Presentation On Credit Rating AgenciesGROUP NO. 5

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 InvestorsLow Cost Information

Quick Investment Decision

Independent Investment Decision

Investors Protection

Benefits to Rated companiesSource 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 Ltd Company

Established on January 1, 1987 Mumbai

Started Jointly By ICICI and UTI with an equity capital of Rs.4crores.

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 Scale

LONG 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.