Request
Callback


Credit Rating

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 Investors:

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.

For Issuers:

 

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.

For Intermediaries:

 

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.

For Regulator:

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 merger
  • For takeover
  • 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:

  • CRISIL
  • CARE
  • SMERA
  • ICRA
  • ONICRA
  • Brickworks
  • India Ratings
  • FItch

 

  • AAA+,AAA, AA+, AA,A+, A – Good Credit Rating
  • BBB+,BBB, BB+,BB,B+, B – Average Credit Rating
  • B, C, D – Low Credit Rating

RATING PROCESS:

  1. Firstly Company select the credit rating agency.
  2. After this they execute agreement with them.
  3. Then rating agency assigns rating team in the concerned company.
  4. The team analyses the information and interacts with client, undertakes site visits and analyses data, interacts with bankers and auditors; prepares ratings note.
  5. Rating Committee awards rating to client, rating is conveyed to client along with the key rating consideration.
  6. Now it is the choice of the company whether to accept rating or not
  7. If company accepts the rating provided by agency then rating letter and rationale issued by rating agency and rationale published in website.
  8.  After this company used to do periodic surveillance
  9. 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.

faq FAQ`s

Credit Rating Agency (CRA) assesses the ability and willingness of the issuer company for timely payment of interest and principal on a debt instrument.

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.

Agency provide rating in symbolic form like AAA+, AAA, AA+, AA and so on.

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+'.

No, rating is not one time exercise, instrument rating needs to be revised on regular gap of interval

 Yes, it may change because rating depends on company’s performance and on its financial statements.

when organisation is going for merger, takeover, issuing IPO, issuing debt instrument in market, at this time company needs to go for credit rating.

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.

A downgrade in the rating indicates that the risk of default of the instrument is higher than what was earlier   predicted.

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 agencies are required to monitor the instrument continuously, in case if any changes in rating occurred they disclose it through press release and on their respective websites.

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.

No SEBI don’t play any role while assessing the rating of instruments, it is only regulatory body of rating agencies.

Rating agencies like CARE, ICRA, CRISIL, Fitch Rating Ltd, Brickwork, are some rating agencies which are registered under SEBI.

It`s Time to Change

Compliance Officer

chnage compliance officer
  • Get 1 months free compliance support
  • 24/7 Expert Advice anytime anywhere
  • 200+ Top CA/CS/Legal Team

Customer Review

Our Valuable Clients

...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...

How can we help you?

Stay update with us

Get helpful tips and info from our newsletter!