credit rating agencies aravind mohan

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Aravind Mohan(FM-1068)

CREDIT RATING AGENCIES

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Credit Rating refers to an expert opinion by a rating agency on the relative willingness & obligation of a issuer of debt instrument to meet the debt servicing obligation as and when they airse. These are judgements on a firms financial and business aspects. These ratings are of symbols of alphabets or alpha numericals.

DEFINITION

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Ratings are chalked out exclusively for the purpose of grading debentures, bonds, Govt. bonds, municipality bonds, public deposits, commercial papers etc.

Rating is a current assessment of the credit worthiness of an issuer of securities with respect to specific obligations.

Credit Rating is an opinion of credit rating agencies indicating relative safety of timely payment of interest and principal debenture, preference share, fixed deposit or short term instrument by a company.

Rating is not based on audit.

Features of Credit Rating

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Equity RatingBond RatingCommercial Paper RatingIndividual RatingAsset backed securities RatingCountry RatingOther Ratings

Classification of Credit Rating

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Major Elements of Analysis-• Business Analysis• Financial Analysis• Management Evaluation• Environmental Analysis• Fundamental Analysis

RATING METHODOLOGY

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Famous Credit Rating AgenciesInternational (BIG

THREE)Standard & Poor’s

Financial ServicesMoody’s Investor ServiceFitch Ratings Inc

NationalCRISILICRACAREFITCH SMERAONICRA

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Founded in 1860 by Henry Varnum PoorIs a division of McGraw Hill Financial Headquartered at New York, US.Issues credit ratings for the debt of public and private

companies & other public borrowers such as governments and governmental entities.

STANDARD & POOR’S

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Founded in 1909 by John MoodyHeadquartered at New York, US.Services offfered- Moody’s AnalyticsMoody’s Pricing & Valutation ToolsMoody’s Advisory ServicesMoody’s Economy.comMoody’s Training and Certification

MOODY’S

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Founded in 1913 by John Knowels FitchHeadquartered at New York, US.Provides Ratings on-Corporate FinanceFinancial InstitutionsPublic FinanceResearch on Emerging Markets

FITCH RATINGS INC

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Largest credit rating agency in IndiaEstablished in 1987Initially promoted by ICICI Ltd and UTI as a public limited

company. S & P holds majority stake in CRISIL.Services-Credit Rating ServicesResearch Information and Evaluation ServicesAdvisory ServicesTraining Services

Credit Rating and Information Services of India Limited (CRISIL Ltd)

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Established in 1993Promoted by IDBI, Canara Bank and SBI.2 divisions- CARE Ratings and CARE ResearchServices offered-Credit RatingInformation and Advisory ServicesEquity ResearchOther Services like CARE Loan Rating etc.

Credit Analysis & Research Ltd (CARE Ltd)

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Established in 1991Promoted by IFCI and other financial institutionsServices Offered-Rating ServicesAdvisroy Services andInvestment Information Services.

Investment Information and Credit Rating Agency of Inida. Ltd (ICRA Ltd)

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Subsidiary of FITCH GroupEntered India by acquiring Duff & Phelps Credit Rating

India Pvt Ltd.Recognized by SEBI, RBI, IRDA and NHBMainly provides Rating Services

India Ratings and Research Pvt Ltd (Ind-Ra)

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Joint Initiative between Small Industries Development Bank of India (SIDBI) and Dun & Bradstreet Information Services India Pvt Ltd (D&B) and several leading banks.

Established in 20051st rating agency that focuses on SMEs.Rating Services- MSME Ratings, IPO grading, Project

ratings, Micro Finance institutions ratings

SME Rating Agency of India Ltd (SMERA)

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1st individual rating agency in IndiaEstablished in 1993 and promoted by ONIDA GroupServices offered-Rating ServicesGrading ServicesCredit Information

ONIDA Individual Credit Rating Agency (ONICRA)

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RATING SYMBOLS

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RATING SYMBOLS

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RATING SYMBOLS

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“Financial Institutions and Markets: Structure, Growth and Innovations”- by L.M.Bhole

“Financial Services”- by Dr.A.J George and Anish Thomas, Prakash Publications

standardandpoors.commoodys.comfitch.com

Sources

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