CREDIT ANALYSIS AND RESEARCH LIMITEDCREDIT ANALYSIS AND RESEARCH LIMITED

Launched in the year 1993Launched in the year 1993

Set by IDBI in collaboration wit Set by IDBI in collaboration wit some banks and financial institutionssome banks and financial institutions

SERVICES OFFEREDSERVICES OFFERED

The main services offered by it are:The main services offered by it are:

Credit rating of debentures/fixed Credit rating of debentures/fixed deposits/preference shares/commercial papersdeposits/preference shares/commercial papers

Information servicesInformation services

Equity research – extensive study of the shares Equity research – extensive study of the shares listed on major stock exchanges through EIL listed on major stock exchanges through EIL (Economy, Industry, Company) analysis.(Economy, Industry, Company) analysis.

PROJECTS DONE BY CAREPROJECTS DONE BY CARE Offers advisory services relating to securitisation transactions, Offers advisory services relating to securitisation transactions,

structuring financial instruments, financing of infra structure structuring financial instruments, financing of infra structure projects, mergers and amalgamations, and financial projects, mergers and amalgamations, and financial restructuring.restructuring.

Credit analysis rating of parallel marketers of LPG and SKO and Credit analysis rating of parallel marketers of LPG and SKO and collective investment schemes of plantation companies.collective investment schemes of plantation companies.

Advance service division on power sectors and municipal Advance service division on power sectors and municipal finances.finances.

Completed studies for 17 public sector enterprises for the Completed studies for 17 public sector enterprises for the disinvestment commission.disinvestment commission.

Upto march 31, 2006, it had completed 3175 rating Upto march 31, 2006, it had completed 3175 rating assignments for an aggregate value of about Rs. 5,231 billion.assignments for an aggregate value of about Rs. 5,231 billion.

IPO Grading by Credit Rating IPO Grading by Credit Rating AgenciesAgencies IPO Grading – provides an independent assessment of IPO Grading – provides an independent assessment of

fundamentals to aid comparative assessment that would fundamentals to aid comparative assessment that would prove useful as an information and investment tool for the prove useful as an information and investment tool for the investors.investors.

Credit rating agencies registered with SEBI would carry out Credit rating agencies registered with SEBI would carry out IPO grading for any individual issue, which would represent IPO grading for any individual issue, which would represent a relative assessment of the fundamentals of that issue in a relative assessment of the fundamentals of that issue in relation to other listed equity shares.relation to other listed equity shares.

IPO grading is a one-time assessment done prior to the IPO IPO grading is a one-time assessment done prior to the IPO issue during the draft prospectus stage.issue during the draft prospectus stage.

Cost of IPO grading – borne from investor protection funds Cost of IPO grading – borne from investor protection funds administered by stock exchanges or from Investor administered by stock exchanges or from Investor Education and Protection Fund (IEPF) administered by Education and Protection Fund (IEPF) administered by Ministry of Company Affairs.Ministry of Company Affairs.

LIMITATIONS OF CREDIT RATING IN LIMITATIONS OF CREDIT RATING IN INDIAINDIA

Credibility of rating is questionableCredibility of rating is questionable Frequent revision of grading by credit rating Frequent revision of grading by credit rating

agenciesagenciesAround a third of the ratings done by credit rating Around a third of the ratings done by credit rating

agencies are not accepted by the clients.agencies are not accepted by the clients.Rating agencies do not perform an audit but rely Rating agencies do not perform an audit but rely

solely on the information provided by the issuer.solely on the information provided by the issuer.Rating exercise appears biased.Rating exercise appears biased.Rating agencies often fail to correctly predict a Rating agencies often fail to correctly predict a

borrower’s financial health in the short-term.borrower’s financial health in the short-term.