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PROJECT REPORT

ON

MARKET STUDY ON CORPORATE CREDIT RATINGS

Project report submitted in partial fulfillment of the requirement for the award of the degree of

Masters program in international business

Under the guidance of

Mr. SYED MUZAMMILUDDIN

PROFESSOR

RAKESH REDDY B.V : 09-44

BADRUKA INSTITUTE OF FOREIGN TRADE

KACHIGUDA, HYDERABAD

2009-2011

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CERTIFICATE

This is to certify that the Project Report titled MARKET STUDY ON

CORPORATE CREDIT RATINGS submitted in partial fulfillment for award

of degree of Masters Program in international business was carried out by

RAKESH REDDY B.V under my guidance. This has not been submitted to any

other University or Institution for the award of any Degree / Diploma/ Certificate.

Name and address of supervisor

Mr. SYED MUZAMMILUDDIN Professor G.S. RAOPROFESSOR& GUIDE DIRECTOR

BIFT BIft

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DECLARATION

I hereby declare that this Project Report titled MARKET STUDY ON

CORPORATE CREDIT RATINGS is been submitted by me to the

Department ofBADRUKAINSTITUTE OF FOREIGN TRADE is a bonafied

work undertaken by me and it is not submitted to any other University or

Institution for the award of any Degree / Diploma / Certificate or published any

time before

RAKESH REDDY B.V: 09-44

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ACKNOWLEGDGEMENT

The satisfaction and euphoria that accompany the successful completion of any

task would be but incomplete without the mentioning of the people who made it

possible, whose constant guidance and encouragement crowned my effort with

success.

I am greatly thankful to Mr. G.S. RAO, director ofBhadruka institute of

foreign trade for kindly considering our request and graciously permitting me to

do project work of our MPIB course. I take this opportunity to profusely thank

him.

I express my profound gratitude to Mr. SURYANARAYANA MANGINA

(REGIONAL HEAD), my external guide, FITCH TRATINGS for his kind

acceptance in providing me project training in their prestigious company. I

express my profound gratitude of our professor & guide Mr. SYED

MUZAMMILUDDIN, who provide us with the necessary facilities and

encouragement that held us in completing the project within time, and providing

guidance throughout.

RAKESH REDDY B.V(09-44)

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S.No Topic Page No.

1 Executive Summary 11

2 Objectives & Limitations 12

3 Credit ratings 09

4 Basel II 10

5 About Fitch Ratings 15

7 Fitch Ratings in India 22

8 Types of ratings 23

9 Ipo gradings 24

10 Pharma sector Outlook 2511 Aurobindo pharma Rating Rationale 27

12 Healthcare sector Outlook 29

13 Mittal hospitals Rating Rationales 31

14 Marketing Of Bank Loan Rating 36

15 Data analysis 38

16 Conclusion&Project findings 40

17 Annexure 42

EXECUTIVE SUMMARY

This project is focusing on one of the famous rating agency namely Fitch Ratings.

The company is already established very well in the global competitive market and spreading

its wings into Indian corporate sector.

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The study was conducted from 24 th June to 7th August of 2010.

The objectives of this study were to find the present status of credit rating in the corporate

world. Other Objectives includes marketing about our own firm i.e. Fitch Ratings India Pvt Ltd

also getting the financial information of the corporates and finding the rating opportunity with

those companies. Research was conducted by meeting the financial heads of the companies,

with Questionnaire as tool of data collection.

OBJECTIVES

.To study and understand the credit ratings process & its importance

To perform B to B marketing

.Market mapping of Fitch Ratings in pharma and health care sectors

.To promote ratings,its importance and penetration in the SMEs.

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LIMITATIONS

The study is limited to few companies according to the availability of primary data

source such as monthly fact sheets and web sites.

This study is limited with in various rating processes done bu Fitch Ratings alone.It

does not include the rating processes and evaluations of other credit rating agencies.

Credit Rating:

A credit rating estimates the credit worthiness of an individual,

corporation, or even a country. It is an evaluation made by credit bureaus of

a borrowers overall credit history.[1] A credit rating is also known as an

evaluation of a potential borrower's ability to repay debt, prepared by a

credit bureau at the request of the lender (Black's Law Dictionary). Credit

ratings are calculated from financial history and current assets andliabilities. Typically, a credit rating tells a lender or investor the probability

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http://en.wikipedia.org/wiki/Credit_worthinesshttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Credit_rating#cite_note-0http://en.wikipedia.org/wiki/Black's_Law_Dictionaryhttp://en.wikipedia.org/wiki/Current_assethttp://en.wikipedia.org/wiki/Liability_(financial_accounting)http://en.wikipedia.org/wiki/Credit_worthinesshttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Credit_rating#cite_note-0http://en.wikipedia.org/wiki/Black's_Law_Dictionaryhttp://en.wikipedia.org/wiki/Current_assethttp://en.wikipedia.org/wiki/Liability_(financial_accounting)


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of the subject being able to pay back a loan. However, in recent years,

credit ratings have also been used to adjust insurance premiums, determine

employment eligibility, and establish the amount of a utility or leasing

deposit.

A poor credit rating indicates a high risk ofdefaulting on a loan, and thus

leads to high interest rates, or the refusal of a loan by the creditor.

Rating Agencies in India

1. Fitch Ratings India

2. Credit Rating Information Services of India Limited (CRISIL)

3. Credit Analysis & Research Limited (CARE)

4. Investment Information and Credit Rating Agency of India (ICRA)

Basel II

Basel II is a revised framework on Capital Adequacy by Basel Committee on

Banking and Supervision. Under this system the balance sheets, non-

funded exposures are assigned prescribed risk weights and banks have to

maintain the minimum capital funds equal to the prescribed ratio on the

aggregate risk weighted assets and exposures on an going basis. With a

view to have consistency and harmony with International standards, RBI has

decided that all commercial banks in India shall adopt standardized

approach for measuring credit risk under Basel II.

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http://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Default_(finance)http://en.wikipedia.org/wiki/Interest_ratehttp://www.indiaonestop.com/creditrating.htm#CRISILhttp://www.indiaonestop.com/creditrating.htm#CAREhttp://www.indiaonestop.com/creditrating.htm#ICRAhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Default_(finance)http://en.wikipedia.org/wiki/Interest_ratehttp://www.indiaonestop.com/creditrating.htm#CRISILhttp://www.indiaonestop.com/creditrating.htm#CAREhttp://www.indiaonestop.com/creditrating.htm#ICRA


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All Indian Banks having operational presence outside India and Foreign

Bank in India will

have to migrate to Basel II by March 31, 2008 and all other banks by

March 31, 2009.So

depending upon who you might be banking with, you may to get rated

before March 31, 2008.

The underlying philosophy while prescribing the Basel II principles for the

Indian banking sector was that this must not result in further segmentation

of the sector.Accordingly, it was decided that all scheduled commercial

banks in India, both big and small, shall implement the standardized

approach for credit risk and the basic indicator approach for operational

risk with effect from March 31, 2007. However, the existing three-tier

structure in respect of SCBs, the cooperative banks and RRBs may

continue. Currently, the commercial banks are required to maintain capital

for both credit and market risks as per Basel I framework; the

cooperative banks, on the second track, are required to maintain capital for

credit risk as per Basel I framework and through surrogates for market

risk; the Regional Rural Banks, on the third track, have a minimum

capital requirement which is, however, not on par with the Basel I

framework.

By opting to migrate to Basel II at the basic level, the

Reserve Bank has

considerably reduced the Basel II compliance costs for the system. In a way,

the elementary approaches which have been identified for the Indian

banking system are very similar to the

Basel I methodology. For instance,

a) there is no change in the methodology for computing capital

charge for

market risks between Basel I and Basel II;

b) the computation of capital charge for operational risk under the

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BIA is

very simple and will not involve any compliance cost;

c) the computation of capital charge for credit risk will involve

compilation

of information in a marginally more granular level, which is

expected to

be achieved with a slight re-orientation of the existing MIS.

In the above circumstances, it might not be an entirely correct

assessment that implementation of the elementary levels of Basel II

significantly increases the cost of regulatory compliance. No doubt some

additional capital would be required, but the cushion available in the

system, which at present has a Capital to Risk Assets Ratio (CRAR) of

over 12 per cent, provides for some comfort.

What is the benefit to my organization for getting rated under

Basel II?

Getting rated has multiple benefits:

Lower borrowing cost, arising from the lending banks savings in its

capital charges.

Visibility to the rated entity, to reach broad investor base.

Easier and faster loan sanction.

Increased credit worthiness among investors and lenders, resulting in

increased negotiation capacity for the rated entity.

How does it affect my organization?

As banks have to set aside higher capital for exposures having higher credit

risk, or lower credit

rating means increased borrowing costs. Banks will have to pass on the cost

of higher capital

requirement to exposures that are unrated or having higher credit risk. This

may effect your

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organizations borrowing costs.

Why do I have to get rated?

Recent RBI guidelines on Basel II require that banks use external credit

rating agencies such as Fitch to largely support measurement of credit risk.

Banks will have to get all their current

exposures/claims rated in order to arrive at amount of capital required for

the amount of credit risk they are exposed to. The ratings need to be

solicited and has to be accepted by the borrower. More ever, it has been

prescribed that all fresh sanctions and renewals of unrated exposures in

excess of Rs.50 crore will attract risk weight of 150% from March 31, 2008

and all similar risk weight for unrated exposures in excess of Rs.10 crores

from March 31, 2009. This means increased borrowing costs. Hence you

need to get your organizations all claims rated at the earliest

Which claims have to be rated? Do Guarantees and Letter of

Credits have to be rated?

RBI guidelines include all fund based and non-fund based exposures. This

includes all funded, off balance sheet and market exposures. Hence,

guarantees and L.Cs too have to be rated. All

claims with contractual maturity of more than one year have to be mapped

to the long term

rating scale and claims with contractual maturity of less than year to be

mapped on to a short tem scale. Cash credit facilities are rolling facilities

and are perennial, hence, mapped to a long term scale.

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About Fitch Ratings

Fitch Ratings is a global rating agency dedicated to providing the worlds

credit markets

With independent and prospective credit opinions, research, and data.

With 49 offices

worldwide, Fitch Ratings global expertise, built on a foundation of

local market

experience, spans across capital markets in over 150 countries. Fitch

Ratings is widely

recognized by investors, issuers, and bankers for its credible,

transparent, and timely

coverage.

Fitch Ratings currently maintains coverage on more than 6,000

financial institutions,

including 3,213 banks and 2,414 insurance companies. Finance &

Leasing companies,

broker-dealers, managed funds and covered bonds all compose the

remainder of Fitch

Ratings coverage universe for financial institutions.

Additionally, Fitch rates approximately 1,700 corporate issuers, 106

sovereigns, 177 sub-sovereigns and 95,841 U.S. municipal transactions. Fitch also maintains

surveillance on

more than 7,200 U.S., 1,700 European and 730 Asia-Pacific structured

finance

transactions.

Fitch Ratings is headquartered in New York and London and is part of the

Fitch Group.

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In addition to Fitch Ratings, the Fitch Group also includes Fitch Solutions, a

provider of

data, analytics and related services including Fitch Training, which

offers high-quality

analytical training for financial professionals. The Fitch Group also

includes

Algorithmics, a world leading provider of enterprise risk management

solutions.

The Fitch Group is a majority-owned subsidiary of Fimalac, S.A.,

headquartered in Paris,

France.

Fitch Ratings India

Fitch Ratings India is a 100% subsidiary of Fitch Ratings and rates

over 400 entities/

structures in India. Some of the leading corporates including Hindalco

Industries Ltd,

Reliance Industries Limited, Gujarat Ambuja Cements Limited, ACC,

Hindustan Lever

Ltd. Ashok Leyland Limited, Mahindra and Mahindra, Indo Gulf Fertlisers,

Tata

Metaliks Ltd,Tata projects, TRF Limited, Bajaj Hindusthan Limited, Ballarpur

Industries

Limited. Fitch also rates some of the large banks such as State Bank

of India, HDFC

Bank, ING Vysya Bank, Bank of Baroda, Andhra Bank, Federal Bank, Kotak

Mahindra

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Bank etc. Fitch also rates structured finances including mortgage-backed

securitizations,

asset backed securitizations and public finance deals.

Why should I get myself rated from Fitch?

Fitch provides you with:

Quality research, clarity of opinion

Superior surveillance, calling split/ recovering credits

Access to experienced analytical team with product expertise

Transparent ratings analysis

Explaining the credit story more clearly

Methodologies consistent with international standards

Ratings reflect global trends

Global Rating Committee

Worldwide distribution of rationales and India research

Global templates used for ratings and rationales and more

importantlyability to

provide domestic and international ratings under the same brand!

Types of Ratings By FITCH

1. Bank loan rating

2. IPO ratings

3. CP rating

4. NCD rating

5. International ratings

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The Process

Typically, Fitch receives for its review a detailed information package

(comprising both

qualitative and quantitative information) from the entity being rated. This is

followed by

meeting(s) with the entitys senior management, which assists the

Fitch analysts in

understanding the credits operational, financial, and strategic goals.

Fitch views

management practices as one of the most important factors in a credit

rating and believes

the opportunity to spend time with management is essential. The goal of

the meeting with

members of the management team is to develop an understanding of

its management

philosophy, mission, and strategic goals. Timely and adequate information

is the key for

a fast and accurate delivery of the assessment.

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Information Requirement: ABC Limited

Confidentiality: The information provided by the applicant shall remainstrictly confidential and be used for the

purpose of rating only.

Organizational Details

1.Group structure including details of holding /subsidiary /group companies.

Shareholding

pattern as on date.

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2.Organisation Chart showing functional divisions of the company including

resume of key executives

3.List of Board of Directors as on date (giving breakup of promoter,

institutional, employee and independent

directors), including details of qualifications, age, experience and

shareholding, if any.

4.Details of any delays, defaults, LC devolvement, guarantee invocation and

restructuring (business or financial)

implemented in the past 5 years

Business Details

5.Segment wise details of cost of production (including cash cost of

production) for the last 5 years

6.Linkages for raw materials viz. contracts for sourcing and pricing. Copy of

raw material contracts, if any.

7.Product flow chart, details of technical collaboration, if any and terms and

conditions of the contracts including

tenure, rights and obligations coupled with financial terms.

8.Customers profile. Break up of revenues from top 10 customers during the

past 5 years. Details of any long

term contracts, if any, with end customers. Copy of sample contracts with

end consumers

9.Terms of credit to customers, both domestic and export

Financial Market Risks

10. Does the company have a policy for managing financial market/

commodity risk? When was it last reviewed?

The analytical team would like to review this document

11. What are the risk limits set by the policy in respect to:

- Covered and open positions (capital and revenue, for forex, interest

rate and commodity risks)

- Stop-loss on open positions

- Counter-party exposures

12. How is compliance with the policy monitored?

- Segregation of front office and back office

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- Middle office for risk monitoring

- MIS

- Approval authority for materially large hedging contracts, and

policy on leveraged positions

13. Is the treasury subject to any risk audit? If so, at what frequency?

14 Hedging Derivatives Outstanding, their nature (plain vanilla or

structured), are they marked to market, how

are these reported/monitored? Accounting treatment

15 Total Value at Risk of hedging contracts with details of potential

liabilities as at the date of the balance sheet

for the past three years

Financial Details

16.Copy of the printed annual reports for the past 5 years (standalone and

consolidated financials), copy of

recent offer document (FCCB, ECB etc)

17.Segment wise profitability (if not provided in the annual report) for the

key divisions of the company

18.Monthly cash flow statement for the past 12 months and projected for

next 12 months including utilization of

fund based and non-fun based limits

19.Details of sundry debtors written off and debtors beyond six months for

the past 3 years. Please provide an

age wise profile of debtors for this period.

20.Details of related party transactions with group companies including

loans and advances made, guarantees

provided, received and the terms and conditions thereof in the last 3

years. Please provide financials of these

entities, in case not provided in the annual report

21.Details of any off balance sheet transactions including leases

22.Debt repayment schedule for (loan wise) the total interest bearing

liabilities outstanding as

on 31 March 2007

23.Break up of current assets/ liabilities between trade and those

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attributable to other affiliate/ group companies

technically not covered as related parties

24.Please specify if there are any cross-default provisions/ letters of

comfort outside contingent liabilities for of

loans taken by other group/ affiliate/ JV entities of the company, and

indicate the amount of the underlying

obligation

Projected Plans

25.Proposed business plan for next 5 years including inorganic, organic and

merger/divestment plans

26.Projected Profit & Loss Account, Cash flow statement and Balance Sheet

for the next 5 years together with

detailed workings and assumptions both on standalone and on

consolidated basis (in an electronic form)

Additional requirements for Basel II

27. Details of fund-based and non-fund based limits enjoyed from Banks

(please indicate if there is any amount

untied in relation to the assessed limits), giving exposure of all the banks

separately, along with their rates of

interest. Please also furnish copy of the sanction letters for the latest

limits from the respective banks. We may

also require copies of the agreements for working capital and term loans

proposed to be rated under Basel II.

Types of Ratings

The suffix (ind) refers to National Ratings assigned by Fitch India. Fitchs

National ratings provide a relative measure of creditworthiness for

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rated entities in countries with sub- or low-investment grade

international sovereign ratings. The best risk within a country is rated AAA

and other credits are rated only relative to this risk. National ratings are

designed for use mainly by local investors in local markets and are signified

by the addition of an identifier for the country concerned, such as AAA

(ind) for National ratings in India. Specific letter grades are not therefore

internationally comparable. An additional suffix of (SO) refers to structured

obligations.

Long-Term

Credit Ratings

Investment Grade

AAA(ind)AAA national ratings denote the highest rating assigned in its national

rating scale. This rating is assigned to the best credit risk relative to all

other issuers or issues in the country.

AA(ind)

AA national ratings denote a very strong credit risk relative to other

issuers or issues in the country. The credit risk inherent in these financial

commitments differs only slightly from the countrys highest rated issuers

or issues.

A(ind)

A national ratings denote a strong credit risk relative to other issuers or

issues in the country. However, changes in circumstances or economic

conditions may affect the capacity for timely repayment of these financial

commitments to a greater degree than for financial commitments denoted

by a higher rated category.

BBB(ind)

BBB national ratings denote an adequate credit risk relative to other

issuers or issues in the country. However, changes in circumstances or

economic conditions are more likely to affect

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the capacity for timely repayment

of these financial commitments than for financial commitments denoted by

a higher rated category.

Speculative Grade

BB(ind)

BB national ratings denote a fairly weak credit risk relative to other issuers

or issues in the country. Within the

context of the country, payment of these financial commitments is

uncertain to some degree and capacity for timely repayment remains more

vulnerable to adverse economic change over time.

B(ind)

B nationalratingsdenote a significantly weak credit risk relative to other

issuers or issues in the country. Financial commitments are currently being

met but a limited margin of safety remains and capacity for continued

timely payments is contingent upon a sustained, favorable business and

economic environment.

C(ind)

This rating denotes an extremely weak credit risk relative to other issuers or

issues in the country. Capacity for meeting financial commitments is solely

reliant upon sustained, favourable business or economic developments.

D(ind)

This rating is assigned to entities or financial commitments which arecurrently in default.

Within a band of rating symbols from AA(ind) to B(ind), the modifers +

or - may be appended to a rating to denote relative status within

the rating category.

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Short-Term

Credit Ratings

F1(ind)Indicates the strongest capacity for timely payment of financial

commitments relative to other issuers or issues in the country. Under the

national rating scale, this rating is assigned to the best credit risk relative

to all others in the country.

F2(ind)

Indicates the satisfactory capacity for timely payment of financialcommitments relative to other issuers or issues in the country. However,

the margin of safety is not as great as in the case of the higher ratings.

F3(ind)

Indicates an adequate capacity for timely payment of financial

commitments relative to other issuers or issues in the country. However,

such capacity is more susceptible to near-term adverse changes than for

financial commitments in higher rated categories.

F4(ind)

Indicates a highly uncertain capacity for timely payment of financial

commitments relative to other issuers or issues in the country. Capacity or

meeting financial commitments is solely reliant upon a sustained,

favourable business and economic environment.

F5(ind)

Indicates actual or imminent payment default. Only short-term ratings of

F1(ind) and F2(ind) will carry the modifier +.

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Relation Between Long Term and Short Term Ratings

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IPO Grading Scale

The IPO grade scale as arrived at by SEBI is a 5 point scale with Grade 1

denoting poor fundamentals and Grade 5 indicating strong fundamentals.

The grade assigned to any individual issue represents a relative assessment

of the fundamentals of that issue in relation to the universe of other listed

equity securities in India.

IPO Grading Scale

Grading Category Definitions

Fitch IPO Grade 5 (ind) Strong fundamentals

Fitch IPO Grade 4 (ind) Above average fundamentals

Fitch IPO Grade 3 (ind) Average fundamentals

Fitch IPO Grade 2 (ind) Below average fundamentals

Fitch IPO Grade 1 (ind) Poor fundamentals

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Indian Pharma industry outlook

Overview

Fitch Ratings takes a stable outlook on the India pharmaceutical sector

in 2010. A rising global acceptance of generics, coupled with

increased outsourcing of manufacturing by Global Pharma to low

cost locations, will benefit the exports focused Indian pharma

companies. This has led to increased contract manufacturing volumes

outsourced to India, as well as certain alliances by international

pharma companies with quality Indian majors. Companies such as

Aurobindo Pharma Ltd (APL, A+(ind)/Stable/F1+(ind)) and

ClarisLifesciences Ltd (Claris, BBB+(ind)/F2+(ind)/Stable) have

entered into alliances with large pharma Strides Arcolab Limited.

Indiafocussed pharma companies will continue to benefit from steady

domestic growth, with a consequent overall growth in volumes and

capacity utilisation. Fitch notes that pricing pressures due to a greater

than expected increase in competition could moderate the anticipated

improvements in profitability.

Competition could arise from both existing players as well as new

entrants into the generics space. This remains a key risk factor for future

margins. Regulatory issues could have an impact, primarily with regard

to approvals for new products and any

tightening in quality controls.

The majority of the entities within Fitchs rated national pharma

portfolio have completed

he majority of their capacity expansion programmes, and will likely

spend the next one to two years consolidating their recently expanded

facilities.

Large future capacity additions appear unlikely over the near term, and

Fitch will continue to view any large debtled capex programme with

concern from a rating perspective. Although refinancing risks remain on

account of foreign currency convertible bonds

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(FCCBs) outstanding on many Indian pharma companies books, the

improved liquidity

scenario, coupled with the improved cash flows over the near term,

should partly offset

this risk. Some companies bought back a portion of their FCCBs in 2009

at a discount, which also partly mitigates refinancing risks. Some of the

major FCCB buybacks include those conducted by APL and Bilcare Ltd.

Fitch notes that with the arrival of Global Pharma into the generic

market, thealreadycompetitive market is likely to face further strain.

Indian companies,by contrast,are much smaller and do not have the

financial strength to absorb high price cuts or deep discounts. Indian

companies distribution networks in regulated markets is also far

below that of Global Pharma. Fitch expects that Indian companies

will have to work harder to manage costs and maintain profitability in

order to compete effectively.

Any delay in product approvals from the US Food and Drug

Administration (FDA).

Increased Demand from both the Export and Domestic

Markets

The global pharmaceutical industry is facing a period of significant

drug patent expiries, which substantially expands the addressable

market for generics companies. Regulatory steps taken by developed

countries towards curtailing growing healthcare budgets has also

contributed to the increase in demand for generics. The sharpened

focus of Global Pharma on the generics market will also lead to

greater outsourced manufacturing volumes in order to control costs.

This could be either through higher contract manufacturing volumes, or

through longerterm relationships/alliances. India is wellplaced to

benefit from this shift, with the countrys strong manufacturing base

both in formulations, as well as in key inputs (bulk drugs and APIs).

India has the highest number of US FDAapproved plants outside of

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the US. Fitch expects revenue growth in both these segments over the

medium term.

The domestic pharma industry is expected to continue to grow at

11%12% per annum in 2010. Fitch notes that rising purchasing power

and the increasing penetration penetration of health insurance will support strong

growth in the domesti formulations business in the long term.

Rating Rationales

Aurobindo Pharma LtdThe affirmation of Aurobindo Pharma ltds (APL) ratings reflects the

strong growth in revenues and operating profit,and the subsequent

improvement in credit metrics during the financial year ended march

2009(FY09).Higher capacity utilization of formulation units and a

favourable US dollar/indian rupee exchange rate resulted in a 20%

growth in APLs top line.Furthrmore,higher contributions from the high

margin formulation business (percentage of total sales:46% in FY09,39%

in FY08)and dossier sales/license income resulted in a higher operating

profit and operating margin of 18% versus 15% in FY08.

Fitch Ratings notes that given APLs established business, strong

formulation product profile, and agreement with Pfizer Inc.

(AA-/StabLe), future growth and profitabiLity should continue to

remain robust. In addition, lack of any major capex plans wouLd resuLt

in a sustained improvement in credit metrics.

Recent Events

In March 2009, Pfizer entered into a 15-year expanded collaboration with

APL to commercialize off-patent products for US/Europe and emerging

markets. APL has approved a proposal to acquire a

100% stake in Trident Life Sciences Limited (TLSL), valued at

INR1,349.5m.

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Future Plans

In August2009,APLs board approved a proposal to acquire a 100% stake

in Trident Life Sciences Limited (TLSL). The total expected expenditure

for the acquisition including capex would be INR1.8bn.

TLSL has a Clinical Research Organizations (CRO) business,and was in

the process of implementing a liquid injectibles facility near

Hyderabad.However,due to managements intention to focus on its core

business of CRO,it demerged the CRO business into a separate

company,leaving it with just the injectibLe pLant this willbe used to meet

APLs injectable requirements.

The injectable facility specializes in manufacturing a range of general

injectible formulation products including glass vials for sterilepowder

and liquids, pre-filled syringes and bLow-filled seals. As of November

2009,

75% of the facility was complete, and commencement of operations is

expected in Apri l 2011.

29

Term Loans

Bank (INRm) Rating

Andhra Bank 2,000 A+(ind)

Bank of India 1,083 A+(ind)

Total 3,083

Source: Company

Bank (INRm) Rating

ICICI Bank 500 A+(ind)/F1+(ind)Nova Scotia 375 A+(ind)/F1+(ind)

Deutsche Bank 500 A+(ind)/F1+(ind)

IDBI Bank 500 A+(ind)/F1+(ind)

Total 1,875


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India Health Care Outlook 2010

Overview

Fitch Ratings outlook on Indias healthcare sector is stable for 2010. The

agency expects the industry to expand by 10%15%: revenues will

increase as occupancy rates rise for existing hospitals,and newly

commissioned facilities become operational.As healthcare is a high

operatingleverage business, EBITDA margins are likely to improve with

capacity utilisation, and also due to hospitals increasing their focus on

highmargin tertiary and quaternary services. Expansion will continue to

be driven by a persistent demand/supply gap and significant investments

funded by privatesources.

However, the credit profiles of many players will remain affected by their

dependence on debt for capex and acquisition plans. Increasing

concentration of reputed players in metropolitan cities should see many

established players chalking out plans to spread to Tier 1 and Tier 2

cities to increase their catchment area. Meanwhile, however, a limited

supply of doctors and trained medical staff will continue to restrict

industry growth.

Rising Revenues and Improved Profitability

Demand for healthcare facilities in 2010 should arise from more

frequent instances of lifestylerelated diseases, a greater awareness of

healthcare issues, generally higher income levels, an improved health

insurance business, and an escalating theme of medical tourism.

The higher demand and an existing undersupply situation will help

healthcare providers to record robust revenue growth rates; as

occupancy metrics improve for existing hospitals, and inpatient traffic

starts catching up in recently commissioned facilities. Cardiac, oncology

and diabetes are expected to continue to remain front runners in terms

of revenue from hospitalisation cases.

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Among Fitchrated players, Alchemist Hospitals Limited (AHL, BB

(ind)/Stable) and Fateh Chand Charitable Trust (FCCT, BB+

(ind)/Stable) are both expected to benefit as revenues start accruing

from recently deployed capex. FCCTs revenues will further i

increase with a rise in the number of student batches in its medical

college. Dayanand Medical College and Hospital Managing Society

(DMCH, A (ind)/Stable) and Mittal Hospitals Limited (BB(ind)/Stable)

should witness relatively lower though significant revenue

addition.

Average revenue per occupied bed (ARPOB) is only likely to improve for

established players with an increased focus on highermargin tertiary

and quaternary (specialised, highly technical and advanced levels of

healthcare) inpatient procedures. Companies providing hospital

management and consultation services will also benefit, as smaller

players try to streamline their processes to enhance gains from the

booming market. With a considerably high portion of healthcare

providers costs being of a fixed nature, more revenue will directly

translate into enhanced EBITDA margins and improved cash flow from

operations (CFO).

Government Initiatives

The Government of India launched the National Rural Health Mission

(NRHM) in 2005 with a view to providing quality healthcare to all,

and to increase healthcare expenditure to 2%3% of GDP by 2012.

Government made significant investments in the sector in 2009, eg the

central government allocated USD2.4bn for the NRHM in the 2009

interim budget; while the Tamil Nadu state government allocated

USD698m for heath and family care for financial year 200910 (FY10, to

March 2010). Fitch expects considerable government spending in 2010,

and also an increase in public/private partnership projects. The

recently proposed Bachelor of Rural Medicine and Surgery course

(rural MBBS) will greatly benefit the rural population, where the

doctor/patient ratio remains five to six times lower than in cities.

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Impediments to Growth

Rising real estate costs, and the limited availability of doctors and

trained medical staff, will continue to be the strongest deterrents to

growth. High upfront capital investment and long execution periods

will also mean that players have to cautiously strategise their

expansion plans.

Mittal Hospitals LimitedRatingRationale

The ratings reflect MittaL HospitaLs Limiteds (MHL) Lack of track

record, given its relativelyshort operational history, and the companys

stretched financial, profiLe, owing to initiaL debt-

fundedcapital&expenditure.

The ratings are also constrained by semi-urban clientele, who prefer

low-cost health care solutions. This limits the scope of growth into high-

end services, and restricts the size of operations.

The occupancy rates remain low, with only 55%-60% of beds used daily;

the hospital faces competition from nursery homes which are able

to provide healthcare solutions at a lower price. However, as operations

pick up, MHL management expects the number of

referralcases for specialized treatments to increase, thereby benefit

in utilization levels.

The ratings draw comfort from MHLs ability to tie-up with various

entities for empanelments under these contracts, the hospital is

authorized to treat employees of the tie-up entity, with payments made

by the employer.

In FY09, tie-ups with the Central Government Health Scheme (CGHS) and

Rajasthan Diary, along with the creation of the Cardiac department in

December, Led to an increase in revenues.

MHL is in the process of finalising more empanelments which, if

successfull,will add to the predictability of revenues and provide further

growth to existing revenues.

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The ratings are supported by revenue growth and EBITDA-level

profitability which the company has been able to achieve in a relatively

short time period (MHL started operations in November 2005). A

substantial portion of its expenditures are of a fixed nature, and the

company was not profitable at the EBITDA until 2007. Hospital revenues

increased to INR141m in FY09 (FY06: INR14m), while the EBITDA margin

improved to 4.2% in FY08 and 17.2% in FY09 (from negative EBITDA

levels in FY06 and FY07).

KeyRatingDrivers

A demonstration of the envisaged company pLan, with operations

picking up to the desired levels and an increase in the occupancy

rates Leading to a stabiLisation of the EBITDA margins and cash

flow from operations would act as a positive rating

trigger.

Slower than anticipated growth and/or continued Losses at the PAT

LeveL, coupLed with

an erosion of its net worth, could act as a negative rating trigger.

Business Overview

MittaL Hospitals Limited (MHL) was originally incorporated as a

private Limited company in December 1993 and was converted into a

public limited company in May

2002. The company was promoted by the MittaL Group of

Ajmer.

The company initiated a hospital project in 2004 (MittaL HospitaL and

Research Centre) with the objective of establishing a muLti-speciality

hospital to provide preventive, diagnostic, curative, and rehabilitation

health services, at a tota lproject cost of INR124m.

The company commenced health services in November 2005 with 150

beds. Most of the initial business took the form of indoor patients

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availing cashless facilities under various medical insurance schemes;

payment for the same is settled through various agencies and

Government Departments. The process of settlement and recovery of

such bills requires considerable time. The hospital also has a pharmacy

shop for the sale of various medicines, for which stock of medicines and

other items is required.

MHL has tie-ups with various entities for empanelments; under these

contracts the hospital is authorised to treat employees of the tie-up

entity, with payments made by the employer. In FY09, tie-ups with the

Central Government Health Scheme (CGHS) and Rajasthan Diary, along

with the setting up of the Cardiac department in December, led to an

increase in revenues. MHL is aLso in the process of finalising moreempanelments which, if successfull, will add to the predictability of

revenues and provide further growth to existing revenues.

Financial Overview

Revenues & ProfitabilityThe hospitaL has shown a substantiaL increase in the number of patients

over the past four years. Revenues have grown continuousLy since the

inception of the hospitaL, from INR14m in FY06 to INR141m in FY09. This

growth in revenues at FY09 can be expLained by the tie-up with CGHS

in which aLL government empLoyees and there dependents are

reimbursed expenses incurred as part of their treatment at MHS and

the tie-up with Rajasthan Diary (which has an insurance poLicy forempLoyees). Another factor contributing to the revenue growth is the

avaiLabiLity of super-speciaLised treatment which is not avaiLabLe in

the nearby geographicaL Locations.

Operating Metrics

Patient traffic

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The total number of patients has increased from 17,819 in FY06 to 76,182

in FY09.The IPD has fewer patients (mostLy there for sophisticated

treatments) whiLe the out- patient department (OPD) is more voLume-

driven and consequentLy has more patients.

Increased Margin with volume increase

A substantial portion of expenditures are of a fixed nature; hence the

company was not profitable, even at the EBITDA level, untill 2007. With

the planned empanelments, the company expects sales to improve, thus

improving profitability. The EBITDA margin of the company has also

improved, from a negative EBITDA level in FY06 and FY07 to 4.2% in FY08

and 15.5% in FY09.

Capital expenditure

The cash flow from operations for the company also turned positive for

the first time in FY09 (NR12m). Management does not envisage any

further capital expenditure.

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36

Financial Summary

(INRm) 2009 2008 2007 2006

Revenues 141 95 71 14

EBIT 8 -12 -19 -12

Net income -3 -24 -29 -14

Balance sheet

TotaLassets 160 136 149 151

Senior Long-term debt 82 89 85 83

TotaLdebt 82 89 85 83

TotaLadjusted debt 82 89 85 83

Common equity 33 4 46 45

Operating EBITDAR (op. EBITDAR) 22 4 -1 -6

Cash tax paid 0 0 0 0

Other changes before funds from operationsa 2 0 0 0

Working capitaL -4 -2 -4 6

Non-operationaL cash fLow 0 0 0 0

Dividends paid 0 0 0 0

Receipts from asset disposaL s 0 0 0 0

Business divestments 0 0 0 0

Net cash in/outfLow -19 -10 -24 -104

FX movement 0 0 0 0

Net cash fLow avaiLabLe for financing -3 -3.9 1.3 -58.4

Op. EBITDAR/revenues (%) 15.5 4.2 -1.4 -42.9

FFO return on adjusted capitaL (%) 17.18 3.2 -0.7 -4.3

Credit ratios

FFO fixed charge cover (x) 2.0 0.3 -0.1 -3

Adjusted Leverage/FFO (x) 3.4 22.3 -85 -13.8

TotaLadjusted debt/totaL adjusted capitaLisation (%) 59.3 71.8 61.2 58.9


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MARKETING METHODOLOGIES

There are different methods when it comes to marketing. This includes direct marketing,

relationship marketing, advertising, public relations, and positioning.

Direct marketing is a form of advertising that reaches its audience without using traditional

formal channels of advertising, such as TV, newspapers or radio. Businesses communicate

straight to the consumer with advertising techniques such as fliers, catalogue distribution,

promotional letters, and street advertising.

Guerrilla marketing was invented as an unconventional system of promotions

that relies on time, energy and imagination rather than a big marketing budget.

Typically, guerrilla marketing campaigns are unexpected and unconventional;

potentially interactive and consumers are targeted in unexpected places

Relationship Marketing was first defined as a form of marketing developed from direct

response marketing campaigns which emphasizes customer retention and satisfaction, rather

than a dominant focus on sales transactions.

As a practice, Relationship Marketing differs from other forms of marketing in that it

recognizes the long term value of customer relationships and extends communication beyond

intrusive advertising and sales promotional messages.

Viral marketing and viral advertising refer to marketing techniques that use pre-existing social

networks to produce increases in brand awareness or to achieve other marketing objectives

(such as product sales) through self-replicating viral processes, analogous to the spread of

pathological and computer viruses. It can be word-of-mouth delivered or enhanced by thenetwork effects of the Internet Viral promotions may take the form of video clips, interactive

Flash games, advergames, ebooks, brandable software, images, or even text messages.

APPROACH DEPLOYED AND ANALYSIS

BUSINESS MARKETING

Business Marketing is the practice of individuals, or organizations, including

commercial businesses, governments and institutions, facilitating the sale of their

products or services to other companies or organizations that in turn resell them,

use them as components in products or services they offer, or

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use them to support their operations. Also known as industrial marketing,

business marketing is also called business-to-business marketing, or B2B

marketing, for short.

People (Target Market)

Quite often, the target market for a business product or service is smaller and has more

specialized needs reflective of a specific industry or niche.[3] A B2B niche, a segment of the

market, can be described in terms of firmographics which requires marketers to have good

business intelligence in order to increase response rates.I were very well defined about our

target market,fitch serves top notch corporates of all the sectors,it decided its placing in small

and mid-range corporates which having CC ratio more than 10 crores.

Pricing

The structure of pricing plays an important role.pricing strategies differs from one service to

another service provided by fitch.negotiations regarding pricing will be done befor signing a

mandate.here competition plays a major role,ultimately quality defines pricing

Promotion

Promotion planning is relatively easy when you know the media, information seeking and

decision making habits of your customer base, not to mention the vocabulary unique to their

segment.Extensive promotion was made by organising seminars on july 16th titled as FITCH

FRIDAY.Several corporate dignitaries have been invited and created vast awareness about

fitch,its products services.This helped us a lot to penetrate into all the sectors with ease.Market

establishment was achieved successfully by this promotional events

PROCESS&TOOLS USED

From the given resources of fitch ratings database of several companies was

acquired,preparation of appropriate message was done by using the literature obtained from

company.Strong message was made without any misconceptions in the form of

brochures.these are issued accoding to the interest of companies

Through the relevant data made such as brochures and outlooks of different sectors I started

approaching companes.Appointments have been taken according to the interest of thecompanies.

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COLLECTION OF DATA

Hence spread of my message was done successfully,now we started collecting relevant

information from the companies of Pharma &Healthcare sectors.Tools such as questionnaire

helped me a lot.This data was analysed and report was made which gives detailed

oppurtunities and possibilities of getting business with several companies.

DATA ANALYSIS

Data has been refined and a report was made.

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CONCLUSION

.Successfully achieved the above mentioned objectives

.Learned corporate etiquette

.Wide range of publicity has been given regarding Ratings and its

importance among small and medium entities in and around

Hyderabad.

.Done negotiations with several entities regarding ratings procedure

of Fitch Ratings

.Earned and refinement of database has been done to find out

potential customers for Fitch Ratings

.Required financial details have been collected from the interested

small and medium range companies through appropriate

questionnaire.

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.Market mapping has been achieved for Fitch ratings effectively

PROJECT FINDINGS

The versatility of ratings among the SMEs, the presence of ratings and its

importance is very scarce.

Credit rating market share in Hyderabad is yet to be exploited, Fitch ratings with its

international standards can become a major player.

Fitchratings with its rigid background , reliability, and vividness can establish a

strong base of clients

Wide range of publicity should be given to provide requied awareness regarding

ratings Partial in-depth detail of corporate functions has come to understanding.

Fitch ratings has helped me recognize potential in the field of marketing ,as a boost

of confidence in providing a real time project

Bibliography:

http://www.fitchindia.com

http://www.fitchratings.com

http://google.com

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http://www.fitchindia.com/http://www.fitchratings.com/http://google.com/http://www.fitchindia.com/http://www.fitchratings.com/http://google.com/


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D BANKING DETAILS

1 Details of exiting Bankers

a. d.

b. e.

c. f.

2 Main / Lead Bank :

3

Fund based exposure ( Cash credit + Short

term loans):

(Rs. In

Crs.)

a. Cash Credit limit

b. interest on Cash credit

4 Non Fund based Exposure (BG/LC):

a. Bank Gurantee Limits

b. Letter of Credit

5 Details of Term Loans :

(Rs. In

Crs.)

a. Term loan

b.interest on term loans

c. tenor of term loan

E OPPORTUNITIES

1 Bank loan rating :

2 IPO Rating :

3 International rating:

4 CP/NCD Rating:

rakesh final

Documents