ICRA

1. Investment Information and
credit rating agency of India
By
A.SAIKUMAR(2B4-01)
K.SIVAREDDY(2B4-11)
M.HARISH(2B4-15)
AMARNATH(2B4-21)
RAKESH(2B4-25)
S.AKHILESH(2B4-28)

2. INTRODUCTION
• It was established in 1991, and was originally named Investment
Information and Credit Rating Agency of India Limited
• Headquarters: Gurgaon, India
• It is second largest Indian rating company in term of customer base. It was a
joint-venture between Moody's and various Indian commercial banks and
financial services companies
• 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
• Credit ratings apart, ICRA also assigns Corporate Governance Ratings,
besides Performance Ratings, Grading's and Rankings to mutual funds,
construction companies and hospitals
• Stock price: ICRA (NSE) Rs. 2,613.00 +24.35 (+0.94%)
• Revenue – 2.28 billions

3. Mr. Pranab Kumar Choudhury is
the Chairman of ICRA Limited & Chief
Executive Officer of the Group ICRA
Mr. Naresh Takkar is the Managing Director
& CEO of ICRA.

5. Objectives of ICRA
• Provide information and guidance to institutional and individual
investors/creditors.
• Enhance the ability of borrowers/issuers to access the money market
and the capital market for tapping a larger volume of resources from a
wider range of the investing public.
• Assist the regulators in promoting transparency in the financial
markets.
• Provide intermediaries with a tool to improve efficiency in the funds
raising process.

6. ICRA Rating Scales
Long-Term rating Scale: All Bonds, NCDs, and other debt instruments (excluding Public Deposits)
with original maturity exceeding one year.
• LAAA The highest-credit-quality rating assigned by ICRA. The rated instrument carries the lowest
credit risk
• LAA The high-credit-quality rating assigned by ICRA. The rated instrument carries low credit risk.
• LA The adequate-credit-quality rating assigned by ICRA. The rated instrument carries average
credit risk.
• LBBB The moderate-credit-quality rating assigned by ICRA. The rated instrument carries higher
than average credit risk.
• LBB The inadequate-credit-quality rating assigned by ICRA. The rated instrument carries high
credit risk.
• LB The risk-prone-credit-quality rating assigned by ICRA. . The rated instrument carries very high
credit risk.
• LC The poor-credit-quality rating assigned by ICRA. The rated instrument has limited prospects of
recovery.
• LD The lowest-credit-quality rating assigned by ICRA. The rated instrument has very low prospects
of recovery.

7. Short-Term Rating Scale: All instruments with original maturity within one
year.
• A1 The highest-credit-quality rating assigned by ICRA to short-term debt
instruments. Instruments rated in this category carry the lowest credit risk in
the short term. Within this category, certain instruments are assigned the
rating of A1+ to reflect their relatively stronger credit quality.
• A2 The above-average-credit-quality rating assigned by ICRA to short-term
debt instruments. However, instruments rated in this category carry higher
credit risk than instruments rated A1.
• A3 The moderate-credit-quality rating assigned by ICRA to short-term debt
instruments. However, instruments rated in this category carry higher credit
risk than instruments rated A2 and A1.
• A4 The risk-prone-credit-quality rating assigned by ICRA to short-term debt
instruments. Instruments rated in this category carry high credit risk.
• A5 The lowest-credit-quality rating assigned by ICRA to short-term debt
instruments. Instruments rated in this category have very low prospect of
recovery.

8. Grading Scales of ICRA
ICRA’s IPO Grading methodology examines the following key variables:
• Business and Competitive Position
• New Projects—Risks and Prospects
• Financial Position and Prospects
• Management Quality
• Corporate Governance practices
• Compliance and Litigation History
Grading Scale for IPO’S are
IPO Grade 5 Strong fundamentals
IPO Grade 4 Above-average fundamentals
IPO Grade 3 Average fundamentals
IPO Grade 2 Below-average fundamentals
IPO Grade 1 Poor fundamentals

9. Grading for Micro Finance Companies
Key parameters taken in to consideration are:
• Business Orientation & Outreach
• Management
• Investment Operational Efficiency and Risk Management
• Portfolio Quality
• Financial Performance
Grading Scale for Microfinance Institutions
• M1 Indicates that in ICRA’s current opinion, the Graded MFI’s ability to manage its microfinance activities in a sustainable manner
is the highest.
M2 Indicates that in ICRA’s current opinion, the Graded MFI’s ability to manage its microfinance activities in a sustainable manner
is high.
M3 Indicates that in ICRA’s current opinion, the Graded MFI’s ability to manage its microfinance activities in a sustainable manner
is moderate.
M4 Indicates that in ICRA’s current opinion, the Graded MFI’s ability to manage its microfinance activities in a sustainable manner
is below average.
M5 Indicates that in ICRA’s current opinion, the Graded MFI’s ability to manage its microfinance activities in a sustainable manner
is weak.

10. Categories of ICRA
• Corporate Debt rating
• Financial Sector Rating
• Insurance Sector Rating
• Infrastructure Sector Rating
• Public Finance Rating
• Mutual Funds Rating
• Bank Loans/Line of Credit

12. ICRA Rating Methodology: Indian Cement Companies
• The Indian cement industry is the second largest in the world.
• Total installed capacity of around 300 million tonnes per annum
(MTPA) (March 31, 2012)
• Cement production of 225 million metric tonnes (MMT) in
FY12.
• The cement industry occupies an important place in the
national economy because of its strong linkages to other
sectors such as construction, transportation, power,
construction, and coal, besides the financial markets.

13. ICRA’s rating methodology evaluates:
• Geographical diversity and regional supply-demand scenario
• Locational economics-Availability of raw materials
Market related
factors
• Cost efficiencies
• Product diversity and Blending
• Brand development
Operational strengths
• Management’s track record on project implementation
• Management’s ability to implement cost-reduction
programmes
Management quality
• Profitability
• Debt servicing track record
• Consolidated Financial Analysis
• Adequacy of Future Cash Flows
Financial strength
and future cash flows
•Reimbursement of VAT, transport subsidy, exemption from income
tax, excise duty etc
•Relative advantage or disadvantage arising out of these benefits
Government policies

14. Rating methodology for Tea Industry
• ICRA‘s rating framework for players in the bulk tea industry involves an
assessment of the risks.
• The industry analysis includes study of the cyclicality and price
volatility of tea.
• demand-supply position at both the domestic as well as international
markets and
• regulatory issues, while some of the key issuer-specific factors that
are evaluated while assessing its credit quality are as follows:

15. Factors taken into consideration:
• Geographical diversity
• Scale of operations, operating efficiency and cost competitiveness
• Product quality & revenue mix
• Financial health
• Profitability
• Leverage and cash flows
• Foreign currency related risks
• Tenure mismatches, and risks related to interest rates and refinancing
• Debt servicing track record
• Contingent liabilities/off-balance sheet exposures
• Consolidated financial analysis
• Adequacy of future cash flows
• Company strategy, management quality and corporate governance

16. Rating methodology for Mobile service providers
• Regulatory Risks
• Market Potential of the Circle(s) of the Issuer
• Existing Subscriber Base and Composition
• Intensity of Competition
• Network Coverage and Quality
• Brand Image
• Customer Care and Retention
• Sales and Distribution
• Operating Costs
• Economies of Scale
• Management Quality and Strategy
• Foreign Promoters
• Approach to Technology
• Sponsors’ Strength and Financial Flexibility
• New Project Risks
• Financial Evaluation