INTERNATIONAL

CREDIT RATING
Submitted to- Nidhi Ma’am
Submitted by – Mehazabeen
Kachchawala
MBA-IB (IV SEM)
OVERSEAS PROJECT
MANAGEMENT
 MEANING
 A credit rating estimates the credit
worthiness of an individual, corporation,
o r e v e n a c o u n t r y. I t i s a n e v a l u a t i o n
made by credit bureaus of a borrower’s
o v e r a l l c r e d i t h i s t o r y. C r e d i t r a t i n g s a r e
calculated from financial history and
current assets &  liabilities. 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 default of a loan, and leads to high
interest rate, or the refusal of a loan by
t h e c r e d i t o r.
 It should be noted that a credit rating is
assigned to the investment instrument
and not to the company issuing it as a
whole.
CREDIT RATING
AGENCIES
A Credit Rating Agency is a company that assigns
credit ratings for issuers of certain types of debt
obligations as well as debt instruments.
Credit Rating Agencies are regulated by SEBI.

Four Main Credit Rating Agencies in India:

 Credit Rating Information Services of India Limited
(CRISIL), Associate of Standards & Poor ’s
 Credit Analysis & Research Ltd. (CARE Ratings)
 Investment Information and Credit Rating Agency
of India Limited (ICRA), Associate of Moody’s
Investors Service
 Fitch Ratings
IMPORTANCE OF
CREDIT RATING
For The Money Lenders:
 Better Investment Decision: No bank or
money lender companies would like to
g i v e m o n e y t o a r i s k y c u s t o m e r. W i t h
credit rating, they get an idea about the
credit worthiness of an individual or
company (who is borrowing the money)
and the risk factor attached with them.
By evaluating this, they can make a
better investment decision.
 Safety Assured: High credit rating
means an assurance about the safety of
the money and that it will be paid back
with interest on time.
IMPORTANCE OF
CREDIT RATING
For Borrowers:
 Easy Loan Approval: With high credit
rating, you will be seen as low/no risk
c u s t o m e r. T h e r e f o r e , b a n k s w i l l a p p r o v e
y o u r l o a n a p p l i c a t i o n e a s i l y.
 C o n s i d e r a t e R a t e o f I n t e r e s t : Yo u m u s t
be aware of the fact every bank offers
loan at a particular range of interest
rates. One of the major factors that
determine the rate of interest on the
l o a n y o u t a k e i s y o u r c r e d i t h i s t o r y.
Higher the credit rating, lower will the
rate of interest.
 CREDIT
RATING
PROCESS
• The rating process is initiated once a
rating agreement is signed between
agency and the client/ on receipt of a
formal request (or mandate) from the
client.
• Once engaged, a rating team is formed,
with the expertise and skills required to
evaluate the business of the client. The
client is then provided with a list of
information required and the broad
framework for discussions.
• The primary focus of the rating exercise
is to assess future cash generation
capability of the entity and its adequacy
to meet debt obligations, even in adverse
conditions.
 CREDIT
RATING
PROCESS
• The analysis attempts to determine the
long-term fundamentals and the
probabilities of change in these
fundamentals. This requires extensive
interactions with the client’s management,
visit to the client’s plant (in case of
manufacturing firms), and a study of many
factors, including industry characteristics,
competitive position of the client,
operational efficiency, management quality,
funding policies and past and projected
financials.
• After understanding the business and level
of operations, the rating team carries out
business and financial risk analysis. The
rating team undertakes an in-depth analysis
of the client’s past and projected financial
statements to understand the client’s
business fundamentals, financial position,
liquidity and flexibility and its ability to
service debt.
 CREDIT
RATING
PROCESS
• After completing the analysis, the rating
team prepares a rating note based on
based on the information received from
client as well as other information
received from other reliable sources and
management evaluation.
• The rating note is subjected to a
multitiered review mechanism to ensure
that high quality standards are met. The
final rating (including rating outlook) is
assigned by the Rating Committee. A risk
profile for each company made by the
rating team helps the Rating Committee
in assigning the rating.
CREDIT RATING SCALE FOR LONG
TERM & SHORT TERM DEBT
INSTRUMENTS
CREDIT RATING SCALE FOR LONG
TERM & SHORT TERM DEBT
INSTRUMENTS
CREDIT RATING SCALE FOR LONG
TERM & SHORT TERM DEBT
INSTRUMENTS
 CREDIT RATING INFORMATION
SERVICES OF INDIA LTD. (CRISIL
Ltd)

• CRISIL was incorporated in the year 1987 with the name Credit
Rating Information Services of India Ltd. The company was
promoted by leading financial institutions, nationalised banks,
foreign banks and private sector banks. During the year 1995-96,
they formed a strategic alliance with Standard & Poor's rating group,
New York. They also made a tie up with International Information
Vendors for dissemination of CRISIL Ratings. The company
launched CRISIL 500 equity index during the year.

• They are also the foremost provider of high-end research to the

world's largest banks and leading corporations. CRISIL is majority
owned by S&P Global Inc., a leading provider of transparent and
independent ratings, benchmarks, analytics and data to the capital
and commodity markets worldwide.
CREDIT RATING INFORMATION
SERVICES OF INDIA LTD. (CRISIL
Ltd)

CRISIL Ltd provides :

• Ratings
• Research
• Risk and Policy Advisory Services
CRISIL operates through two segments: Ratings and Research.
• Rating services include credit ratings for corporates, banks, small
and medium enterprises (SME), training in the credit rating field,
credit analysis services, grading services and global analytical
services.
• Research segment provides equity research, industry reports,
customized research assignments, subscription to data services
and initial public offer grading. It operates from seven research
centers worldwide.
CREDIT ANALYSIS AND RESEARCH
LTD. (CARE RATINGS)

• Credit Analysis & Research Ltd (CARE) commenced its operations

in the year 1993 has established itself as the leading credit rating
agency of India. The company provides various credit ratings that
help corporates to raise capital for their various requirements and
assist the investors to form informed investments decision based
on the credit risk and their own risk-return expectations.
• The company is recognized by Securities and Exchange Board of
India (SEBI), Government of India (GoI) and Reserve Bank of
India (RBI) etc.
• The company carries out rating of the debt instruments, namely
structured obligations, Commercial paper, Debentures, Fixed
deposits and Bonds, covering the full spectrum of Universe
comprising Industrial Companies, Service companies,
Infrastructure companies, Banks, Financial Institutions (FIs), Non-
Bank Finance companies (NBFCs), Public Sector Undertakings
(PSUs), State Government Undertakings, Municipal Corporations,
Structured Finance Transactions, Securitization Transactions,
SMEs, SSI and Micro Finance Institutions.
CREDIT ANALYSIS AND RESEARCH
LTD. (CARE RATINGS)

• In addition to debt ratings, the company has experience in

providing specialized grading/rating services, such as Corporate
Governance ratings, IPO grading, Mutual Fund Credit quality
Ratings, Insurance Claims Paying Ability Ratings, Issuer Ratings,
Grading of Construction entities, Grading of Maritime training
institutes and LPG/ SKO Ratings.
• The company's Credit Rating is an opinion on the relative ability
and willingness of an issuer to make timely payments on specific
debt or related obligations over the life of the instrument. CARE
rates rupee denominated debt of Indian companies and Indian
subsidiaries of multinational companies.
• The Research and Information division of CARE provides
contemporary research and information covering various
industries and financial markets. Publications include Industry
Research Reports with Updates, Debt Market Review, Budget
Analysis, other policy impact analysis, and special commentaries
on topical issues.
INVESTMENT INFORMATION AND
CREDIT RATING AGENCY OF INDIA
LTD (ICRA)

• ICRA Ltd was incorporated on January 16, 1991 by leading

financial/investment institutions, commercial banks and financial
services companies as an independent and professional
Investment Information and Credit Rating Agency with the name
Investment Information and Credit Rating Agency of India Ltd. The
company launched Credit Rating Service on September 1, 1991.
• The company rates rupee-denominated debt instruments issued
by manufacturing companies, commercial banks, non-banking
finance companies, financial institutions, public sector
undertakings and municipalities.
• They also rates structured obligations and sector-specific debt
obligations such as instruments issued by Power, Telecom and
Infrastructure companies.
• The other services offered by them include Corporate Governance
Rating, Stakeholder Value and Governance Rating, Credit Risk
Rating of Debt Mutual Funds, Rating of Claims Paying Ability of
Insurance Companies, Project Finance Rating, and Line of Credit
Rating.
THANK YOU