Presentation On Credit Rating Agencies

Group No. 5By,

GuruprasadHarishrilakshmi C H

Hemath ShenoyJayashree

Jayashree Achar H

Definition and Meaning• According to Moody’s, “ Ratings are designed exclusively for

the purpose of grading bonds according to their investment qualities”.

• A credit rating is an evaluation of the credit worthiness of an individual, corporate or even a country. The evaluation is made by a credit rating agency of the debtor’s ability to pay back the debt and the likelihood of default.

• Credit rating are based on financial history and current asset and liabilities

Benefits of credit ratings to Investors

Low Cost Information Quick Investment Decision Independent Investment Decision Investors Protection

Benefits to Rated companies Source of Additional Certificate Encourages Financial Discipline Foreign collaborations Made Easy Merchant Bankers Job Made Easy Increase the Investors Population

Credit Rating Agencies In India• Credit Rating Information Service Ltd(CRISIL)• Investment Information and Credit Rating Agency of India

(IICRA) • Credit Analysis and Research (CARE)• Duff Phelps Credit Rating Pvt.Ltd.(DCR India)• Onida Individual Credit Rating Agency Ltd (ONICRA)• SME Rating agency Ltd( SMERA)

CRISIL• It is an Public company• Established on January 1, 1987 Mumbai• Started jointly by ICICI and UTI with an equity capital of Rs.4

crores.• It become Public in 1993• In 1996, it framed a strategic alliances with S & P rating group.• Has 5 offices- Mumbai, Delhi, Kolkata, Chennai and Bangalore

OBJECTIVES• To assist both individual and institutional investors in making

investment decisions.• To enable corporates to raise large amounts at fair cost• To enable intermediaries to placing their debt instrument with

investors by providing effective marketing tool.

Rating Process

Limitations• Possibility of Bias exist• Improper disclosure may happen• Impact of changing environment• Differences in Ratings

ICRA• Set up by IFCI on 16th January 1991, but operation started

from 15th March 1991.• Headquarter- Gurgaon, India• Public Limited company with an authorized share capital of

Rs.101crores• IICRA was listed in NSE and BSE on 13th April 2007• Main objective to assist both investors individual and

institutional in making well informed decisions.

IICRA Rating ScaleLong term including

Debentures Bonds and Preference shares

• LAAA: Highest safety• LAA: High safety• LA: Adequate safety• LBBB: Moderate safety• LBB: Inadequate safety• LB: Risk prone• LC: Substantial Risk• LD: Default

Medium Term including Deposit Fund

• MAAA: Highest safety• MAA: High safety• MA: Adequate safety• MB: Inadequate safety• MC: Risk prone• MD: Default

• Short term including commercial paper A-1 : Highest safety A-2 : High safety A-3 : Adequate safety A-4 : Risk prone A-5: Default

CARE• Promoted in 1993 jointly with Investment companies, Banks

and Finance companies• It commenced its credit rating operations in October 1993• Three largest shareholders of CARE are IDBI Bank, Canara Bank

and SBI.

Rating Services• Debentures• Certificate of Deposits• Commercial paper• Fixed Deposit

DCR• Founded in 1993 to provide high quality investment research

services focused on utility of industry.• Started its operation in 1996• Its main objective is to give credit rating to debt instrument.• Renamed as Fitch Ratings India Private Limited in 2001 again

renamed as India Ratings and Research Private Limited in 2012

ONICRA• Leading Credit and performance credit agencies in India.• It provides ratings, risk assessment and analytical solution to

individuals, MSME’s and corporate.• It has been sponsored by the ONIDA Finance Ltd

Services

RatingsMSME’S

Vendor & Associate

GradingAPMC

EducationHealth CareSolar energy

SMERA• Founded in 2005 by small Industry development Bank of India

( SIDBI)• Headquarter is at Maharashtra, Mumbai• It is a public company which is comprehensive and

independent third-party evaluation of the MSME.

Benefits• Aids in enhancing the credibility of the MSME unit.• Helps open doors to the corporate sector, especially for

MSMEs having a large vendor base.• Facilitates international trade and commerce by building

confidence amongst potential trading partners.• Motivates MSMEs in adopting good governance practices for

long term benefits.

CONCLUSION• Credit ratings helps the market regulators in promoting

stability and efficiency in the securities market. Ratings make market more efficient and transparent.

• The credit agencies perform a valuable service that make capital markets more efficient and stable in the markets.