Read this new article on the global car industry on the economist. My take in terms of impact on the indian industry

– The weaking of the global companies like GM, Ford and their suppliers like Delphi etc would be a great positive for the indian auto parts industry as these companies would have to look at further cutting costs to survive. Indian auto part companies are very cost competitive and are rapidly moving up the value chain
– Critical factor for indian auto parts companies would be how rapidly they can scale up and meet the global quality and service standards ( provided they get some support on infrastrucutre ). Also they can avoid cost pressures if they develop the required technology and IP.
– Not been able to come to conclusion on it would impact the domestic car industry…will it be beneficial for maruti, Tata motors etc ??

I am looking at the financial numbers of crisil. My thinking was that CRISIL and any other rating agency would have a good business model. On looking at the numbers i have been completely blown away.

– Return on networth – 20 % +
– Return on capital employed in business – 80 % (approximate ). The company has about Rs100/share of investment
– Net profit is almost equal to cash flow as a rating agency would not have too much fixed expenses (other than offices which can be bought or leased)
– Not much of working capital requirement (close to zero)
– Net margins of 20% +
– Strong competitive advantage in the form of a strong brand name ( CRISIL or ICRA etc ). Any company wanting to get rated will have to go to these companies …sometimes to all of them ( and i cant think of new companies being able to get into this business easily)
– additional lines of business through these relationships with companies like advisory services, research services etc which provides additional revenue streams.

So if everything is so good , why not buy the stock …?? looked at the price and ofcourse the market is smart enough to recognise a good business. The stock sells at a PE of around 35. So it seems to be a great business available at not a great price. I will give it a pass ..but will continue studying the business model