Investment Information and Credit Rating Agency OF INDIA (ICRA)

Introduction
ICRA Limited (ICRA) is an Indian independent and professional investment information
and credit rating agency. It was established in 1991, and was originally named Investment
Information and Credit Rating Agency of India Limited (IICRA India). It is second largest Indian
rating company in term of customer base. It was a joint-venture between Moody's and various
Indian commercial banks and financial services companies. The company changed its name
to ICRA Limited, and went public on 13 April 2007, with a listing on the Bombay Stock
Exchange and the National Stock Exchange.

ICRA Limited (ICRA) is an independent Indian professional investment information and

Credit rating agency.

It was established in 1991, and was originally named Investment Information and Credit
Rating Agency of India Limited (IICRA India).

It was a joint-venture between Moody's and various Indian commercial banks and
financial services companies.

The company changed its name to ICRA Limited, and went public on 13 April 1997, with
a listing on the BSE & NSE

ICRA Credit Rating

ICRAs credit ratings are symbolic representations of its current opinion on the relative credit
risks associated with the rated debt obligations/issues. These ratings are assigned on an Indian
(that is, national or local) credit rating scale for Rupee (local currency) denominated debt
obligations. ICRA ratings may be understood as relative rankings of credit risk within India.
ICRA ratings are not designed to enable any rating comparison among instruments across
countries; rather these address the relative credit risks within India.
ICRAs ratings (other than Structured Finance Ratings) in the investment grade convey the
relative likelihood of default, that is, the possibility of the debt obligation not being met as

promised. All other ratings, including Structured Finance Ratings, reflect both the probability of
default and the severity of loss on default, that is, the expected loss against the rated debt
obligation.
Credit ratings apart, ICRA also assigns Corporate Governance Ratings, besides Performance
Ratings, Gradings and Rankings to mutual funds, construction companies and hospitals.

ICRA Ratings

Sanghvi movers: Updates on rating by ICRA

Sayaji Hotels: Updates on rating by ICRA

Wheels India: Updates on rating by ICRA

Bajaj Electrical: Updates on rating by ICRA

APL Apollo Tubes: Updates on rating by ICRA

ICRA Research

Look at CARE, Target Rs 2100-2200: Devang Mehta

FM discusses step to control rising NPAs with PSB chiefs

ICRAs impact analysis on RBIs new norm for NBFCs

Expect 30-35% upside in CARE, says Rahul Arora

Rating Given by ICRA

Remarks

Long-

Highest Safety
High Safety
Adequate safety
Moderate Safety
Inadequate Safety
Risk prone
Substantial Risk
Default

Instrument
LAAA
LAA
LA
LBBB
LBB
LB
LC
LD

Term Medium-

Term Short-term Including

Instruments
MAAA
MAA
MA
MB
MC
MD

commercial Paper
A-1
A-2
A-4
A-5

SUBSIDIARIES
Today, ICRA, a full-service Credit Rating Agency with its shares listed on the BSE & NSE, has
five subsidiaries:

ICRA Management Consulting Services Limited (IMaCS)

ICRA Techno Analytics Limited (ICTEAS);

ICRA Online Limited (ICRON);

PT. ICRA Indonesia (ICRA Indo), and

ICRA Lanka Limited

(ICRALanka), together, ICRA and its subsidiaries, form the ICRA Group of Companies, that is,
Group ICRA.

ICRA STYLE
The corporate governance practices prevalent in an organization reflect the:
1. Distribution of rights and responsibilities among its different participants, namely:
o The Board,
o Management,
o Shareholders and
o Other financial stakeholders and
2. The rules and procedures laid down and followed for making decisions on corporate affairs.
The emphasis of ICRAs CGR is on substance over form.
CONCEPTUAL BASIS FOR ICRAS CGR
The Organization for Economic Co-operation and Development (OECD) has defined Corporate
Governance as the system by which business corporations are directed and controlled.
The corporate governance structure specifies the distribution of rights and responsibilities among
different participants in the corporation, and spells out the rules and procedures for making
decisions on corporate affairs.
By doing this, it also provides a mechanism through which
o the company objectives are set,
o the means of attaining those objectives defined, and
o the process of monitoring performance .

With the OECD definition of Corporate Governance serving as the basis, ICRAs CGR
framework seeks to understand the interaction among different participants in the company
being rated.
The following diagram depicts the typical participants in a corporation, and the
interrelationship between them.
BOARD STRUCTURE AND PROCESSES
The key Board functions of any organization may be summed up as follows:
o Approving, monitoring and reviewing the strategy proposed by the executive
management
o Evaluating the performance of the top management
o Ensuring compliance with legal and statutory requirements (that is, the control function
of the Board)
Balancing the rights and concerns of shareholders and other stakeholders
A competent Board of Directors, free of conflict of interest, can help protect stakeholders'
interests, ensure compliance with the prevailing laws of the land, and provide strategic
guidance to the executive management.
However, the full Board may not be able to meet very frequently to devote its close attention
to the business of the organization. Some of the Board functions are therefore performed
through specially constituted Board Committees consisting mainly or wholly of Independent
Directors.
The more important among these Committees are
o The Audit Committee,
o The Remuneration Committee,

o The Appointment Committee &

o The Investment Committee.
Through these Board Committees, organizations seek to strengthen the ability of the NonExecutive Directors to discharge their control functions more effectively.

EVALUATION
Among the Board Committees, the Audit Committee is clearly the most important in terms of
scope of activities.
A properly functioning Audit Committee has the potential
o To improve the quality of financial reporting,
o Strengthen the position of auditors, and
o Ensure that effective internal audit and internal control/risk management systems are in
place.
The key aspects relating to the effectiveness of Audit Committees as reviewed by ICRA are:
o Composition of the Audit Committee
o Background, expertise, experience and independence of its members
o Deliberations at Audit Committee meetings with respect to:
Compliance with Accounting Standards
Qualifications in published accounts

 Major issues involving the financial reporting process, systems and control, and internal audit
coverage

Financial Discipline
The ultimate objective of Corporate Governance is to create and maximize shareholder value.
While the actual shareholder value generated by a company may be dependent on a number of
factors that are beyond the control of its management, ICRA believes that maintenance of a
certain level of discipline in the conduct of business operations also has an important role to play.
ICRAs analysis therefore focuses on factors that are within the companys control, and which, in
ICRAs opinion, impact the shareholder value that a company is able to generate in the long run.

Conclusion
ICRA believes that this rating service would assist the corporates to project an objective and
credible opinion on the quality of their corporate governance practices and on their
responsiveness in addressing the interests of all financial stakeholders.
Empirical research shows that corporate governance is one of the important factors influencing
corporate valuations.

Credit Analysis and Research Limited (CARE):

Credit Analysis and Research Limited (CARE) sponsored by the Industrial Development Bank of
India Jointly with Canara Bank, UTI, Private sector banks, and equity research service
companies to offer credit rating information and equity research service to Indian industry and
institutions. CARE was incorporated on April 21, 1993, and commenced its operation in October,
1993.It undertakes rating of all types of debt instrument like commercial paper, fixed deposits,
bonds, debentures, and structural obligations, involving an independent and professional
assessment of debt servicing capabilities of companies. Since its inception till the end of March
1995, CARE has rated 249 debt instruments covering a total debt volume of RS. 9729 Cr.

Rating Given BY CARE

Remarks
Highest

Long-Term

Medium-Term

Short-Term

Instruments

Instruments

Instruments

Investment CARE AAA

Grade

Upper
Grade

CARE
(FD/CD/So)

Investment CARE AA

CARE
(FD/CD/So)

AAA PR-1,

superior

capacity for repayment

AA PR-2, Strong capacity

for repayment

Upper

Medium CARE A

Investment Grade

CARE

(CFD/ PR-2, Strong capacity

CD/SO)

Investment Grade

CARE BBB

CARE

BB PR-4 minimal Degree

(FC/CD/So)
Susceptible to Default

CARE B

CARE B (FD/CD/So)

High Investment Risk CARE C

CARE C (FC/CD/So)

with

livelihood

of safety

of

default
Lowest

Category CARE D

Default or likely to be
Default

CARE D (FD/CD/so)

PR, default or likely to

be default

Fitch Rating: Fitch Rating India LTD. is the latest agency to do credit rating from the foreign
sector. It is a 100% subsidiary of its parent company abroad operating in India.
Remarks

Rating

of

different Fitch

Instruments
Highest Safety

Long- Term Instruments

AAA (Ind)

High Safety

AA (Ind)

Adequate Safety

A (Ind)

Moderate Safety

BBB (Ind)

Inadequate Safety

BB (Ind)

High Risk

B (Ind)

Substantial Risk

C (Ind)

Default

D (Ind)

Very Strong

Middle- Term Instrument

TAAA (Ind)

Strong

TAA (Ind)

Satisfactory

TA (Ind)

Moderate

Adequate
Inadequate

TB (Ind)

Doubtful

TC (Ind)

Default

TD (Ind)

Very strong

Short-Term Instrument

F1 (Ind)

Lower than P-1

F2 (Ind)

Adequate

F3 (Ind)

Minimal

F4 (Ind)

Default

F5 (Ind)

Fitchs Ratings
Countries

Rating

Outlook

Australia

AAA

Stable

Brazil

BBB

Stable

Egypt

Negative

France

AAA

Negative

Germany

AAA

Stable

Hong Kong

AA+

Stable

India

BBB-

Negative

Japan

A+

Negative

United Kingdom

AA+

Stable

Unites States

AAA

Negative