Credit Rating Agencies
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Presentation On Credit Rating AgenciesGROUP NO. 5
GURUPRASADHARISHRILAKSHMI C H
HEMATH SHENOYJAYASHREE
JAYASHREE ACHAR H
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Definition and Meaning According to Moody’s, “ Ratings are designed exclusively for the purpose of grading bonds according to their investment qualities”.
A credit rating is an evaluation of the credit worthiness of an individual, corporate or even a country. The evaluation is made by a credit rating agency of the debtor’s ability to pay back the debt and the likelihood of default.
Credit rating are based on financial history and current asset and liabilities
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Benefits of credit ratings to InvestorsLow Cost Information
Quick Investment Decision
Independent Investment Decision
Investors Protection
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Benefits to Rated companiesSource of Additional Certificate
Encourages Financial Discipline
Foreign collaborations Made Easy
Merchant Bankers Job Made Easy
Increase the Investors Population
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Credit Rating Agencies In India
Credit Rating Information Service Ltd(CRISIL)
Investment Information and Credit Rating Agency of India (IICRA)
Credit Analysis and Research (CARE)
Duff Phelps Credit Rating Pvt.Ltd.(DCR India)
Onida Individual Credit Rating Agency Ltd (ONICRA)
SME Rating agency Ltd( SMERA)
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CRISIL
It is an Public Ltd Company
Established on January 1, 1987 Mumbai
Started Jointly By ICICI and UTI with an equity capital of Rs.4crores.
It become Public in 1993
In 1996, it framed a strategic alliances with S & P rating group.
Has 5 offices- Mumbai, Delhi, Kolkata, Chennai and Bangalore
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OBJECTIVES To assist both individual and institutional investors in making investment decisions.
To enable corporates to raise large amounts at fair cost
To enable intermediaries to placing their debt instrument with investors by providing effective marketing tool.
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Rating Process
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Limitations Possibility of Bias exist
Improper disclosure may happen
Impact of changing environment
Differences in Ratings
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ICRA Set up by IFCI on 16th January 1991, but operation started from 15th March 1991.
Headquarter- Gurgaon, India
Public Limited company with an authorized share capital of Rs.101crores
IICRA was listed in NSE and BSE on 13th April 2007
Main objective to assist both investors individual and institutional in making well informed decisions.
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IICRA Rating Scale
LONG TERM INCLUDING DEBENTURES BONDS AND PREFERENCE SHARES
LAAA: Highest safety
LAA: High safety
LA: Adequate safety
LBBB: Moderate safety
LBB: Inadequate safety
LB: Risk prone
LC: Substantial Risk
LD: Default
MEDIUM TERM INCLUDING DEPOSIT FUND
MAAA: Highest safety
MAA: High safety
MA: Adequate safety
MB: Inadequate safety
MC: Risk prone
MD: Default
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Short term including commercial paper
A-1 : Highest safety
A-2 : High safety
A-3 : Adequate safety
A-4 : Risk prone
A-5: Default
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CARE Promoted in 1993 jointly with Investment companies, Banks and Finance companies
It commenced its credit rating operations in October 1993
Three largest shareholders of CARE are IDBI Bank, Canara Bank and SBI.
Rating Services
Debentures
Certificate of Deposits
Commercial paper
Fixed Deposit
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DCR Founded in 1993 to provide high quality investment research services focused on utility of industry.
Started its operation in 1996
Its main objective is to give credit rating to debt instrument.
Renamed as Fitch Ratings India Private Limited in 2001 again renamed as India Ratings and Research Private Limited in 2012
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ONICRA Leading Credit and performance credit agencies in India.
It provides ratings, risk assessment and analytical solution to individuals, MSME’s and corporate.
It has been sponsored by the ONIDA Finance Ltd
Services
RatingsMSME’S
Vendor & Associate
GradingAPMC
EducationHealth CareSolar energy
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SMERA Founded in 2005 by small Industry development Bank of India ( SIDBI)
Headquarter is at Maharashtra, Mumbai
It is a public company which is comprehensive and independent third-party evaluation of the MSME.
Benefits Aids in enhancing the credibility of the MSME unit.
Helps open doors to the corporate sector, especially for MSMEs having a large vendor base.
Facilitates international trade and commerce by building confidence amongst potential trading partners.
Motivates MSMEs in adopting good governance practices for long term benefits.
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CONCLUSION Credit ratings helps the market regulators in promoting stability and efficiency in the securities market. Ratings make market more efficient and transparent.
The credit agencies perform a valuable service that make capital markets more efficient and stable in the markets.
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