Crisil’s 8.6% y-o-y revenue and 13.4% EBITDA growth in Q2CY17 came below estimates due to miss in research segment. Key highlights were: research revenue growth slackened to 9%, 14% in Q1CY17, impacted adversely by appreciating Rupee; ratings revenue grew 5.7% y-o-y, 4.3% in Q1CY17, led by large corporate ratings, whereas SME declined post reduction in NSIC subsidy; and overall EBITDA margin expanded 107bps to 25.4% on account of downsizing in SME segment. Despite improving bond outlook, CRISIL is cautious on short-term credit growth and SME segment’s prospects due to cut in NSIC subsidy. On account of expensive valuations maintain ‘hold’ using DCF with TP of Rs 2,068. Research revenue growth slowed to 9.2% y-o-y, 14% in Q1CY17 and CY16, due to a much stronger rupee during the quarter. Lower rupee realisation also led to 3% y-o-y EBIT dip. While Financial research was muted, Risk & Analytics and Coalition continued to grow strongly. Risk & Analytics continued strong run led by model validation, stress testing & regulatory change management. Coalition could grow in double digits led by launch of new products. Further, the stress testing module is submitted to the government by March-April and revenues pick up in H2. Management has guided for 10% growth in the segment going forward. Though ratings revenue growth was a modest 5.7% y-o-y, it was a pick up from 4.3% in Q1CY17. The spurt was driven by large corporate ratings, whereas SME fell post significant cut in NSIC subsidy. Domestic business environment improved, though private investments and credit off take remained weak due to low capacity utilisation and high leverage. CRISIL expects 8-12% growth in outsourced ratings in CY17. It estimates double digit growth in ratings in CY18 on improvement in private capex cycle and spurt in outsourced ratings. Due to cost control, particularly downsizing in SME segment as well as operating leverage, EBIT margin jumped 510bps, leading to EBIT rising 29%. It has guided for sustained margin improvement due to SME downsizing.