3 FY26 happened during a healthy credit expansion phase, which explains the 16% growth and the palpable optimism in the concall.

Q3 FY26: The Numbers That Don’t Lie (Allegedly)

Result type: Quarterly Results  |  Q3 FY26 Annualised EPS: ₹47.84  |  Full-year (TTM) EPS: ₹53.70

The QoQ volatility story: Q2 FY26 was an absolute blockbuster with 52% EBITDA margin and ₹18.89 EPS. Q3 came in softer. But here’s where most investors miss the plot: CARE Ratings’ management explicitly warns investors to evaluate performance on an annual basis, not quarter-to-quarter. This matters because rating agencies hit lumpiness—some quarters have massive deals closing, others have longer sales cycles. Q3 might have been a slower quarter in deal closures, but the YoY numbers are crystal clear: +16% revenue, +29% PAT growth. That’s not stagnation, that’s acceleration.

The standalone vs. consolidated game: Consolidated revenue for Q3 FY26 was ₹112.12 crore (+16% YoY). Standalone revenue was ₹90.24 crore (+15% YoY). The subsidiaries (primarily non-ratings) contributed ~₹22 crore in Q3, or about 20% of consolidated revenue. Non-ratings grew 21% YoY, which is faster than the core ratings business. This is important: CARE is actively building a more diversified revenue base, not relying on ratings alone.

P/E Calculation: TTM EPS of ₹53.70 ÷ CMP of ₹1,552 = P/E of 28.9x. Industry median P/E is ~28.0x (only ICRA as a listed peer, trading at 26.7x). CARE is essentially at peer valuation, despite higher growth momentum.

What’s A Credit Rating Agency Worth When It Rates Everything?