Credit Rating Agency : CRISIL

 

       The discussion was all about the one of the credit rating agency i.e. CRISIL and its rating for different type of business & organizations. In next article you can read more about different rating  agencies.

 

Credit rating information services of India Ltd : CRISIL

In  previous article we discussed about credit rating , different kinds of rating, users of credit rating and rating process for different concern. Lets discuss more about credit rating and the different agencies and their ratings. Below is the brief discussion about CRISIL ( the rating agency).

 

CRISIL : Credit rating information services of India Ltd.

According to CRISIL, “ Credit Rating is an unbiased and independent opinion as to issuer’s capacity to meet its financial obligations. Its doesn't constitute a  recommendation to buy/sell or hold a particular security”.

CRISIL  , the first credit rating agency  was started on January 1, 1988. It was started jointly by ICICI bank and UTI bank with an equity capital of Rs. 4 crores. The main objective of CRISIL is to rate debt obligation of Indian Companies. CRISIL commences rating as per the request of the companies.

Crisil provides the rating as per  the investment i.e.

(a)    Debenture

(b)   Fixed deposit

(c)    Short term investment

(d)   Structured obligations

(e)    Real estate developers projects

(f)     Foreign Structure Obligations

(g)    Bond funds

(h)   Real estate developers

(i)      Governance and value creation

(j)     Health-care institutions

(k)    Credit assessments

(l)      Collective investment scheme

Following is the brief of ratings for above said investments.

 

(a)    CRISIL Debenture Rating Symbols :

(i)                  High Investment Grades :

AAA(Triple A) : Highest Safety  - on timely payment of interest and principal

AA (double A) : High Safety (This  symbol shows the minor variation from triple A)

(ii)                Investment Grades :

A : Adequate safety. This rating shows the adverse impact arising out of changed circumstances.

BBB : Moderate Safety – This rating shows  the variations caused by changing circumstances weakening the capacity.

(iii)               Speculative Grades:       

BB : Inadequate Safety – This rating shows the comparative uncertainties faced by the issuer.

B : High Risk – This  shows adverse business or economic conditions affecting the issuer.

C : Substantial Risk – This rating shows unfavorable circumstances to develop as it can be default.

D : Default – This rating shows that such debentures are extremely speculative and returns from them can be realized only on reorganization or liquidation.

 

(b)   CRISIL  Fixed Deposit Ratings Symbols:

FAAA ( F triple A) : Highest Safety

FAA (F double A) : High Safety

FA : Adequate Safety – This rating shows the changes in circumstances can affect the issues more than those in higher  rated categories.

FB : Inadequate Safety – This  shows the inadequacy capacity to make the timely interest and principal payments.

FC : High Risk – Such rating shows the adverse business or economic conditions would lead to lack of ability or willingness to pay interest or principal.

FD : Default – this shows that the issuer is either in default or is expected to be default upon maturity.

 

(c)    CRISIL’s Rating for Short – term Instrument :

P - 1 :Very Strong . This rating shows the degree of safety regarding timely payment on the instrument is very strong.

P – 2 : Strong     

P – 3 : Adequate

P – 4 : Minimal. This rating shows adversity affected by short term adversity  or less favorable conditions.

P – 5 : Default : This rating indicates that the instrument is expected to be in default on maturity or is in default.

 

(d)   CRISIL’s Rating for Structured Obligations:

Structured Obligations are using the same rating as debentures. However, structured obligations rating are  defined differently.

(1)    High Investment Grades:

 

AAA (SO) : Highest Safety . This rating shows the highest degree of certainty regarding timely payment of financial obligations on the instrument.

AA (SO) : High Safety

(2)    Investment Grades :

A (SO) : Adequate Safety. This rating shows changes in circumstances can adversely affect such instrument more than those in higher rated categories.

BBB(SO) : Moderate Safety

(3)    Speculative Grades :

 

BB (SO) : Inadequate Safety. This ratings shows the less susceptible to default than instrument s.

B(SO) : High Risk. This rating shows high risk as well as greater  susceptible to default. An adverse business or economic  

C (SO) : Substantial Risk. This rating indicates the certainty of the payment  of instrument.

D (SO): Default

 

(e)   CRISIL’s Rating Symbols for Real Estate Devlopers ‘ Project :

Highest Ability : PA – 1 :This rating shows the highest ability of developer to specify and build to agreed quality levels and transfer clear title within stipulated time schedules.

 

High Ability : PA – 2

Adequate Ability : PA – 3

Inadequate Ability : PA – 4 . this rating shows theinabilty of completion of project.

 

(f)     CRISIL ‘s Rating of Foreign Structured Obligations :

CRISIL ratings of Foreign Structured Obligations(fso) are based on the entity based outside of the country. The rating shows the certainty regarding timely payment of financial obligation on the instrument.

 

Financial Structured Obligations rating shows the same scale (AAA to D) as CRISIL rates for long term instrument.

 

(g)    CRISIL’s Rating  for Bond Funds :

CRISIL  rates the bonds and shows the protection capacity in  terms of profit or loss o credits. The following  are the ratings:

·         AAAf : Very Strong

·         Aaf : Strong

·         Af : Adequate

·         BBBf : Moderate

·         BBf : Inadequate

·         Cf : Defaults

 

(h)   CRISIL’s Rating  for Real Estate Devlopers:

CRISIL rates real estate projects on the basis of their past achievement records . This records  indicates the future expectation. The following are the ratings:

·         DA1 : Excellent :  This shows  the past record of the real estate project is excellent

·         DA2 : Very Good

·         DA3 : Good

·         DA4 : Unsatisfactory

·         DA5 : Poor

 

(i)      CRISIL Rating for Corporate Governance and Value Creation :   

This rating was introduced  because of few companies’ failure in USA due to governance  failure. As a result  for investor protection this ratings scale is introduced. This ratings analysis the credit worthiness of corporate governess.

 

The following are the ratings for corporate governance :

·         Level 1: Highest

·         Level 2 : High

·         Level 3 : Strong

·         Level 4 : Moderate

·         Level 5 : Adequate

·         Level 6 : inadequate

·         Level 7 : Poor

·         Level 8 : Lowest

 

(j)     CRISIL  Rating for Health Care Institution :

CRISIL rates the health care institutions in the terms of delivering  Patient care.  In addition to this some more  components are considered to rate i.e. facilities, equipments, manpower and also the service quality.

 

The following are the ratings :

·         Grade A : Very good

·         Grade B : Good

·         Grade C : An average

·         Grade D : Poor

 

(k)    CRISIL Ratings for Credit Assessments :

CRISIL rates different type of Credit Assessment , whether the borrower can pay the principal and interest timely or not. The following are the ratings as follows:

·         1 : Very Strong Capacity

·         2 , 3, 4 : Strong Capacity

·         5 ,6, 7 : Adequate Capacity

·         8, 9, 10 : Inadequate Capacity

·         11, 12, 13 : Poor Capacity

·         14 : Default

 

(l)      CRISIL Ratings for Collective Investment Scheme :

CRISIL rates investment schemes  to assure the investor that whether they are going to get there return of investment or not. The followings are the ratings as follows :

·         Grade l : High Certainty

·         Grade ll : Adequate Certainty

·         Grade lll : Moderate Certainty

·         Grade lV : Inadequate Certainty

·         Grade V : High Uncertainty

 

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