Sector Guides
How to Analyze Rating Agencies Stocks in India: Bond Issuance & BLR
Team QuartrlyCredit rating agencies like CRISIL, ICRA and CARE Ratings earn fees only when companies borrow, so their earnings track debt-market activity rather than their own operations — Bond Issuance Volume, Bank Loan Ratings (BLR), and Surveillance Revenue are the three levers that actually move quarterly revenue. Because the marginal cost of issuing one more rating is near zero, EBITDA margins for established Indian CRAs typically run 30-45% — but that same operating leverage means a slowdown in bond issuance or bank credit growth hits the topline fast, with little cost base left to cut in response.
Key Takeaways
- Bond Issuance Volume is the primary revenue driver — when companies stop borrowing, rating fees decline sharply
- Bank Loan Ratings (BLR) provide stable, recurring revenue from mandatory regulatory requirements
- Surveillance Revenue creates an annuity-like income stream from existing rated entities
- Securitization Volume offers high-margin revenue but is sensitive to NBFC sector health
- Non-Ratings Revenue Mix (research, advisory) serves as a hedge against debt market volatility
Quick Reference
| Metric | Definition | Healthy Range | Warning Sign |
|---|---|---|---|
| Bond Issuance Volume | Value of new debt securities issued | >10% YoY growth | Negative growth or "de-grew" |
| Bank Credit Growth | Growth in bank lending to corporates | 12-15% annually | <5% growth |
| Surveillance Revenue % | Recurring fees as % of ratings revenue | >40-50% | Declining surveillance book |
| Securitization Volume | Value of rated loan pools | ₹1-2.5 lakh crore annually | NBFC sector stress |
| Non-Ratings Mix | Non-rating revenue as % of total | 30-40% | Over 80% ratings dependence |
How Credit Rating Agencies Make Money
Credit rating agencies operate a distinctive business model with exceptionally high operating leverage. Their primary cost is human capital (analysts), while their product — a credit opinion — has near-zero marginal cost once the infrastructure exists. This results in EBITDA margins typically ranging from 30% to 45% for established Indian CRAs.
Revenue for rating agencies is directly tied to debt market activity. When companies issue bonds or take bank loans, they must obtain ratings. This creates a business that is highly cyclical and sensitive to interest rate movements, credit growth, and regulatory mandates. Unlike manufacturing businesses where capacity utilization drives margins, rating agencies depend on the volume and value of debt being rated in the market.
Bond Issuance Volume
What it is: Bond Issuance Volume measures the total value of new debt securities (primarily Non-Convertible Debentures or NCDs) issued in the market during a period. Rating agencies earn initial rating fees as a percentage of the issue size, typically ranging from 0.01% to 0.05% depending on complexity and issuer relationship.
Why it matters: Bond issuance represents the highest-margin revenue stream for rating agencies. Large issuances by corporates, NBFCs, and financial institutions generate substantial one-time fees. This metric directly correlates with rating agency revenue growth in any given quarter.
What good looks like: YoY growth of 10-15% in bond issuance volume indicates healthy demand for ratings. Periods of monetary easing typically see elevated issuance as borrowing costs decline. CRISIL and ICRA benefit disproportionately from large corporate issuances due to their market leadership.
Red flag: Declining issuance volumes or "de-growth" signals reduced fee income. High interest rate environments compress issuance as borrowers defer fundraising.
"Amid heightened global volatility, the bond issuances de-grew at 32.9% YoY in Q3 2025 after showcasing strong growth in previous quarter." — CRISIL Q3 FY25 Earnings Call
Bank Loan Ratings (BLR)
What it is: Bank Loan Ratings refer to credit ratings assigned to term loans and working capital facilities extended by banks to corporate borrowers. RBI regulations mandate that banks obtain credit ratings for exposures above specified thresholds, making this a compliance-driven revenue stream.
Why it matters: Unlike bond ratings which depend on capital market conditions, bank loan ratings are tied to overall credit growth in the economy. This provides more stable, volume-driven revenue. The fee per rating is lower than bond issuances, but the volume is significantly higher.
What good looks like: Bank credit growth of 12-15% annually indicates healthy demand for loan ratings. Strong industrial credit offtake and working capital demand support BLR volumes. CARE Ratings and ICRA have traditionally held strong positions in the mid-corporate BLR segment.
Red flag: Bank credit growth below 5% or commentary indicating "muted industrial credit" or "sluggish capex demand" suggests declining BLR volumes.
Surveillance Revenue
What it is: Surveillance Revenue represents annual fees collected from issuers to maintain and monitor existing credit ratings. Once an entity obtains a rating, it must pay recurring fees for the rating agency to continue monitoring and updating the rating until the debt matures or is redeemed.
Why it matters: Surveillance fees create predictable, annuity-like revenue that provides stability during periods of low new issuance. A large surveillance portfolio acts as a revenue floor, covering fixed costs even when new rating activity declines. This metric reflects the cumulative value of all previously rated instruments still outstanding.
What good looks like: Surveillance revenue as a percentage of total ratings revenue above 40-50% indicates a mature, stable business. Growth in the surveillance book over time compounds this advantage. CRISIL's large surveillance portfolio provides significant earnings stability.
Red flag: Rising "rating withdrawals" (companies prepaying debt or delisting instruments) erodes the surveillance base. A shrinking surveillance portfolio indicates either early debt redemptions or clients moving to competitors.
Securitization Volume
What it is: Securitization Volume refers to the value of loan pools (vehicle loans, gold loans, mortgages, microfinance loans) that are packaged and sold as Pass-Through Certificates (PTCs) or Asset-Backed Securities (ABS). Each securitization transaction requires a credit rating, generating fees for the rating agency.
Why it matters: Securitization is a high-margin business segment because rating a pool of thousands of loans requires specialized analytical capabilities. NBFCs are the primary originators of securitized assets in India, using this mechanism to raise funds and manage balance sheet constraints.
What good looks like: Strong securitization volumes of ₹1-2.5 lakh crore annually indicate active NBFC participation. CARE Ratings has historically held a strong position in ABS/MBS ratings.
Red flag: NBFC sector stress (as seen during the IL&FS crisis) causes securitization markets to freeze. Regulatory tightening on NBFCs or deteriorating asset quality in underlying loan pools can sharply reduce volumes.
"CARE has rated around 856 Asset Backed Securitisation pools aggregating to around ₹1.20 lakh crore." — CARE Ratings July 2025 Investor Presentation
Non-Ratings Revenue Mix
What it is: Non-Ratings Revenue Mix measures the proportion of total revenue derived from non-rating services such as research subscriptions, advisory services, risk solutions, data analytics, and ESG assessments. This segment is independent of debt market cycles.
Why it matters: A higher non-ratings mix provides diversification against debt market volatility. Research and advisory services often carry higher margins and more predictable revenue streams. This segment has grown in importance as rating agencies seek to reduce cyclicality.
What good looks like: Non-ratings revenue contributing 30-40% of total revenue indicates meaningful diversification. CRISIL has successfully built substantial research and advisory businesses (including its global research center serving S&P Global) that contribute significantly to earnings stability.
Red flag: Over-reliance on ratings revenue (above 80% of total) leaves the company vulnerable to debt market downturns. Declining non-ratings revenue may indicate competitive pressure in research and advisory segments.
Special Considerations
The Issuer-Pays Model
Rating agencies in India operate on an "issuer-pays" model where the entity seeking the rating pays the fee. This creates an inherent conflict of interest, as agencies may face pressure to assign favorable ratings to retain clients. Investors should monitor market share trends — an agency rapidly gaining share may be competing on rating leniency rather than analytical quality.
Regulatory Environment
SEBI regulates credit rating agencies in India and has progressively tightened oversight following rating failures. Enhanced disclosure requirements, mandatory rating rationale publications, and stricter default recognition norms impact operating costs and rating methodologies. Regulatory actions against any CRA can significantly affect its reputation and market position.
Market Concentration
The Indian CRA market is concentrated among CRISIL, ICRA, CARE Ratings, and India Ratings. CRISIL (majority owned by S&P Global) and ICRA (majority owned by Moody's) benefit from global parentage and methodology transfer. Market share shifts between these players can significantly impact individual company revenues.