1. DETAILED CRITERIA ANALYSIS USED IN CORPORATE CREDIT RATING
INDUSTRY MENTOR FEEDBACK “You have been one of the best Interns working with us , with sound technical knowledge,
inquisitive and always ready to learn attitude“
DETAILED CRITERIA ANALYISIS USED IN CORPORATE CREDIT RATINGProject Objective
CRISIL
 Business
analysis
 Regulatory
and
Competitive
environment
 Fundamental
analysis
 Management
analysis
 Financial
analysis
ICRA
 Industry
characteristics
 Competitive
position of the
issuer
 Financial position
of the issuer
 Operational
efficiency
 Management
efficiency
 Commitment to
new projects
 Funding policies of
the issuer
CARE
 Economic &
Industry risk
 Business risk
(competitor’s
assignment)
 Instrument terms
 Management
assessment
 Financial risk
FITCH
 Past Years‟
Rating
Methodology
 Past Years‟
Financial Data
 Competitive
position of the
company
 Forecast of the
future
performance
 Analysis of
company’s
financial
position
1.1Financial Analysis
• EBITDAR around 8%.
• Cash inflow negative
• Capital requirements are managed by
debts
• Net leverage stands at 23x even at such
small operations scale.
• Interest coverage also is low standing at
2x
• RATED AT D
Rating Rationale
Peer Comparison
 Visa’s credit profile is very weak
compared to peers with high debt
& low profit margins.
 High risky profile with huge
amounts of debts, thus cannot be
rated the same way as peers
 Visa is progressing much better
with a higher growth, revenue,
EBITDAR though on the other
hand the cash management is not
very good.
 We can rate the company at a
BB+ with a positive outlook on
the future operations of the
firm.
Particulars Visa Steel
Mahamaya
Steel SteelCo Gujarat
Outstanding Rating TO BE RATED BBB BB
2013 2014 2013 2014 2013 2014
Revenue 10,443.9
14,685.
4
3,340.
6
2,897.3 5,447.1 5,296.3
Growth (%) 42 13 (3)
EBITDA (262) 1,111 123 126 219 168
EBITDA Margin % (2.6) 7.6 4.7 4.4 4.7 3.4
EBITDAR (252) 1124 123 127 220 168
EBITDAR Margin (%) (2.5) 7.7 4.7 4.4 4.1 3.2
Interest Expense 1,684 1,626 62 54 201 196
Lease expense/ Rent 10 13 0.06 0.4 0.6 0.8
PAT (1,112) (1,435) 18 30 4 (36)
PAT Margin (%) (10.8) (9.8) 1.5 1.1 0.07 (0.6)
Cash and Cash
Equivalents
420 1189 37 45 186 218
Total Debt 23,569 27,994 148 568 974 1145
Total Adjusted Debt 23,148 26,804 110 523 788 927
EBITDAR/ (Interest
Expenses + Rent)
(0.13x) 0.64x 2.22x 2.89x 1.15x 0.89
Gross Adj. Debt/
EBITDAR (x)
(90.02x) 25.19x 1.20x 4.5x
4.44x 6.84x
Net Adj. Debt/
EBITDAR (x)
(90.20x) 25.13x .90x 4.13x 3.58x 5.51x
Capacity/ Capacity
Utilization
1Million Tonne
Blended steel
200000 Metric
Tonne Blended
steel
144000 Tonne
Blended Steel
Rating on Qualitative basis
The Hotels of Karnataka were taken as a subject to be rating which included
Youth hostels, Restaurants, Vendors, Adventure sports , Amusement Parks and
other recreational areas-
-Service Quality - Food quality -Target Group
-Ambience - Pricing Structure - Location
-Safety and Security
• Across Rating agencies
**5 including India ratings
• Across Industries
**6 as done by India ratings
• Service sector (Qualitative rating)
**Hotel industry
Understanding the
Rating Criteria
• Manufacturing sector
**Steel (10 firms)
**Cement (5 firms)
Performed credit
rating analysis
Rating criteria
Secondary
research
Credit rating analysis
Financial analysis
Financial modeling
Sector credit
factor analysis
Peer analysis
Peer comparison among 5 selected firms from that industry and
assigning rating
Giving a rating for each firm along with a rationale
SCF Mapping
Calculating the Sector Credit factor(SCF) from the corresponding
industry’s criteria
Creating a detailed financial analysis
Collection of information from Annual report for past 2 Financial years
Selecting ten companies from the particular industry STEEL& CEMENT
Methodology
Industry Specific Criteria Comparison
Comparative Analysis of Agency-wise Criteria
1.2Sector Credit Mapping
Process
1.3Peer analysis
Acknowledgement
• Privilege to express
gratitude towards my
Mentor Dr. Sangeetha
• Gratitude to my Industry
Mentor Mr. Saravana
Pandian