Credit rating is an evaluation of credit risk of a borrower or of a business or of an instrument of a business on relevant factor indicating ability to pay back the debt in general term. Credit Rating establishes a link between risk and return, it is a symbolic indication of the current opinion regarding the relative capability of a corporate entity to service its debt obligations in time with reference to rating. For easy understanding, credit rating is expressed in alphabetical or alphanumerical symbols. It is considered more relevant for gradation of debt securities; it can be applied for other purposes also.
Rating is not only beneficial for investor but also beneficial for company as a whole in terms of direct mobilization of savings from individuals. Ratings also encourage discipline amongst corporate borrowers to improve their financial structure and operating risks to obtain a better rating for their debt obligations and thereby lower the cost of borrowing. Companies those get a lower rating are forewarned, as it were and have the freedom, if they desire, to take steps on their financial or business risks and thereby improve their standing in the market.
Credit rating is useful to investors, issuers, intermediaries and regulators
For investor credit rating plays important role because through this rating they used to judge whether to invest in proposed fund or investment or not. The rating help them to judge whether the investment will give expected return or not, it will show the credibility of the investee company o organization.
The market places immense faith in opinion of credit rating agencies, hence the issuers also depend on their critical analysis Credit rating provides a basis for determining the additional return (over and above a risk free return) which investors must get in order to be compensated for the additional risk that they bear. The difference in price leads to significant cost savings in the case of highly rated instruments.
Rating is helpful to intermediaries like merchant banker, underwriter, broker, for planning and pricing of issue. And they also use rating to calculating and monitoring the risk of investment.
The Reserve Bank of India (RBI) prescribes a number of regulatory uses of ratings. The RBI requires that a NBFC must have minimum investment grade credit rating if it intends to accept public deposits. As per money market regulations of the RBI, a corporate must get an issue of CP rated and can issue such paper subject to a minimum rating. SEBI has also stipulated that ratings are compulsory for all public issue of debentures. SEBI has also made mandatory for acceptance of public deposit by Collective Investment Schemes.
Credit rating is important for activities like
For issuance of security instrument
For issuance of debt instrument etc.
Better Lending Rate from Financial Institutions
Better Brand Good will
Rating Agencies in India:
AAA+,AAA, AA+, AA,A+, A – Good Credit Rating
BBB+,BBB, BB+,BB,B+, B – Average Credit Rating
B, C, D – Low Credit Rating
Firstly Company select the credit rating agency.
After this they execute agreement with them.
Then rating agency assigns rating team in the concerned company.
The team analyses the information and interacts with client, undertakes site visits and analyses data, interacts with bankers and auditors; prepares ratings note.
Rating Committee awards rating to client, rating is conveyed to client along with the key rating consideration.
Now it is the choice of the company whether to accept rating or not
If company accepts the rating provided by agency then rating letter and rationale issued by rating agency and rationale published in website.
After this company used to do periodic surveillance
If company don’t accept the rating then it can appeal for review of rating
What Corpseed will do for you
We will play the role of Shadow Analyst for you; we will prepare information and data for you which will be reviewed by rating agency for rating process.
Our team of highly experienced and qualified analysts performs a shadow analysis of your rating application in consonance with the rating procedures of the respective rating agencies prior to filing the final application with the rating agencies.
We analyse the concerned organisation in a very careful and precise manner. Post this analysis we run and exact simulation (Shadow Rating Exercise) of the rating exercise as performed by the rating agencies thus ensuring we deliver what we commit. On completion of Shadow rating exercise, we will let you the probable rating that can be achieved at the current position of the organisation for you to take an informed decision.
We play the role of intermediary in between your Company and rating agency(ies).
Turn Expense into Investment
We ensure that your expenses (payment to rating agency for good rating) turns out to be an investment by performing a shadow rating exercise.
Expenses incurred to achieve a good credit rating or investment grade credit rating for your organisation turns out to be an investment in terms of reduced interest rates offered by the banks. The financial institutions and banks offer better interest rates in direct proportion to the grade of credit rating of the Company. In other words, higher grade of credit rating attracts lesser interest rates.
Ratings are based on a comprehensive evaluation of the strengths and weaknesses of the company fundamentals including financials along with an in-depth study of the industry as well as macro-economic, regulatory and political environment.
Plus and minus symbols are used to indicate finer distinctions within a rating category. In fact, ratings in a higher rating category such as 'AAA-' are stronger than ratings in a lower rating category such as 'AA+'.
Information can change significantly over time causing the rated instruments performance to deviate from the earlier expectations thereby affecting the future repayment abilities and thus, requiring the rating to be altered.
Rating information is useful to investor as they can get prediction of risk associated with investment, rating is useful to intermediaries as they get prediction of issuer company’s risk, rating is helful for regulatory bodies like RBI, SEBI etc.
The SEBI (Credit Rating Agencies) Regulations, 1999 govern the credit rating agencies and provide for eligibility criteria for registration of credit rating agencies, monitoring and review of ratings, requirements for a proper rating process, avoidance of conflict of interest and inspection of rating agencies by SEBI, amongst other things.
Download free legal guide on how to successfully start and manage business in India & achieve 100% compliance.
4.60 average based on 280 reviews.
I would like to thank for professionalism and efficiency. Your assistance and sound advice has allowed me to compute my tax bill in efficient and prompt manner.
Sun Line Communications Systems
What I liked most is the reporting method and the proper communication by CORPSEED team & delivery of services on time.
CEO and Principal Consultant at Advance Innovation Group
We are very pleased with the quality of service your company provides. We sincerely appreciate your work and the way you conduct business.
Founder and CEO at Skill Development Council of India
I have found CORPSEED to be quietly dedicated efficient, providing good value for services relating to company formation in Singapore!
CEO - ByKie
"I just experienced possibly the very best customer service provided by CORPSEED as they provided point to point details of their services."
AVP Services at Liqvid
"I heard about CORPSEED through a friend and I came to know that they are providing service of AYUSH and they assisted me for product and I am very about it."
"Thanks for the prompt response to my request, I really appreciate it. Moreover, your service charges on company formation are reasonable enough for new start-up company like us."
Samarpan Herbs Life
"We are very pleased with the service and professionalism provided by CORPSEED. In addition to registration, accounting and tax services you have assisted us with advice to better operate our Us business."
Founder - Mittre India
"Really happy with the services provided by CORPSEED as they not only deliver the product on time but also suggest other innovative services which will give add on to your business."