credit ratings
Post on 20-Nov-2014
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Credit Analysis and Research Limited (CARE)
Overview• The CARE was promoted by investment companies, banks and
finance companies.
• CARE is recognized by Securities and Exchange Board of India (Sebi), Government of India (GoI) and Reserve Bank of India (RBI) etc.
• The three largest shareholders of CARE are IDBI Bank, Canara Bank and State Bank of India.
FEES STRUCTURE
• Initial Rating Fees
• Fixed Deposit
• Debenture
• Commercial Papers
• Issuers Rating
Banks and FI ratings
Sub-sovereign ratings
Structured Finance Ratings
Insurance/ CPA ratings
Infrastructure ratings
Corporate Governance ratings
Corporate ratings
Services
Construction GradingGrading of MTI
Fund credit Quality rating
SME/SSI ratingsIPO Grading
Issuer Rating
RANGE OF RATING AND GRADING SERVICES
What ratings do not measure• They are not recommendations to invest.
• They do not take into account many aspects which influence the investment decision.
• Ratings do not take into account the risk of prepayment of issuer.
CARE's Role in Indian Capital Market
Investors.
Issuers of Debt Instruments.
Financial Intermediaries.
Business Counterparties.
Regulators.
•information provided by the company
•In-house database and data from other sources that CARE considers reliable. CARE does not undertake unsolicited ratings.
•The primary focus of the rating exercise is to assess future cash generation capability and their adequacy to meet debt obligations in adverse conditions.
contd………
RATING CRITERIA/METHODOLOGY
• The analytical framework of CARE's rating methodology is divided into two interdependent segments. The first deals with the operational characteristics and the second with the financial characteristics.
• Besides quantitative factors, qualitative aspects like assessment of management capabilities play a very important role in arriving at the rating for an instrument.
• The relative importance of qualitative and quantitative components of the analysis vary with the type of issuer.
Rating ProcessCLIENT CLIENT
REQUEST FOR RATING ASSIGNS RATING TEAM
Submits information and detailed schedules
The team analyses the information
Interacts with team, responds to queries and provides additional data necessary for the analysis.
Team interacts with client, undertakes site visits and analyses data submitted by client
RATING COMMITTEE awards rating. Rating Letter & rationale issued to client
Rating Kept Under No Periodic Surveillance
Press Release, published in website, CAREVIEWand Rating Reckoner
Appeal for Review of rating (once)
AcceptsRating?
YES
NO
RESEARCH METHODOLOGYTREND ANALYSIS
ECONOMIC SCINERIO
MEET TOP CLASS PEOPLE
I & II SOURCES
FUTURE PERSPECTIVES
KEY PLAYERS
LATEST DEVELOPMENT
Services
5 YEAR BACK RECORDMAKE SURVEY
STRESS ON FACTS
GLOBAL COMPETITIONGOVT RULES & POLICIES
EXTENT OF COMPETITION
Rating SymbolsLong term / Medium term debt instrumentsCARE AAA: Highest SafetyCARE AA: High SafetyCARE A: Adequate SafetyCARE BBB: Moderate SafetyCARE BB: Inadequate SafetyCARE B: Low SafetyCARE C: Very high-RiskCARE D: DefaultedShort term instrumentsPR1: lowest credit riskPR2: higher credit riskPR3: high credit riskPR4: Very high credit riskPR5: default on maturity CARE assigns '+' or '-' signs to be shown after the assigned rating wherever
necessary) to indicate the relative position within the band covered by the rating symbol.
Rating Symbols for SSI
• SE 1A• SE 1B• SE 1C• SE 2A• SE 2B• SE 2C• SE 3A• SE 3B• SE 3C• SE4A• SE 4B• SE 4C• SE 5A• SE 5B• SE 5C
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