care valuation ppmld - careratings.com · care's ppmld valuation services may also availed by...
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CARE
Valuation PPMLDof
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BackgroundPrincipal Protected Market Linked Debentures (PPMLD) are instruments issued with coupons associated with the
performance of certain underlying asset, generally an equity index. The Principal portion of the instrument
is protected for downside and even in case of any negative return on the underlying equity index, the coupon
is not negative. The structure benefits from the positives of debt instrument in form of protection of the principal
amount and benefits from positives of equity instrument in form of participation in positive returns. Generally,
the instrument do not have periodic payments towards coupons and the coupons are payable only at the maturity
of the instrument.
Need for ValuationªIn view of the fact that PPMLDs are different in
their nature and their risk return relationship,
SEBI has mandated compulsory valuation of the
structures by credit rating agencies like CARE.
ªInvestors are informed with an unbiased
independent valuation of the hybrid structure.
ªInvestors, at times, lack the expertise and
knowledge to evaluate such hybrid structures,
which an independent agency like CARE
possesses.
Why CARE RatingsRegulatory Recognition
ªCredit Analysis and Research Ltd (CARE) is recognized by Government of India and all regulatory agencies
in India like SEBI, RBI, NABARD, NHB and NSIC.
Independent
ªCARE is an independent rating agency promoted by major banks and financial institution in India.
Professional
ªAnalyst team of CARE includes qualifies and multifaceted professionals from diverse backgrounds such as
chartered financial analysts, chartered accountants, engineers, economists and financial risk managers.
MethodologyªWe use Local Volatility Method for valuation of
structured products using the analytic and simulation
capabilities of Numerix Portfolio software.
ªThe valuation methodology adopts a simulation based
approach that is accepted across market participants
as the appropriate method for valuation of exotic
options.
ªInputs for the valuation are based on our analysis of
information from various data service provider
including SuperDerivatives, FIMMDA and Issuers.
CARE's Valuation of PPMLD structures are opinions on the valuation of a
given instrument based on CARE's analysis of the structure and the
impact of underlying market variables affecting the structure on the
given valuation date. The valuation considers various market scenarios
using some of the most advanced simulation software and high quality
data on the underlying variables.
An independent Valuation opinion provided by CARE helps the
investors in taking the right investment decision in the complex PPMLD
market. CARE's PPMLD Valuation services may also availed by Issuers
for getting an independent third party evaluation of their portfolio.
PPMLD Issuer Request forValuation
Issuersubmits term
sheets and otherrelevant
information
CAREValuation Team
is assigendfor valuation
Team interactswith Issuer
and analyses term sheets
Valuationexecrcise
completed bythe concerned
analyst
Valuationdisscussion atthe valuationteam Meeting
Valuationconveyed to
the issuer andpress releasemade for the
same
Weeklyupdation of the
valuation on the website
Valuation Process
Market Linked Debenture Valuation provided by the Valuation Agent reflects the Valuation Agent's opinion on the value of the Market Linked
Debenture on the valuation date and does not constitute an audit of the Issuer by the Valuation Agent. The Valuation is based on the information
sought from and/or provided by the Issuer or obtained by the Valuation Agent from sources it considers reliable. The Valuation Agent does not
guarantee the completeness or accuracy of the information on which the Valuation is based. The Valuation Agent specifically states that the
Valuation is an indicative value of the Debenture on the valuation date and can be different from the actual realizable value of the Debenture. The
Valuation does not comment on the market price of the Market Linked Debentures or suitability for a particular investor. The Valuation Agent is not
responsible for any errors and especially states that it has no financial liability to the issuer / users / investors of the Valuation. In the event of early
redemption/buy back/ any other premature exit, the investors may choose to contact the Issuer directly or through their intermediaries (through
whom investments in the Specified MLDs were made) or, in the alternative, follow the procedure as set out in the relevant Offer Document.
DISCLAIMER
Credit Analysis & Research Ltd. (CARE), promoted in 1993 by some of the leading Indian banks and financial
institutions including Industrial Development Bank of India (IDBI), Canara Bank and others is amongst the premier
credit rating agencies in India and provides credit rating, research and information services. CARE Ratings is well equipped
to rate all types of debt instruments including Commercial Papers, Fixed Deposits, Bonds, Debentures, Hybrid Instruments, Preference Shares,
Loans, Structured Obligations, Asset Backed Securities, Residential Mortgage Backed Securities etc. CARE's rating methodologies are in line with
the best international practices.
CARE Research & Information Services (CARE Research)is an independent division of CARE. CARE Research services a variety of business
research needs with credible, high-quality research and analysis on various facets of the Indian Economy and Industries. The Publications include
Industry Reports, Debt Market Review, Budget Analysis and other policy impact analysis and special commentaries on topical issues.CARE
Research offers both subscription-based reports as also customized reports on request. The reports by CARE Research provide insightful data
and analysis on various industry sectors and CARE's outlook on the same.
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