Post on 10-Apr-2018
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A credit rating assesses the credit worthiness
of an individual, corporation, or even acountry. Credit ratings are calculated fromfinancial history and current assets andliabilities.
A credit rating tells a lender or investor the
probability of the subject being able to pay
back a loan.
A poor credit rating indicates a high risk of
defaulting on a loan, and thus leads to high interest rates
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An assessment of the credit worthiness of individuals
and corporations. It is based upon the history of borrowing and repayment, as well as theavailability
of assets and extent of liabilities.
Credit is important since individuals andcorporations
with poor credit will have difficulty finding
financing,and will most likely have to pay moredue to the riskof default
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Moodys¶: ³Ratings are designed exclusively f or the purpose of
gradingbonds according to their investmentsqualities´.
Australian Ratings: µA corporate credit rating pr ovides lenders with a simple
system of gradation by which the relativecapacities of companies to make timely
repayment of interest and principal on aparticular type of debt can be noted¶.
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Credit rating is an assessment of the capacity
of the issuer of debt security by anindependent agency, to pay interest and repayprincipal as per the terms of issue of debt.
The ratings are expressed in code numbers
which can be easily comprehended by the lay
investors.
Credit rating, as exists in India, is done for a
specific security and not for a company as a
whole.
A debt rating is not one time evaluation of
credit risk, which can be regarded as valid for
the entire life of the security.
A credit rating does not create fiduciary relatinship between the agency andthe users
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unc ons o re a ng
Agencies
Superior informationLow cost informationBasis for proper risk, return &
Trade off
Healthy discipline on corporate
borrowers
Formulation of public policy
guidelines on Institutional investmen
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ene s
Low cost inf ormationQuick investment decision
Independent investment
decision
Investor pr otection
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Benefits to rated companie
Sources of additional certificationIncrease the investor population
Forewarns risk
Encourages financial Discipline
Merchant bankers job made easy
Foreign collaborations made easy
Benefits the industry as a whole
Low cost of borrowingRating as a marketing too
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CRA in India
Credit Rating Information Services Limited (CRISIL)
Investment Information and Credit
Rating Agency of India (ICRA) Credit Analysis and research
(CARE)
Duff Phelps Credit Rating Pvt. Ltd(DCRIndia
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Services
Ltd The first credit agency floated on January 1, 1988.
It was jointly started by ICICI and UTI with an equity capital of 4 cr ores.
CRISIL is India's leading rating agency, and is the
f ourth largest in the world.
With over a 60% share of the Indian Ratings market,
CRISIL Ratings is the agency of choice for issuers and
investors. CRISIL Ratings is a full service rating agency that offers a
comprehensive range of rating services. CRISIL Ratingsprovides the most reliable opinions on risk by combiningits understanding of risk and the science of building riskframeworkswith a contextual understandinof business.
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The principal objective of CRISIL is to rate the
debt obligations of Indian companies.Its ratingguides the investors about the risk of timelypayment of interest and principal on a particular debt instrument.
CRISIL's rating pr ocess and rating committee are
designed to ensure that all assigned ratings arebased on the highest standards of independenceand analytical rigor.
The rating committee comprises members whohave the pr ofessional competence to meaningfully
assess the credit analysis that underlies therating, and have no interest in the entity beingrated. A team of analysts carries out the credit analysis
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Debenture Rating SymbolsHigh Investment Grades:AAA(triple A):Highest SafetyAA (double A): High SafetyInvestment Grades:A: Adequate Safety
BBB (triple B): Moderate SafetySpeculative Grades:BB: Inadequate Safety
B: High Risk
C: Substantial Risk D: Default
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Rating Agency of India (ICRA
ICRA Limited (an Associate of Moody's
Investors Service) was incorporated in 1991 as an independent and professional company.
ICRA is a leading provider of investment
information and credit rating services in India.
ICRA¶s major shareholders include Moody's
Investors Service and leading Indian financial institutions and banks.
With the growth and globalisation of the Indian
capital markets leading to an exponentialsurge in demand for professional credit riskanalysis, ICRA has been proactive in widening
its service offerings, executing assignmentsincluding credit ratings, equity gradings,specialised performance gradings and mandated
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In addition to being a leading credit
rating agency with expertise in virtuallyevery sector of the Indian economy,ICRA has broad-based its services for the corporate and financial sectors, bothin India and overseas, and currentlyoffers its services under the following
banners:
Rating Services Inf ormation,Grading and Reasearch ServicesAdvisory ServicesEconomic Research Outsourcing
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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 cr ores.
The initial paid up capital of Rs. 3.50
cr ores was subscribed by IFC, UTI, LIC, GIC SBI and others