Credit Rating

Credit rating (CR) is all about assessing the credit worthiness of a business entity by a registered credit rating agency. The rating agency determines whether the entity will be in the condition to repay the loan on-time according to the loan agreement. In other words, it assesses the probability of default on a debt that may result from the inability of the entity to make the required payments.

Why credit rating is required?

Lending Credibility: When a business entity has a low credit rating, financial institutions are hesitant to lend money, and banks may refuse the request for a loan. Good credit ratings make it possible for companies to borrow from financial institutions or public debt markets easily.

Saving in Rate of Interest: The rating influences the amount of money that a business entity is entitled to borrow. A good rating indicates that the company has a higher chance of repaying the loan on-time. Conversely, a lower rating means that it has a lesser chance of repaying the loan on-time. In such cases, lenders will treat these companies as high-risk creditors because they are more likely to turn into defaulters.

Borrowing at a lower cost: Companies having good credit ratings can effortlessly raise funds from the market at lower costs. This is because lenders prefer to invest in low-risk instruments. On the contrary, companies with lower ratings may find it hard to raise funds from the market, thereby impacting their overall business.

Large audience for borrowing: The high rating denotes that a company can have a broad audience for borrowing, including banks, financial institutions, investment companies, etc. This is because financial institutions and the public market easily understand the rating made by a registered credit rating agency.

Utilizing Rating as marketing tool: Today, companies utilize the credit rating as a marketing tool to boost their own reputation and build a stronger image in dealing with their customers. By doing so, customers feel confident in the quality of the products manufactured by the high rating company.

Why Choose Us

Today, the market is crowded with hundreds of credit rating advisory firms to choose from. It’s a tough job to find the one you can count on. Here are some reasons why you’ve made the best decision by choosing us for your company.

Providing Unrivalled Expertise: With over ten years of experience in the credit rating advisory field, we have specialists who provide reliable credit rating advice that the company’s management can trust. We endeavor to deliver stellar customer service and go the extra mile for our clients.

Broad Client Base: We have successfully helped numerous clients get the expected or high credit rating through our service in the last several years. We have confidence in our ability to illustrate the company's strengths more efficiently, helping them optimize their credit rating.

Confidentiality: As stated in our terms and conditions, which are given to all issuer clients, we retain confidentiality over all the sensitive information obtained and will not reveal it to third parties.

Maintaining Honesty, Integrity, and Respect: These core values are the cornerstones of Finnova Advisory. We never let the notion of success supersede the moral values that we carry along in today’s competitive world.

Credit Rating Process

We help companies procure good credit rating by embracing a holistic methodology that is divided into several steps so that we consider all key factors:

Step 1: Client's Formal Request For Rating

The rating process starts with a formal rating request from a company willing to have its issuing obligations assessed by CR agencies under the proposed instrument.

Step 2: Understanding Rating Requirements

First, we begin any project by understanding the credit rating requirements and estimated outcomes. We perform a primary analysis of the data based on the financials and project details shared by the company.

Step 3: Analysis of Financial Statements and Other Information

Our in-house specialists analyze the company's past financial statements and other related information to draft forecast financial statements/credit ratios adjusted for agency methodologies, stresses and/or business plan scenarios, as appropriate.

Step 4: Discussion and Presentations of Findings

We share our useful feedback with the client after the analysis step is completed. This information is presented in the most persuasively way, and the first draft of the rating agency presentation is completed by us. We also prepare the supplementary material to give the rating agency a holistic image that helps them to have a fair view of your company's creditworthiness.

Step 5: Selection of Rating Agency

There are seven credit rating agencies in the market. Based on discussion with client and credit analysis input, we select the rating agency and inform the client.

Step 6: Interaction with Rating Agency

We provide complete hand-holding while discussing and presenting client’s case against the chosen credit rating agency. As a matter of fact, we work as partners with our clients and also serve as a single point of contact to provide the agency with all the necessary details.

Step 7: Credit Rating Agency Decision Finalization

Finally, the rating grade is conveyed to the client along with explanations or reasoning, justifying the rating. We review the rating report for errors, misstatements, or the omission of any information. We offer advice on whether to appeal any part of the decision or acknowledge the results and convert to a public rating as appropriate.

Step 8: Continuous Monitoring

The ranking is not a one-time procedure, and every year the rating of companies is assessed and evaluated. Therefore, we provide support to our clients in annual surveillance of the credit rating.

List of Registered Credit Rating Agencies

Regulated by SEBI, there are credit ratings agencies operate in India according to SEBI Regulations, 1999 of the SEBI Act, 1992.

1. CRISIL (Credit Rating Information Services of India Limited)

CRISIL is a leading and innovative global analytics company that provides ratings, risk and advisory, research services to numerous companies and financial institutions. The company has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers since its inception in 1987. The company roaster of clients includes micro, small and medium companies, top global financial institutions, large corporates, and investors. It also works with insurance companies, commercial and investment banks, private equity players, and asset management companies globally. It has an interest in the businesses of Ratings, SME Solutions, India Research, Global Research & Analytics, CRISIL Coalition, Infrastructure Advisory, BI & Risk Management, and Global Analytical Center.

2. ICRA (Investment Information and Credit Rating Agency of India Limited)

Formerly known as Investment Information and Credit Rating Agency of India Limited, ICRA Limited was set up as an independent and professional investment Information and Credit Rating Agency by leading financial/investment institutions, commercial banks, and financial services companies. At present, ICRA and its subsidiaries have formed the ICRA Group of Companies (Group ICRA). The agency performs rating for Financial Rating, Corporate Debt, SME, Mutual Funds, Structured Finance, Infrastructure, Insurance, Project, Public Finance, Market-Linked Debentures, etc.

3. CARE (Credit Analysis and Research Limited)

CARE Ratings takes pride in being known as the second-largest credit rating agency in India. The Research and Information division of CARE provides contemporary research and information covering various industries and financial markets. The agency provides two different categories of bank loan ratings, long-term and short-term debt instruments. It also offers ratings for Initial Public Offerings (IPOs), real estate, renewable energy service companies (RESCO), financial assessment of shipyards, Energy service companies (ESCO) grades various courses of educational institutions. Today, it has emerged as the leading agency for covering many rating segments, including manufacturing, infrastructure, financial sector, banks, and non-financial services.

4. India Ratings and Research Pvt. Ltd

India Ratings and Research is a 100% owned subsidiary of the Fitch Group. It is committed to providing India's credit markets accurate, timely, and prospective credit opinions. Headquartered in Mumbai, the agency currently covers corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies, and structured finance and project finance companies.

5. BWR (Brickwork Ratings)

Brickwork Ratings has been accredited by RBI and empanelled by NSIC, NCD, MSME ratings, and grading services. The agency was founded by banks, credit rating professionals, former regulators, and professors, and is committed to promoting Financial Literacy. Canara Bank, a leading public sector bank, is the promoter and strategic partner of BWR. The agency provides ratings for corporate governance, bank loans, municipal corporations, capital market instruments, SMEs, and financial institutions. It also grades real estate investments, NGOs, educational institutions, tourism, hospitals, IPOs, IREDA, MFI, and MNRE.

6. SMERA Ratings Limited (Acuite Ratings & Research Limited)

Acuite was incorporated in 2005 as an initiative of the Ministry of Finance (GOI) and RBI to facilitate the credit rating of bank borrowers. Since most of its borrowers are SMEs, the agency chose to call as SME Rating Agency, which they later rechristened to SMERA Ratings Limited. SMERA analyses and establishes the credibility of existing micro, small, and medium enterprises (MSMEs). MSMEs can improve, grow, and avail cheaper/faster loans.

7. Infomerics Valuation and Rating Private Limited

Infomerics is RBI accredited and was founded by finance professionals, former bankers, and administrative services personnel. The crucial management team consists of quite a few highly qualified & experienced professionals having demonstrated illustrious attainments in the rating industry. The agency aims to provide an impartial and systematic review and assessment of creditworthiness to NBFCs, banks, companies, and small and medium-scale units.

Rating Symbols

The credit rating agencies uses rating symbols to denote the creditworthiness and risk level. The below table contains the rating symbols used in India:

Table: Long Term Scale
Rating Risk level Description
AAA Highest Safety It has the highest degree of safety regarding timely servicing of financial obligations and carries the lowest credit risk.
AA High Safety It has a high degree of safety regarding timely servicing of financial obligations and carries very low credit risk.
A Adequate Safety It has an adequate degree of safety regarding timely servicing of financial obligations and carries low credit risk.
BBB Moderate Safety It has a moderate degree of safety regarding timely servicing of financial obligations and carries moderate credit risk.
BB Moderate Risk It has a moderate risk of default regarding timely servicing of financial obligations.
B High Risk It has a high risk of default regarding timely servicing of financial obligations.
C Very High Risk It has a very high risk of default regarding timely servicing of financial obligations.
D Default Already in default or expected to be in default soon.

Note: For the rating categories AAA through to D, the modifier + (plus) or – (minus) may be appended to the rating symbols to indicate their relative position within the rating categories concerned. Thus, the rating of AAA+ is one notch higher than AAA, while AAA- is one notch lower than AAA.

Table: Short Term Scale
Rating Description
A1 It has a very strong degree of safety regarding timely payment of financial obligations and carries the lowest credit risk.
A2 It has a strong degree of safety regarding timely payment of financial obligations and carries low credit risk.
A3 It has a moderate degree of safety regarding timely payment of financial obligations and carries higher credit risk than the two higher categories.
A4 It has a minimal degree of safety regarding timely payment of financial obligations and carries very high credit risk, and is susceptible to default.
D Already in default or expected to be in default on maturity.

Note: For the rating categories A1 through to A4, the modifier + (plus) may be appended to the rating symbols to indicate their relative position within the rating levels concerned. Thus, the rating of A1+ is one notch higher than A1 and so on.