Credit Rating: Rohil Sanil Connel Fernandes Sanket Pandit Jaswant Jaiswar Joel Correia Ajay Mandal

CREDIT RATING
Rohil Sanil Connel Fernandes Sanket Pandit Jaswant Jaiswar Joel Correia Ajay Mandal
WHAT IS CREDIT RATING ?
Credit rating is the opinion of the rating agency on the relative ability and willingness of issuer of a debt instrument to meet the debt service obligations as and when they arise. Rating is an opinion on the future ability and legal obligation of the issuer to make timely pay ments of principal and interest on a specific fixed income security
FUNCTIONS OF CREDIT RATING
Provides unbiased opinion. Provides quality and dependable information. Provides information at low cost. Provides easy to understand information. Provides basis for investment.
ADVANTAGES OF CREDITRATING FOR INVESTORS
Safety of investments. Recognition of risk and returns. Freedom of investment decisions. Wider choice of investments. Dependable credibility of issuer
ADVANTAGES OF CREDITRATING TO COMPANIES
Sources of additional certification Increase the investor population Forewarns risk Encourages financial Discipline Merchant bankers job made easy Foreign collaborations made easy Benefits the industry as a whole Low cost of borrowing Rating as a marketing too
DISADVANTAGES OF CREDIT RATING
Non-disclosure of significant information. Rating is no certificate of soundness. Rating may be biased. Rating under unfavourable conditions. Difference in rating grades.
CREDIT RATING PROCESS
HOW CREDIT RATING IS DONE ?

The rating exercise commences at the request of a company. A rating applies to a particular debt obligation of the company and is not a general purpose evaluation of the company. In evaluation and monitoring ratings, both qualitative and quantitative criteria are employed. Rating is based on several analysis like 1. Business Analysis 2. Fundamental Analysis 3. Financial Analysis
BUSINESS ANALYSIS
Industry Risk.
Market position of the company. Operating efficiency of the company. Legal position.
FUNDAMENTAL ANALYSIS
Capital adequacy Asset quality Liquidity Management Profitability and financial position Interest and Tax sensitivity
FINANCIAL ANALYSIS
Accounting quality Adequacy of cash flows Financial Flexibility Earnings protection
CREDIT RATING AGENCIES IN INDIA
1. Credit Rating Information Services Limited (CRISIL), 2. Investment Information and Credit Rating Agency of India (ICRA), 3. Credit Analysis and research (CARE), 4. FITCH. There is one more CRA in India named ONICRA. But it doesnt seem to have official recognition.
CRISIL
The first credit rating agency floated on January 1, 1988.
It was jointly started by ICICI and UTI with an equity capital of 4 crores.
CRISIL is India's leading rating agency, and is the fourth largest in the world.
The head office of the company is located at Mumbai and it has established offices outside India also. With over a 60% share of the Indian Ratings market, CRISIL Ratings is the agency of choice for issuers and investors.
CRISILS RATING SYMBOLS

Debenture Rating Symbols
High Investment Grades: AAA (triple A) : Highest Safety AA (double A) : High Safety Investment Grades: A : Adequate Safety BBB (triple B) : Moderate Safety
Speculative Grades: BB: Inadequate Safety C: Substantial Risk
B: High Risk D: Default
ICRA
ICRA was set up by Industrial Finance Corporation of India on 16 th January 1991.
ICRA was established by the collaboration of financial institutions, investment companies, and banks at Delhi It is a public limited company with an authorized share capital of 10 crores.
The initial paid up capital of Rs. 3.50 crores was subscribed by IFC, UTI, LIC, GIC SBI and others.
ICRAS RATING SYMBOLS

Long term Debentures Bonds and Preference shares-Rating Symbols LAAA : Highest Safety LAA : High Safety LA : Adequate Safety LBBB : Moderate Safety LBB : Inadequate Safety LB : Risk prone LC : Substantial Risk LD : Default, Extremely speculative
CARE
The CARE was promoted in 1993 jointly with investment companies, banks and finance companies.
It is promoted by the Industrial Development Bank of India (IDBl) jointly with Canara Bank, UTI, private sector banks and financial services companies. CARE undertakes rating of all types of debt instruments like commercial paper, fixed deposits, bonds, debentures.
CARES RATING SYMBOLS
Long term debt instruments-Rating Symbols

CARE CARE CARE CARE CARE AAA AA A BB B : : : : : Highest Safety High Safety Adequate Safety Inadequate Safety High Risk
For medium term debt instruments

CARE CARE CARE CARE CARE AAA AA A BB C : : : : : Highest Safety High Safety Adequate Safety Inadequate Safety High Risk

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Credit Rating: Rohil Sanil Connel Fernandes Sanket Pandit Jaswant Jaiswar Joel Correia Ajay Mandal

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CREDIT RATING

WHAT IS CREDIT RATING ?

FUNCTIONS OF CREDIT RATING

ADVANTAGES OF CREDITRATING FOR INVESTORS

ADVANTAGES OF CREDITRATING TO COMPANIES

DISADVANTAGES OF CREDIT RATING

CREDIT RATING PROCESS

HOW CREDIT RATING IS DONE ?

Accounting quality Adequacy of cash flows Financial Flexibility Earnings protection

CREDIT RATING AGENCIES IN INDIA

CRISILS RATING SYMBOLS

Speculative Grades: BB: Inadequate Safety C: Substantial Risk

B: High Risk D: Default

ICRAS RATING SYMBOLS

CARES RATING SYMBOLS

Long term debt instruments-Rating Symbols

For medium term debt instruments

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