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Project On Credit Rating: Prepared By: Rohit Batra Year 3779, SEC-A

Credit ratings provide an assessment of an individual's or company's ability and likelihood to repay debts by independent rating agencies, with higher ratings indicating lower risk of default. Several agencies in India such as CRISIL, ICRA, and CARE analyze financial history and issue to determine credit worthiness and assign ratings using standardized scales. Credit ratings help lenders and investors evaluate risk and make informed financing decisions.

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Vanshik Gupta
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144 views

Project On Credit Rating: Prepared By: Rohit Batra Year 3779, SEC-A

Credit ratings provide an assessment of an individual's or company's ability and likelihood to repay debts by independent rating agencies, with higher ratings indicating lower risk of default. Several agencies in India such as CRISIL, ICRA, and CARE analyze financial history and issue to determine credit worthiness and assign ratings using standardized scales. Credit ratings help lenders and investors evaluate risk and make informed financing decisions.

Uploaded by

Vanshik Gupta
Copyright
© Attribution Non-Commercial (BY-NC)
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Download as PPTX, PDF, TXT or read online on Scribd
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PROJECT ON

CREDIT RATING

PREPARED BY:
Rohit Batra
B.COM(HONS),3rd
YEAR
3779, SEC-A
Introduction to Credit Rating
 A credit rating assesses the credit worthiness of an
individual, corporation, or even a country. Credit
ratings are calculated from financial history and
current assets and 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 defaulting
on a loan, and thus leads to high interest rates.
Introduction to Credit Rating
 An assessment of the credit worthiness of individuals
and corporations. It is based upon the history of
borrowing and repayment, as well as the availability
of assets and extent of liabilities.

 Credit is important since individuals and corporations


with poor credit will have difficulty finding financing,
and will most likely have to pay more due to the risk
of default.
Introduction to Credit Rating
 Moodys’: “Ratings are designed exclusively for
the purpose of grading bonds according to
their investments qualities”.

 Australian Ratings: ‘A corporate credit rating


provides lenders with a simple system of
gradation by which the relative capacities of
companies to make timely repayment of
interest and principal on a particular type of
debt can be noted’.
Introduction to Credit Rating

 Credit rating is an assessment of the capacity of the


issuer of debt security by an independent agency, to
pay interest and repay principal 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 relationship
between the agency and the users
Functions of Credit Rating Agencies

 Superior information
 Low cost information
 Basis for proper risk, return & Trade off
 Healthy discipline on corporate
borrowers
 Formulation of public policy guidelines
on Institutional investment
Benefits of Credit Rating
 Low cost information
 Quick investment decision
 Independent investment decision
 Investor protection
Benefits to rated companies
 Sources of additional certification
 Increase 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 borrowing
 Rating as a marketing tool
Credit Rating Agencies 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.
(DCR India)
Credit Rating Information 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 crores.
CRISIL is India's leading rating agency, and is the
fourth 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 Ratings
provides the most reliable opinions on risk by combining
its understanding of risk and the science of building risk
frameworks, with a contextual understanding of business.
Credit Rating Information Services Ltd.
 The principal objective of CRISIL is to rate the debt
obligations of Indian companies.Its rating guides the
investors about the risk of timely payment of interest
and principal on a particular debt instrument.

 CRISIL's rating process and rating committee are


designed to ensure that all assigned ratings are
based on the highest standards of independence
and analytical rigor.

 The rating committee comprises members who


have the professional competence to meaningfully
assess the credit analysis that underlies the
rating, and have no interest in the entity being
rated. A team of analysts carries out the credit
analysis
Credit Rating Information Services Ltd.
A detailed flow chart of CRISIL's rating process is as
under:
Credit Rating Symbols
Debenture Rating Symbols
High Investment Grades:
AAA(triple A): Highest Safety
AA (double A): High Safety
Investment Grades:
A: Adequate Safety
BBB (triple B): Moderate Safety
Speculative Grades:
BB: Inadequate Safety B: High Risk
C: Substantial Risk D: Default
Investment Information and Credit 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 exponential surge in
demand for professional credit risk analysis, ICRA has
been proactive in widening its service offerings,
executing assignments including credit ratings, equity
gradings, specialised performance gradings and
mandated studies spanning diverse industrial sectors.
Investment Information and Credit Rating
Agency of India (IICRA)

 In addition to being a leading credit rating


agency with expertise in virtually every sector
of the Indian economy, ICRA has broad-
based its services for the corporate and
financial sectors, both in India and overseas,
and currently offers its services under the
following banners:
 Rating Services  Information, 
 Grading and Reasearch Services
 Advisory Services
 Economic Research  Outsourcing
Investment Information and Credit Rating
Agency of India (IICRA)

 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 crores.

 The initial paid up capital of Rs. 3.50 crores


was subscribed by IFC, UTI, LIC, GIC SBI and
others.
Investment Information and Credit Rating
Agency of India (IICRA)

Long term Debentures Bonds and


Preference shares-Rating Symbols
LAAA: Highest Safety
LAA: High Safety
LA: Adequate Safety
LBBB: Moderate Safety
LBB: Inadequate Safety
LB: Risk prone
LC: Substantial Risk
LD: Default, Extremely speculative
Credit Analysis and Research Limited
(CARE)
 The CARE was promoted in 1993 jointly with
investment companies, banks and finance
companies.

 Services offered by CARE are


Credit rating
Information Service
Equity Research etc
Credit Analysis and Research Limited
(CARE)
Long term debt instruments-Rating Symbols
CARE AAA: Highest Safety
CARE AA: High Safety
CARE A: Adequate Safety
CARE BB: Inadequate Safety
CARE B: High Risk
For medium term debt instruments
CARE AAA: Highest Safety
CARE AA: High Safety
CARE A: Adequate Safety
CARE BB: Inadequate Safety
CARE C: High Risk
REFERENCE

www.google.com
www.creditrating.com
www.scribd.com

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