Credit ratings are conducted by agencies to evaluate the creditworthiness of individuals, corporations, and countries. The rating process involves analyzing financial history, current assets and liabilities, as well as country risk, business risk, industry factors, and financial risk. Higher credit ratings indicate a lower probability of default and allow borrowers to access loans at lower interest rates. In India, major credit rating agencies include CRISIL, ICRA, CARE, and Fitch Ratings India.

3. INTRODUCTION TO CREDIT RATING
Rate the company on various analysis
The credit worthiness of an individual, corporation or even a
country.
Analysis financial history, current assets and liabilities.
Tells a lender or investor the probability of the subject being able
to pay back a loan.
Faster and easy availability of loan
Increased publicity.

4. Credit rating agencies in
India
Credit rating Investment
information information and
services credit rating
limited(CRISIL) agency of
India(ICRA)
Credit analysis Fitch Ratings India
and Pvt. Ltd.
research(CARE)

5. Standard and poor
Moody’s
Fitch ratings

6. The rating process????

7. Validation of
Economic
“companies position”
Political
Trends
Country Industry-specific
Quality of earnings
risk factors
Analytical
Foreign exchange
adjustments
profitability
Business Industry
risk factors
Competitive factors Industry trends
Market position Industry structure
Keys to success
Company Market size
position Growth potential
Size
Diversification Competition
management Changing
technology

8. Accounting regime
Operating sources
Reporting and
and uses of liquidity
disclosure
Debt characteristics accounting
Analytical
Bank credit facilities
adjustments
liquidity
financial Government
risk risk
Focus on debt service
capability ownership
Cash flow Board of directors
Cash flow measures
adequacy Management practices
ratios Financial strategy
Analytical distinctions Risk tolerance
with profitability. Internal control
Accounting practices

9. Private
governments institutions

10. Benefits of credit rating
 LOW COST INFORMATION
 QUICK INVESTMENT DECISION
 INDEPENDENT INVESTMENT DECISION
 INVESTOR PROTECTION

11. Benefits to rated companies
o Low cost of borrowing
o Benefits the industry as a whole
o Foreign collaborations made easy
o Merchant bankers job made easy
o Increase the investor population
o Encourages financial discipline

12. Importance
 To increase investor confidence and guide
them
 Facilitate decision making
 Measures probability of default to meet
obligations
 Strengths and weaknesses of the company
 Rated instruments enjoys higher confidence
 Provide information and guidance to
institutional and individual investors
 Assist the regulators in promoting
transparency in the financial market

13. Issues
 CRA are not auditors
 Credit rating changes with time
 Judgment in india is a mix quantitative and
qualitative factors
 It is necessary to regulate CRA
 Solicited and unsolicited ratings
 Regulating the raters

15. Investment information and credit rating
agencies of India (ICRA)
 ICRA Limited (ICRA) is an independent and professional
investment information and credit rating agency.
 ICRA Limited, was established in 1991, and was originally
named Investment Information and Credit Rating Agency of
India Limited (IICRA India).
 It was a joint-venture between moody’s and various Indian
commercial banks and financial services companies.

16. Investment information and credit rating
agencies of India (ICRA)
 The company changed its name to ICRA Limited, and went public on 13
April 1997, with a listing on the Bombay stock exchange and the National
stock exchange.
 In addition to being a leading credit rating agency with expertise in virtually
every sector of the Indian economy, ICRA has broad based its services for
the corporate and financial sectors, both in India and overseas, and
currently offer its services under the following banners:
 Rating service information
 Grading and research services
 Advisory services
 Economic research outsourcing

17. Investment information and credit rating
agencies of India (ICRA)
 IICRA was set up by industrial finance corporation of India on
16th January 1991.
 It is a public limited company with an authorized share capital of
10 crores.
 The initial paid up capital of Rs. 3.50 crores was subscribed by
IFC, UTI, LIC, GIC, SBI and others.

19. Long term Debenture bonds and
preference shares -Rating symbols
1.)High 2.)Investment 3.)Speculative
investment
grades:- grades):- grades:-
• LAAA(triple • LA: adequate • LBB:
A): highest safety inadequate
safety safety
• LBBB(triple
• LAA(double B): moderate • LB: risk prone
A): high safety safety
• LC:
substantial
risk
• LD: default

21.  The care was promoted in 1993 jointly with
investment companies, banks and finance companies.
 Services offered by care are:
o Credit rating
o Information service
o Equity research etc
 The Credit Analysis & Research Ltd (CARE) is
promoted by Unit Trust of India or UTI; Canara Bank;
Industrial Development Bank of India or IDBI and
many other reputed banks and companies dealing
with financial services.

22.  CARE was registered by SEBI as per Securities & Exchange
Board of India Regulations 1999.
 Ratings conducted by Credit Analysis & Research Ltd (CARE),
are authenticated by Government of India.
 Rating Services:
With regard to rating services offered by CARE or Credit
Analysis & Research Ltd, the agency carries out rating of the
following debt instruments: Structured obligations
 Commercial paper
 Debentures
 Fixed deposits
 Bonds