Professional Documents
Culture Documents
RATING
WHAT IS
CREDIT
RATING
WHY CREDIT
RATING
Cont
The foreign collaborators become interested in
investing in a company rated well.
Rating acts as a check post over the performance of
the companies to be rated.
Provides stability in the stock market when the rated
securities are traded.
Contd
establish a link between risk and return
HOW CREDIT
RATING IS
DONE?
Business Analysis
Industry Risk like nature and basis of competition;
key success factors; demand-supply position;
Market position of the company within the industry.
Operating efficiency of the company like location
advantages; labour relationships; cost structure;
technological advantages.
Legal position in terms of prospectus, trustees and
their responsibilities;
Financial Analysis
Accounting quality method of accountong,qualification
of accountant.
Adequacy of cash flows
Financial flexibility -alternative financing plans in times of
stress; ability to raise funds.
Earnings protection -sources of future earnings growth;
profitability ratios; earnings in relation to fixed income
charges; etc.
Fundamental Analysis
Capital Adequacy-assessment of true net worth of the
company,
Asset Quality-quality of the company's credit-risk
management; systems for monitoring credit;
Liquidity Management -capital structure; term matching of
assets and liabilities;
Profitability and Financial Position
Interest and Tax Sensitivity -exposure to interest rate
changes; tax law changes and hedge against interest rate etc.
Rating process:
Review of the public information on the client
Questionnaire
Meeting with client
Preparation of draft report
Draft report sent to subject client for review as to factual
accuracy
Amended report (following client comments) sent to rating
committee members
Rating committee meeting/discussion and assignment of rating
Client advised of rating
Rating made public
CRISIL
It is the first rating agency in India
It was promoted in 1987 by the Industrial Credit and
Investment Corporation of India Limited (ICICI) and Unit
Trust of India (UTI).
The head office of the company is located at Mumbai and it
has established offices outside India also.
Rating Symbols
ICRA
ICRA was established in the year 1991 by the collaboration
instruments.
Rating Symbol:
CARE
It is promoted by the Industrial Development Bank of India
(IDBl) jointly with Canara Bank, UTI, private sector banks
and financial services companies.
CARE, incorporated on April 21, 1993, commenced its
operations in October 1993.
CARE undertakes rating of all types of debt instruments like
commercial paper, fixed deposits, bonds, debentures.
Its services includes credit rating and information services.
Rating Symbol:
ONICRA
ANY QUESTION