CREDIT RATING
A symbolic indicator of the current opinion on the relative capability of the corporate entity to timely service debts and obligations, with reference to the instrument rated. The rating is based on an objective analysis of the information and clarifications obtained from the business entity, as also other sources which are considered reliable by the rating agency.
Methodology
A Credit Rating Agency for an issuer takes into consideration the issuer's credit worthiness - its ability to pay back a loan operational efficiency commitment to new projects and other associate companies funding policies of the issuer past financial statements and estimates of future earnings: made under various sensitivity scenarios and evaluated against the claims and obligations that require servicing over the tenure of the instrument being rated. This affects the interest rate applied to the particular security being issued. Debt fixed Payment: Principal + Interest Rate
Uses of Ratings
For investors:
-Credit rating agencies increase the range of investment alternatives and provide independent, easy-to-use measurements of relative credit risk. -This increases the efficiency of the market, lowering costs for both borrowers and lenders. For borrowers: - It opens the capital markets to categories of borrower who might otherwise be shut out altogether: small governments, startup companies, hospitals, and universities.
RATING PROCESS
The rating process commences at the request of the prospective issuer and on receipt of information as may be available with such issuer. A team of analysts takes up the work of collection of data and information from the books and records of the concern and interacts with its executives. The team also relies on the in-house research and database and other secondary sources considered reliable by the rating agency.
RATING PROCESS
On completion of the analysis, a RATING REPORT is submitted to the rating committee followed by presentation of key rating issues by the rating team. The ratings are assigned by the rating committee. The rating agency ensures strict confidentiality of the information collected from the issuers during the rating process.
2. Time Required
The whole process takes three to four weeks after CRISIL receives complete information.
3. Rating Scale:
Reflects two components: -financial strength & -performance capability.
SE 1A SE 1B SE 2A SE 2B
Moderate SE 3A SE 3B
Weak
Poor
SE 4A SE 4B
SE 5A SE 5B
SE 4C
SE 5C