PRESENTION ON CREDIT RATING

Presented by

MAULIK PATEL(11MBA010)

Subject :MFS

College : Shree Saraswati Education Sansthan’s Group Of Institutions

CREDIT RATING

CREDIT RATING

A credit rating assesses the credit value of an individual, corporation, or even a country.

It tells a lender or investor the probability of the subject being able to pay back a loan.

Credit ratings are calculated from financial history and current assets and liabilities.

The ratings are expressed in code numbers which can be easily comprehended by the lay investors.

OBJECTIVES OF CREDIT RATING The main objective is to provide superior and low cost information to investors for taking a

decision regarding risk-return trade off, but it also helps to market participants in the following ways;

Facilitates formulation of public guidelines on institutional investment,

Helps merchant bankers, brokers, regulatory authorities, etc., in discharging their functions related to debt issues,

Encourages greater information disclosure, better accounting

standards, and improved financial information (helps in investors protection),

May reduce interest costs for highly rated companies,

Acts as a marketing tool

CREDIT RATING PROCESS

CREDIT RATING AGENCIES IN INDIA Credit Rating and Information Service on India Ltd (CRISIL)

Investment Information and Credit Rating Agency (ICRA)

Credit Analysis and Research Ltd (CARE)

FITCH Rating India Private Ltd

Duff Phelps Credit Rating Pvt. Ltd. (DCR India) and

Onicra Credit Rating Agency of India Limited

:Is an established player in the individual credit assessment and scoring services space in the Indian market.

CRISIL The first credit agency setup on January 1, 1988, jointly started by ICICI and UTI

with an equity capital of Rs. 4 crores, as public Ltd company.

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 frame works ,with a contextual understanding of business

It offers a comprehensive range of integrated product & service offerings-real time news, analyzed data , incisive insights & opinions & expert advice-to enable investors , issuers , policy makers de-risk their business & financial decision making, take informed investment decisions& develop workable solutions.

ICRA ICRA was set up by IFCI on 16th January 1991.

It is a public limited company with an authorized share capital of Rs.10 crores, Rs. 5 cores is paid up.

ICRA is major shareholders IFCI (26%), and the balance by UTI, LIC, GIC,PNB, Central Bank of India, Bank of Baroda, UCO Bank and banks (SBI) .

OBJECTIVE -to provide information & guidance to investors for determining the credit risk associated with a debt instrument.

CARE

It was setup by IDBI in collaboration with CANARA banks

financial service companies in NOV 1993.It offers services such as credit rating of debentures/ preference shares / F.D / CP / information services & equity research extensive study of the shares listed on major stock exchanges through EIL (economy, industry ,company) analysis.

RATING POINTS

Benefits to Rated Companies

Sources of additional certification Increase the investor population Encourage financial discipline Merchant bankers job made easy Foreign collaboration made easy Low cost of borrowing Rating as a marketing tool

RATING INFORMATION IS HOW THE CREDIT USEFUL TO INVESTORS

Safeguards against bankruptcy Recognition of risk Credibility of the issuer Easy understandability (ratings) of the investment proposal Savings of resources (time and money) Independence of investment and quick investment decision Choice of investments Good bye to thumb rules Benefits of rating surveillance Low cost information

DISADVANTAGES OF CREDIT RATING

Biased rating and misrepresentation, Static study, Concealment of material information, No guarantee for soundness of the company, Human bias, Reflection of temporary and adverse conditions, Present rating may change (down grade), Differences in rating of two agencies.

THANK YOU