Credit Rating Agencies

Credit Rating Information Services Ltd

(CRISIL)
 First and the largest credit rating agency in India(floated
on January 1, 1988.)
 It was jointly started by ICICI and UTI with an equity
capital of 4 crores
 4th Largest Rating Agency in the World

 Affiliation with Standard & Poor’s (USA)

 The first to rate a state government in India – Gujarat.

 Has5offices-Mumbai, Delhi, Kolkata, Chennai & Bangalore

• The principal objective :
To rate the debt obligations of Indian
companies.

• Guides the investors.

• The rating committee comprises members who have

the professional competence.
 Objectives of CRISIL
• To assist both individuals & institutions.

• To raise large amounts at fair cost from a wide

spectrum of investors.

• To enable intermediaries in placing their debt

instruments with investors by providing them with an
effective marketing tools.
 CRISIL Rating Methodology
• Rating commences at the request of the company
• Assess past performance (problems & response)
• Assess future prospectus.
– Position
– Cash flow projection
– Key issues
• Assess industry (Growth, competition, Govt. Policy)
• Assess operational efficiency (locational advantage)
• Assess management.
– Training system
– Planning & control system
– Goals, attitudes etc.
• Assess companies ability to raise funds quickly .
 CRISIL Rating Methodology Contd.
• Firstly, obtain request for rating,
• Assign 2 teams
• First team assess industry, company & management
• Second team also does the same
• Interaction between both teams.
• Findings of interactions are presented
– Branch Internal Committee
– Rating committee
• Rating committee doesn’t have any links with the
agencies connected with the unit being rated.
Credit rating process
 CreditRating
Credit RatingSymbols
Symbols
CRISIL’sDebenture
CRISIL’s DebentureRating
Ratingsymbols
symbols
Rating Sym bol Definition
Investm ent Grades
AAA Highest Safety
AA High Safety
A Adequate Safety
BBB Moderate Safety
Speculative Grades
BB Inadequate Safety
B High Risk
C Substantial Risk
D Default
 CRISIL’s Fixed Deposit Rating symbols
CRISIL’s Fixed Deposit Rating symbols

Investment Grades
FAAA Highest Safety
FAA High Safety
FA Adequate Safety
Speculative Grades
FB Inadequate Safety
FC High Risk
FD Default
 CRISIL’sShort-Term
CRISIL’s Short-TermRating
Ratingsymbols
symbols

Rating Symbol Indication

P-1 Very Strong
P-2 Strong
P-3 Adequate
P-4 Minimal
P-5 Default
 IICRA
IICRA
InvestmentInformation
Investment Information&&Credit
CreditRating
RatingAgency
Agency

•Was set up by Industrial Finance Corporation of India in 1991.

•It’s a Public Ltd Co with an authorized capital of Rs.101 crores.

The initial paid up capital of Rs. 3.50 crores was subscribed by

IFC, UTI, LIC, GIC SBI and others.
 IICRALong
IICRA Longterm
termrating
ratingsymbols
symbols

Rating Symbol Indication

LAAA Highest Safety
LAA High Safety
LA Adequate Safety
LBBB Moderate Safety
LBB Inadequate Safety
LB Risk Prone
LC Substantial Risk
LD Default
 IICRAMedium
IICRA Mediumterm
termRating
RatingSymbols
Symbols

Rating Symbol Indication

MAAA Highest Safety
MAA High Safety
MA Adequate Safety
MB Inadequate Safety
MC Risk Prone
MD Default
 IICRAShort-
IICRA Short-term
termRating
RatingSymbols
Symbols

Rating Symbol Indication

A-1 Highest Safety
A-2 High Safety
A-3 Adequate Safety
A-4 Risk Prone
A-5 Default
 CreditAnalysis
Credit Analysisand
andResearch
ResearchLimited
Limited
(CARE)
(CARE)
• The CARE was promoted in 1993 jointly with
investment companies, banks and finance companies.
• Services offered by CARE are:
– Credit rating
– Information Service
– Equity Research etc
• CARE has 7 offices in India located at –
• Mumbai,Delhi,Kolkata,Chennai,Hyderabad,Bangalore
and Ahmadabad.
 RatingServices
Rating Services
CAREprovides
CARE providesrating
ratingservice
servicetotothe
thefollowing
following
debtinstruments:
debt instruments:
•Debenture
•Debenture
•Certificate of Deposits
•Certificate of Deposits
•CommercialPaper
•Commercial Paper
• FixedDeposits
•Fixed Deposits
•PreferenceShares
•Preference Shares
•Bonds
•Bonds

CARE Ratings has significant presence in all sectors including

CARE Ratings has significant presence in all sectors including
Banks / FIs, Corporate, Public finance. Coverage of CARE
Banks / FIs, Corporate, Public finance. Coverage of CARE
Ratings has extended to more than 2811 entities
Ratings has extended to more than 2811 entities
The ratings division of CARE has over a decade long experience in
rating debt instruments/Enterprise ratings covering the full
spectrum of Universe comprising:

• State Government
• Industrial Companies
Undertakings
• Service companies
• Municipal Corporations
• Infrastructure companies
• Structured Finance
• Banks
Transactions
• Financial Institutions (FIs) • Securitization
• Non-Bank Finance Transactions
companies(NBFCs) • SMEs
• Public Sector
• SSI
Undertakings (PSUs)
• Micro Finance Institutions
In addition to debt ratings CARE Ratings has
experience in providing the following specialized
grading/rating services:

• Corporate Governance ratings

• IPO grading
• Mutual Fund Credit quality Ratings
• Insurance Claims Paying Ability Ratings
• Issuer Ratings
• Grading of Construction entities
• Grading of Maritime training institutes
• LPG/SKO Ratings
• • CARE Ratings has been recognized by statutory
CARE Ratings has been recognized by statutory
authorities
authorities and
and other
other agencies
agencies inin India
India for
for rating
rating
services.
services.The
Theauthorities/agencies
authorities/agenciesinclude:
include:

• • SEBI
SEBI
• • RBI
RBI
• • Shipping and Ministry of Petroleum and Natural Gas
Shipping and Ministry of Petroleum and Natural Gas
• • National Housing Bank
National Housing Bank
• • Government of India (GoI),
Government of India (GoI),
• • NABARD etc
NABARD etc
 ForLong
For LongTerm
Termdebt
debtinstrument
instrument

Investment Grade CARE

Highest Safety CARE AAA
High Safety CARE AA
Adequate Safety CARE A
Inadequate Safety CARE BB
High Risk CARE B
 ForMedium
For MediumTerm
Termdebt
debtinstruments
instruments

Investment Grade CARE

Highest Safety CARE AAA
High Safety CARE AA
Adequate Safety CARE A
Inadequate Safety CARE BB
High Risk CARE C
 ForShort
For ShortTerm
Termdebt
debtinstruments
instruments

Investment Grade CARE

Highest Safety PR1
High Safety PR2
Adequate Safety PR3
Inadequate Safety PR4
High Risk
 Duffand
Duff andPhelps
PhelpsCredit
CreditRating
RatingPvt.
Pvt.Ltd
Ltd
(DCR)
(DCR)
• Leading International Credit rating agency
• Joint ventured with J.M Financial & Alliance Group

Objective: To give credit rating to debt instrument

Rating of Companies & Countries too on request

Rating Symbols are : D1, D2, D3 etc

 OnidaIndividual
Onida IndividualCredit
CreditRating
RatingAgency
AgencyLtd
Ltd
ONICRA
ONICRA
• Established in 1993
• Rates individual borrowers & SME’s
– helps to know the risk associated with credit
transactions

• Affiliated to the National Small Industries Corporation Ltd.

(NSIC) & the National Association of Professional
Background Screening (NAPBS).

• Sponsored by Onidia Finance Ltd.

• Facilitates over 200,000 transactions per day
 CreditRating
Credit RatingAgencies
Agenciesoperating
operatingworld-wide
world-wide

• Dun & Bradstreet,

• Moody's,
• Standard and Poor's and
• Fitch Ratings
 Moody’s
Moody’s
• Moody's Corporation is the holding company for
Moody's Investors Service, a Credit rating agency
which performs international financial research and
analysis on commercial and government entities.

• Ranks the credit-worthiness of borrowers using a

standardized ratings scale.

• The company has a 40% share in the world credit

rating market,
 Standard & Poor's (S&P)
Standard & Poor's (S&P)

• Standard & Poor's (S&P) is a United States-based financial

• Standard & Poor's (S&P) is a United States-based financial
services company.
services company.
Standard & Poor's, as a credit rating agency (CRA), issues
•Standard
• & Poor's, as a credit rating agency (CRA), issues
credit ratings for the debt of public and private corporations.
credit ratings for the debt of public and private corporations.

• It Itisisa adivision
division of The McGraw-Hill Companies that publishes
•
of The McGraw-Hill Companies that publishes
financial research and analysis on stocks and bonds.
financial research and analysis on stocks and bonds.
Investment Grade
• AAA: the best quality borrowers, reliable and stable
(many of them governments)
• AA: quality borrowers, a bit higher risk than AAA
• A: economic situation can affect finance
• BBB: medium class borrowers, which are satisfactory
at the moment.
 FitchRatings
Fitch Ratings

It’sananinternational
• •It’s internationalcredit
creditrating
ratingagency
agencydual-
dual-
headquarteredininNew
headquartered NewYork
YorkCity
Cityand
andLondon.
London.

• •ItItwas
wasone
oneofofthe
thethree
three
NationallyRecognized
Nationally RecognizedStatistical
StatisticalRating
RatingOrganizations
Organizations
(NRSRO)designated
(NRSRO) designatedbybythe the
U.S.Securities
U.S. Securitiesand
andExchange
ExchangeCommission
Commissioninin1975,
1975,
togetherwith
together withMoody's
Moody'sand
andStandard
Standard&&Poor's.
Poor's.
Investment grade
• AAA  : the best quality companies, reliable and stable
• AA  : quality companies, a bit higher risk than AAA
• A  : economic situation can affect finance
• BBB  : medium class companies, which are
satisfactory at the moment
––Thank
ThankYou—
You—

–– SuhanaHareendran
Suhana Hareendran