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Credit Analysis and Research Limited (CARE)

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Page 1: Credit ratings

Credit Analysis and Research Limited (CARE)

Page 2: Credit ratings

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.

Page 3: Credit ratings

FEES STRUCTURE

• Initial Rating Fees

• Fixed Deposit

• Debenture

• Commercial Papers

• Issuers Rating

Page 4: Credit ratings

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

Page 5: Credit ratings

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.

Page 6: Credit ratings

CARE's Role in Indian Capital Market

Investors.

Issuers of Debt Instruments.

Financial Intermediaries.

Business Counterparties.

Regulators.

Page 7: Credit ratings

•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

Page 8: Credit ratings

• 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.

Page 9: Credit ratings

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

Page 10: Credit ratings

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

Page 11: Credit ratings

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.

Page 12: Credit ratings

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