On

Analysis of CRISIL Credit Rating Agency

In partial fulfillment for the award of degree

of
MASTER OF BUSINESS ADMINSTRATION
(M.B.A. 2003-2005)

Under the Supervision of:

Submitted By:
Ms. Priyanka Sehgal
Faculty- Management
[HIM, Sonepat]

Sukhbir Singh
Roll No. 53
MBA 4th Semester

Hindu Institute of
Management

[Affilated by Maharshi Dayanand

DECLARATION
I Sukhbir Singh Roll No 53 Class MBA 2nd Year (4th
semester)

Hindu

Institute

of

Management

hereby

declare that the project entitled Analysis of CRISIL

Credit Rating Agency is my original research work &
same project is not submitted by me to any other
Institution for the award of other degree.
The interim report was presented to the supervisor
on

. The feasible suggestions have been duly

incorporated in consultation with supervisor.

[Signature of supervisor]

[Signature of the Candidate]

Countersigned
Director/Principal of the Institute

PREFACE
The banking industry encompasses public sector, private
sector and foreign banks. The public sector banks account
maintain in proper way. But there is lot of competition in
private sector.
So private company cannot provide original information about
their assets & liabilities. They give bribes to the auditors so my
significance of the study that how CRISIL do its job related to
correct real assets and liabilities of private company.
Credit rating is a boon to the companies as well as investors. It
facilitates the company in raising funds in the capital market
and helps the investors to select their risk return trade off.
Credit rating essentially indicates the risk involved in a debt
instrument as well it qualities. It essentially reflects the
probability of timely payment of principal and interest by a
borrower company.

ACKNOWLEDGEMENT
I am grateful to all those who assisted me in preparing this
project report, specifically Ms. Priyanka Sehgal, FacultyManagement, Hindu Institute of management, Sonepat.
I express my deep gratitude to Mr.Rajesh Yadav, deputy
director of all India sugar mills for their support and guidance.
I have tried to include issues involved in portfolio analysis in
general and comprehensive manner.

SUKHBIR SINGH
ROLL NO 53

CONTENTS
Introduction to the Project

Page No.

1-58

o Credit Rating & its Concept

o CRISIL Process
o CRISIL Methodology
o CRISIL Symbols
Significance of the Study

59

Review of Exiting Literature

60

Conceptualization

61

Focus of the Problem

62

Objectives

63

Hypothesis

64

Research Methodology

65

Data Analysis and Interpretation

66

SWOT Analysis of CRISIL

72

Suggestion & Recommendations

74

Conclusion

75

Limitations

76

Annexure

77

 Bibliography

80

INTRODUCTION
The

origins

of

credit

rating

can

be

traced

to

the

1840s.Following the financial crisis of 1837; Louis Tappan

established the first mercantile credit agency in New York in
1841. The agency rated the ability of merchants to pay their
financial obligations. It was subsequently acquired by Robert
Dun and its first rating guide was published in 1859. Another
similar agency was set up by john Bradstreet in1849, which
published a rating book in 1857.these two agencies were
merged together to form dun and Bradstreet in 1933,which
become the owner of Moodys investors service in 1962.the
history of moody itself goes back about a 100 years in 1962.
There are credit rating agencies in operation in many other
countries such as Malaysia, Philippines, Mexico, Indonesia,
Pakistan, Cyprus, Korea, Thailand, and Australia.
Credit rating has assumed an important place in the modern
and developed financial markets. It is a boon to the companies

as well as investors. It facilitates the company in raising funds

in the capital market and helps the investors to select their
risk return trade off.
Funds procurement is one of the key functions of a business
undertaking. Among the various sources of fund long term,
debt, debentures, bonds, fixed deposit and commercial paper,
besides, share capital are worth mentioning. The issuer of
these

instruments

approaches

capital

market

financial

institutions and various agencies to raise necessary finance at

certain terms and conditions.
Crediting rating, essentially, indicates the risk involved in a
debt instrument as well as its qualities. Higher the credit
rating greater is the probability that the borrower will make
timely payment of principal and interest advice versa.
Credit rating is not a general evaluation of the issuing
organization. The credit rating is not a one time evaluation of

credit risk of security. The rating agency may change the

rating considering the chaotically.

CRISIL RATING AND CONCEPT

CRISIL was set up in 1987 as India's first credit ratings
agency. Our promoters included leading financial institutions
such as ICICI (now ICICI Bank Ltd, India's largest private
sector bank). The Asian Development Bank was one of the
original

shareholders.

CRISIL

has,

since,

successfully

diversified into businesses that have leveraged our core

competencies in the areas of risk identification, assessment,
quantification and mitigation.
CRISIL is a publicly listed company on India's leading stock
exchanges. About 9.53%(as on March 31, 04) of CRISIL's
shareholding is owned by Standard & Poor's, the world's
leading credit ratings agency, 26.64% is owned by banks and
insurance companies, and 30.54% by Indian and foreign
institutions and mutual funds.
We share with you key milestones from our journey.

2001

2002

2003

CRISIL sets up:

The Centre for Economic Research - to apply economic principles to live
business situations
CRISIL MarketWire - to provide real-time financial news services to help clients
make pricing- and investment-related decisions

CRISIL sets up its investment and risk management services group to offer
integrated risk management solutions and advice to banks and corporates.

CRISIL follows it up with its first overseas acquisition - EconoMatters Ltd (later
the Gas Strategies Group), a London-based company providing natural gas
related consulting, information and training, and conference-organising services.

CRISIL expands its global reach further with an equity investment in the world's
first regional rating agency, the Caribbean Information and Credit Rating
Services Limited (CariCRIS), which CRISIL also helps set up.

The CRISIL Awards for Excellence in Municipal Initiatives are instituted, to

recognise outstanding programmes in urban development.

The strategic alliance with S&P since 1996 culminates in S&P's acquiring
majority control of CRISIL.
CRISIL makes its second overseas acquisition, of Irevna, thus adding equity
research to its wide canvas of work. Irevna is a leading global equity research and
analytics company.
CRISIL launches Small and Medium Enterprise (SME)
Ratings to serve the specialised needs of the SME sector.

CRISIL partners CNBC-TV18 for Emerging India Awards - the first platform to
recognize and reward the achievements of India's Small & Medium Enterprises.

CRISIL launches IPO grading services to provide investors with independent,

reliable, and consistent assessments of the fundamental strengths of new public
issues.

Irevna is ranked globally as the top Investment Research Outsourcing Firm by

The Black Book of Outsourcing.

Ms. Roopa Kudva takes over as Managing Director and CEO of CRISIL,
following Mr. Ravimohan's appointment as Managing Director and Region Head
of S&P, South Asia.
CRISIL assigns India's first Bank Loan Rating under the Reserve Bank of India's
Basel-II related regulations.
The Provident Fund Regulatory and Development Authority awards CRISIL with

2006

2007

CRISIL launches the CRISIL Young Thought Leader (CYTL)

Award - to attract outstanding talent and provide a platform to India's future
business leaders to showcase their views.

2004

2005

CRISIL sets up subsidiary, Global Data Services of India Ltd, to standardise

published financial data for analysis.
CRISIL launches Mutual Fund Awards in association with CNBC-TV18 - a
benchmark award for India's best performing mutual funds.

CRISIL launches Real Estate Awards with CNBC AWAAZ. The award honors
India's exemplary developers and builders.

CRISIL launches Complexity Levels, an initiative to strengthen India's capital

markets by providing greater transparency to investors.

CRISIL's revenues cross Rs.5 billion in 2008.

CRISIL's SME Ratings group assigns its 5000th SME rating.

CRISIL captures about half of India's bank loan rating market.
Irevna is ranked globally by The Black Book of Outsourcing as the No. 1
Investment Research and Analytics Outsourcing Firm.

CRISIL Research launches Independent Equity Research

(IER).

CRISIL moves into a new, corporate head office - the new CRISIL House, at
Powai, Mumbai, is a state-of-the-art, green building.
CRISIL SME Ratings crosses its 15,000th SME rating.
CRISIL launches Real Estate Star Ratings.

2008

2009

2010

a prestigious mandate to assist in the selection of Fund Managers under the New
Pension Scheme.
The Black Book of Outsourcing ranks Irevna the No. 1 Financial Services
Industry Analytics Outsourcing Firm.

CRISIL acquires Pipal Research, further strengthening its leadership in the KPO
industry.

CRISIL PROCESS
CRISIL rating process and rating committee are designed to
ensure that all assigned ratings are based on the highest
standards

of

independence

and

analytical

rigor.

The rating committee comprises members who have the

professional competence to meaningfully assess the credit
analysis that underlies the rating, and have no interest in the
entity being rated. A team of analysts carries out the credit
analysis. Each team has at least two members. CRISIL
analysis is based on issuer meetings and an understanding of
the business environment. The analysis is carried out within
the framework of clearly spelt-out rating criteria.

Rating Process
Management Meeting
Rating Committee and assignment of rating

Confidentiality
Advice to Issuer
Publication
Surveillance and Annual Review
Limitations of CRISIL Credit Ratings

Specific process safeguards that ensure independence from

individual or organizational bias include:
Multi-member rating teams
Multi-tier rating process
Rating committee comprising experienced, competent
and reputed professionals to assign all ratings
Organization-wide internal transparency. Each stage of
the rating process for all ratings, including the final
rating committee discussions, is open to all analytical
staff in CRISIL rating division

 Rating methodologies and criteria are clearly spelt out,

published and consistently applied

CRISIL ensures confidentiality of the information obtained for

the rating exercise by putting in place appropriate process
safeguards. All CRISIL employees are required to sign a
confidentiality

agreement.

CRISIL

does

not

disclose

confidential information that it has obtained for the purpose of

credit rating to anyone (other than market regulators or law
enforcement authorities, if required.

The process of Rating starts with the issue of the Rating

request by the issuer and signing of the Rating agreement.
CRISIL employs a multi-layered decision making process in
assigning a rating. It assigns a team of at least two analysts
who interact with the company's management.

CRISIL strongly believes that the interest of investors is best

served if there is an open dialogue with the issuer. This
enables CRISIL to incorporate non-public information in a
rating decision, and also helps the rating to be forward
looking.

FLOWCHART OF CRISIL RATING

PROCESS

The topics discussed during the management meeting are

wide-ranging,

including

competitive

position,

strategies,

financial policies, historical performance, and near and longterm financial and business outlook. CRISIL emphasizes
discussions

on

the

issuer's

business

risk

profile

and

strategies, in addition to reviewing all financial data.

CRISIL ratings are not based on the issuer's financial
projections or their perspectives on the future. Instead, the
ratings are based on the analysts' assessment of the issuers'
prospects. However, the management's financial projections
are a valuable tool in the rating process, since they indicate
the

management's

future

plans,

how

the

management

assesses the company's challenges, and how it plans to deal

with problems that may arise in the course of business.
From the initial management meeting to the assignment of the
rating, the rating process normally takes three to four weeks.
However, CRISIL has a commendable track record of being

able to deliver rating decisions to meet the clients' urgent

requirements.
After meeting with the issuer's management, our analysts
prepare a report elaborates their analysis and justifies the
rating assigned. The report is then presented to a Rating
Committee at a Rating Committee Meeting RCM). This is the
only aspect of the process in which the issuer does not
participate directly. The Rating Committee comprises experts
who bring with them longstanding experience in numerous
companies and industrial sectors. RCMs are held regular
schedules at CRISIL and form a crucial part of a vigorous
exercise focused on assigning a rating to an issuer company.
The RCM process ensures objectivity of the rating, since the
decision results from the collective thinking of a group that
comprises experts who are familiar with the issuer, the
industry in which the issuer operates the competitors, and the
markets. The RCM process also ensures high analytical quality

and consistency since the reports and discussions are focused

on critical rating factors that are relevant to a particular
issuer. Accordingly, by drawing on the knowledge and expertise
of the participants, the RCM ratifies the individual ratings
assigned by the analysts.

A substantial portion of the information set forth in company

presentations is highly sensitive and is provided by the issuer
to CRISIL only for the purpose of arriving at ratings. Such
information is kept strictly confidential by the ratings group
and not shared with other divisions or group companies of
CRISIL. It is not used for any other purpose, or by any third
party other than C RISIL Ratings.
On finalization of a rating at the rating committee meeting, the
rating decision is first communicated to the issuer, subsequent
to which the reasons or rationale supporting the rating are

forwarded. It is important that the issuer understands the

critical analytical factors that the committee focused on while
arriving

at

the

rating.

In the event an issuer disagrees with the rating outcome, it

has the opportunity to ask CRISIL to take a second look. In
such a case, the issuer needs to submit additional facts/data
and new information to the analysts for a note to be put up
once again before the Rating Committee. The issuer needs to
specifically address the concerns expressed in the earlier
rating rationale appealing a rating decision, it needs to provide
new/ additional information that is material to the appeal and
the Rating Committee is reconvened once the additional
information is submitted. At this stage, the Rating Committee
may or may not modify the rating, depending on the facts of
the case. In case the rating is not changed and the
disagreement with the given rating continues, the issuer has a
right to reject the rating. If this happens, the whole exercise is

kept confidential. Once a final rating is assigned with the

acceptance of the issuer, it is disseminated to CRISIL
subscriber clientele, as well as local and international news
media.

Ratings

onwww.crisil.com

information
and

the

is

also

dedicated

available
ratings

online
website

www.crisilratings.com. In addition, CRISIL publishes detailed

analytical reports and a range of information products, which
subscribers find useful in understanding the credit risk profile
of borrowers.

A CREDIT RATING FROM CRISIL IS NOT:

A general-purpose credit or performance evaluation of the
rated entity: CRISIL Credit Ratings are always issue-specific
A recommendation to invest in, or not to invest in, any
shares, debentures or other instruments issued by the
rated entity, or derivatives thereof.
An opinion on associate, affiliate or group companies of
the rated entity, or on promoters, directors or officers of
the rated entity
A statutory or non-statutory audit of the rated entity
An indication of compliance or otherwise with legal or
statutory requirements
Credit Ratings are arrived at based on information obtained in
the rating process. In addition to management meetings and
information provided by rated entities, the rated entity's
audited accounts, regulatory filings, and information provided
by trustees form an important source of information. CRISIL

does not verify and validate the information that it uses for its
ratings. However, reasonable due diligence is carried out to
ensure that a meaningful and accurate rating exercise is done
(for instance, financial accounts are extensively 'adjusted' to
ensure that they present a relevant picture of the financial
position of an entity from a debt servicing perspective, to the
extent possible).

CRISIL CREDIT RATING SYMBOLS

Long term (Debentures)
Fixed deposits
Short term instruments (Commercial Paper)
Structured obligations
Foreign Structured Obligations
Non Credit Risk
Financial Strength Ratings
Bond funds
Real estate developers
Real estate projects
Governance and Value Creation

 Healthcare institutions grading

Credit Assessments
Collective investments

CRISIL LONG TERM (DEBENTURE) RATING SYMBOLS:

High Investment Grades
AAA
(Triple-A)
Highest Safety
Debentures rated `AAA' are judged to offer highest safety of
timely

payment

of

interest

and

principal.

Though

the

circumstances providing this degree of safety is likely to

change, such changes as can be envisaged are most unlikely to
affect adversely the fundamentally strong position of such
issues.
AA
(Double-A)
High Safety
Debentures rated AA' are judged to offer high safety of timely
payment of interest and principal. They differ in safety from
`AAA' issues only marginally.
Investment Grades
A
Adequate Safety

Debentures rated `A' are judged to offer adequate safety of

timely payment of interest and principal; however, changes in
circumstances can adversely affect such issues more than
those in the higher rated categories.
BBB
(Triple-B)
Moderate Safety
Debentures rated `BBB' are judged to offer sufficient safety of
timely payment of interest and principal for the present;
however, changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal than for
debentures in higher rated categories.
Speculative Grades
BB
(Double-B)
Inadequate Safety
Debentures rated `BB' are judged to carry inadequate safety of
timely payment of interest and principal; while they are less
susceptible to default than other speculative grade debentures

in the immediate future, the uncertainties that the issuer

faces could lead to inadequate capacity to make timely interest
and principal payments.
B
High Risk
Debentures rated `B' are judged to have greater susceptibility
to default; while currently interest and principal payments are
met, adverse business or economic conditions would lead to
lack of ability or willingness to pay interest or principal.
C
Substantial Risk
Debentures rated `C' are judged to have factors present that
make them vulnerable to default; timely payment of interest
and principal is possible only if favorable circumstances
continue.
D
In Default

Debentures rated `D' are in default and in arrears of interest

or principal payments or are expected to default on maturity.
Such debentures are extremely speculative and returns from
these debentures may be realized only on reorganization or
liquidation.
Note:
1) CRISIL may apply "+" (plus) or "-" (minus) signs for ratings
from AA to D to reflect comparative standing within the
category.
2) The contents within parenthesis are a guide to the
pronunciation of the rating symbols.
3) Preference share rating symbols are identical to debenture
rating symbols except that the letters "pf" are prefixed to the
debenture rating symbols, e.g. pfAAA ("pf Triple A").

CRISIL FIXED DEPOSIT RATING SYMBOLS:

FAAA
("F-Triple-A")
Highest Safety
This rating indicates that degree of safety regarding timely
payment of interest and principal is very strong.
FAA
("F-Double-A")
High Safety
This rating indicates that the degree of safety regarding timely
payment of interest and principal is strong. However, the
relative degree of safety is not as high as for fixed deposits with
"FAAA" rating.
FA
Adequate Safety

This rating indicates that the degree of safety regarding timely

payment of interest and principal is satisfactory. Changes in
circumstances can affect such issues more than those in the
higher rated categories.
FB
Inadequate Safety
This rating indicates inadequate safety of timely payment of
interest and principal. Such issues are less susceptible to
default than fixed deposits rated below this category, but the
uncertainties that the issuer faces could lead to inadequate
capacity to make timely interest and principal payments.
FC
High Risk
This rating indicates that the degree of safety regarding timely
payment of interest and principal is doubtful. Such issues
have factors at present that make them vulnerable to default;

adverse business or economic conditions would lead to lack of

ability or willingness to pay interest or principal.
FD
Default
This rating indicates that the issue is either in default or is
expected to be in default upon maturity.
Note:
1) CRISIL may apply "+" (plus) or "-" (minus) signs for ratings
from FAA to FC to indicate the relative position within the
rating category of the company raising fixed deposits.
2) The contents within parenthesis are a guide to the
pronunciation of the rating symbols.

CRISIL
RATING
FOR
(Commercial Paper)

SHORT-TERM

INSTRUMENTS

P-1
This rating indicates that the degree of safety regarding timely
payment on the instrument is very strong.
P-2
This rating indicates that the degree of safety regarding timely
payment on the instrument is strong; however, the relative
degree of safety is lower than that for instruments rated "P-1".
P-3
This rating indicates that the degree of safety regarding timely
payment

on

the

instrument

is adequate;

however,

the

instrument is more vulnerable to the adverse effects of

changing circumstances than an instrument rated in the two
higher categories.

P-4
This rating indicates that the degree of safety regarding timely
payment on the instrument is minimal and it is likely to be
adversely affected by short-term adversity or less favorable
conditions.
P-5
This rating indicates that the instrument is expected to be in
default on maturity or is in default.
Note :
CRISIL may apply "+" (plus) sign for ratings from P-1 to P-3 to
reflect a comparatively higher standing within the category.

CRISIL RATING SYMBOLS FOR STRUCTURED

OBLIGATIONS (so)
AAA(so)
(Triple A SO)
This rating indicates highest degree of certainty regarding
timely payment of financial obligations on the instrument. Any
adverse changes in circumstances are most unlikely to affect
the payments on the instrument.
AA(so)
(Double A SO)
This rating indicates high degree of certainty regarding timely
payment of financial obligations on the instrument. This
instrument differs in safety from `AAA' instruments only
marginally.
A(so)

This rating indicates adequate degree of certainty regarding

timely payment of financial obligations on the instrument.
Changes

in

circumstances

can

adversely

affect

such

instruments more than those in the higher rated categories.

BBB(so)
(Triple B SO)
This rating indicates a moderate degree of certainty regarding
timely payment of financial obligations on the instrument.
However, changing circumstances are more likely to lead to a
weakened capacity to meet financial obligations than for
instruments in higher rated categories.
BB(so)
(Double B SO)
This rating indicates inadequate degree of certainty regarding
timely payment of financial obligations on the instruments.

Such instruments are less susceptible to default than

instruments rated below this category.

B(so)
This rating indicates high risk and greater susceptibility to
default. Any adverse business or economic conditions would
lead to lack of capability or willingness to meet financial
obligations on time.
C(so)
This rating indicates that the degree of certainty regarding
timely payment of financial obligations is doubtful unless
circumstances are favorable.
D(so)
This rating indicates that the obligor is in default or expected
to default.
Note :

1) CRISIL may apply `+' (plus) or `-' (minus) signs for ratings
from AA to C to reflect comparative standing within the
category.
2)The contents within parenthesis are a guide to the
pronunciation of the rating symbols.
CRISIL FOREIGN
RATING SCALES

STRUCTURED

OBLICATIONS

(FSO)

CRISIL has developed a framework for rating the debt

obligations

of

Indian

corporate

supported

by

credit

enhancements extended by entities based outside the country.

The issues considered inter alias include the credit worthiness
of the offshore entity, the nature and structure of the credit
enhancement mechanism to ensure timely payments on rated
debt obligations an regulatory issues as regards the transfer
risk. CRISIL would notch up the standalone credit ratings of
these

Indian

issuers

depending

on

all

these

factors.

CRISIL ratings of Foreign Structured Obligations (fso) factor

the credit enhancement extended by an entity based

outside the country. The ratings indicate the degree of
certainty regarding timely payment of financial obligations on
the instrument. These ratings have been assigned in the
current regulatory framework as regards the transfer risk and
any

change

therein

could

impact

the

ratings.

The credit enhancements could be in the form of guarantees,

letters of credit, asset backing or other suitable structures.
Due to the current regulatory controls on inward remittances,
CRISIL would require suitable liquidity mechanisms to be in
place

for

ensuring

timely

payment

on

due

dates.

Foreign Structured Obligations ratings are based on the same

scale (AAA through D) as CRISIL ratings for long-term
instruments.

Foreign Structured Obligations ratings symbols are defined

below.

C(fso)
Substantial Risk - This rating indicates that the degree of
certainty regarding timely payment of financial obligations is
doubtful unless circumstances are favorable.

D(fso)
Default - This rating indicates that the obligation is in default
or expected to default.
Note: The contents within Parenthesis are a guide to the
pronunciation of the rating symbols.
CRISIL RATING SCALE FOR INSTRUMENT CARRYING
NON-CREDIT RISK
AAAr
(Triple-A-r)
Highest Safety
Debentures rated AAAr are judged to offer highest safety of
timely payment of interest and/ or principal. Though the
circumstances providing this degree of safety are likely to
change, such changes as can be envisaged are most unlikely to
affect adversely the fundamentally strong position of such
issues.

AAr
(Double-A-r)
High Safety
Debentures rated AAr are judged to offer high safety of timely
payment of interest and/ or principal. They differ in safety
from AAAr issues only marginally.
Ar
(Single-A-r)
Adequate Safety
Debentures rated Ar are judged to offer adequate safety of
timely payment of interest and/ or principal; however, changes
in circumstances can adversely affect such issues more than
those in the higher rated categories.

BBBr
(Triple-B-r)
Moderate Safety
Debentures rated BBBr are judged to offer sufficient safety of
timely payment of interest and/ or principal for the present;
however, changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal than for
debentures in higher rated categories.
Speculative Grades
BBr
(Single B r)
High Risk
Debentures rated BBr are judged to carry inadequate safety of
timely payment of interest and/ or principal; while they are
less susceptible to default than other speculative grade
debentures in the immediate future, the uncertainties that the

issuer faces could lead to inadequate capacity to make timely

interest and principal payments.
Br
(Single B r)
High Risk
Debentures rated Br are judged to have greater susceptibility
to default; while currently interest and/ or principal payments
are met, adverse business or economic conditions would lead
to lack of ability or willingness to pay interest or principal.

Cr
(Single C r)
Substantial Risk
Debentures rated Cr are judged to have factors present that
make them vulnerable to default; timely payment of interest
and/ or principal is possible only if favourable circumstances
continue.
Dr
(Single D r)
In Default
Debentures rated Dr are in default and in arrears of interest
and/ or principal payments or are expected to default on
maturity. Such debentures are extremely speculative and
returns from these debentures may be realized only on
reorganisation or liquidation.

Note :
1) CRISIL may apply "+" (plus) or "-" (minus) signs for
ratings from AA to C to reflect comparative standing
within the category.
2) The contents within parenthesis are a guide to the
pronunciation

of

the

rating

symbols.

3) The 'r' symbol attached to the rating indicates that the

instrument has an element of non-credit risk (such as
market risk). The risk represented by the 'r' symbol would
be specific for each instrument.
3) In situations where there is any arrangement for payment
on the instrument by an obligor other than the issuer or
any means of enhancing credit including arrangements
such as guarantees, letters of credit, etc., CRISIL can add
the structured obligations rating symbol '(so)' to this
rating scale.

CREDIT RATING
RATINGS (FSR)

SCALE

FOR

FINANCIAL

STRENGTH

Ratings are broadly divided into two categories - Secure and

Vulnerable. Rating categories from "AAA" to "BBB" are
classified as 'secure' ratings and are used to indicate
insurance

companies

whose

financial

capacity

to

meet

policyholder obligations is sound. Rating categories from "BB"

to "D" are classified as vulnerable ratings and are used to
indicate insurance companies whose financial capacity to meet
policyholder obligations is vulnerable to adverse economic and
underwriting conditions.
The opinion does not take into account timeliness of payment
or the likelihood of the use of a defense such as fraud to deny
claims. For insurance companies with cross-border or multinational operations, including those conducted by branch
offices or subsidiaries, ratings do not take into account any
potential that may exist for foreign exchange restrictions to

prevent policy obligations from being met. Financial strength

ratings do not refer to an insurance company's ability to meet
non-policy obligations (i.e. debt contracts).
The

ratings

are

not

recommendations

to

purchase

or

discontinue a policy, contract or security issued by an

insurance company nor are they guarantees of financial
strength.
Level 4:
The capability of firms rated CRISIL GVC Level-4 with respect
to wealth creation for all their stakeholders while adopting
sound corporate governance practices is moderate.
Level 5:
The capability of firms rated CRISIL GVC Level-5 with respect
to wealth creation for all their stakeholders while adopting
sound corporate governance practices is adequate.

Level 6:
The capability of firms rated CRISIL GVC Level-6 with respect
to wealth creation for all their stakeholders while adopting
sound corporate governance practices is inadequate.
Level 7:
The capability of firms rated CRISIL GVC Level-7 with respect
to wealth creation for all their stakeholders while adopting
sound corporate governance practices is poor.
Level 8:
The capability of firms rated CRISIL GVC Level-8 with respect
to wealth creation for all their stakeholders while adopting
sound corporate governance practices is the lowest.
CRISIL'S
GRADING
INSTITUTIONS

SCALE

FOR

HEALTHCARE

The grading scale for healthcare institutions will have two

components. The first will be the hospital classification such
as
Nursing home
General Secondary care
Specialty secondary care
Single-specialty tertiary care
Multi-specialty tertiary care
The second component of the grading scale will be the
hospital's grading within that classification on a four-point
scale. Thus, a typical grading could read - General secondary
care hospital assigned Grade C or Nursing home assigned
Grade B.
The hospital classification will be based on the number of
specialties offered by the hospital. The definition for various
grades, as envisaged currently, is given below:
Grade A:

Reflects Very Good Quality of delivered patient care. A

healthcare institution graded in this category has facilities,
equipment, manpower and service quality levels which are
consistent

with

the

highest

standards

in

the

Indian

healthcare industry.
Grade B:
Reflects Good Quality of delivered patient care. A healthcare
institution graded in this category has facilities, equipment,
manpower and service quality levels which are consistent with
high standards in the Indian healthcare industry, although
these would be lower than healthcare quality levels in Grade A
hospitals.
Grade C:
Reflects an Average Quality of delivered patient care. A
healthcare institution graded in this category has facilities,

equipment, manpower and service quality levels which are

consistent with adequate standards in the Indian healthcare
industry. Improvements in specific areas would be required for
such hospitals to be eligible for a higher grade.
Grade D:
The grading reflects Poor Quality of delivered patient care. The
healthcare institution graded in this category has facilities,
equipment, manpower and service quality levels which are
below the average standards in the Indian healthcare industry.
The grading indicates that quality standards would need to be
set up in the institution and substantial improvements in
patient care would be needed to obtain a higher grade.
A

typical

definition

would

read

as

follows:

CRISIL has classified the XYZ Hospital as a 'Specialty

Secondary Care Hospital' and assigned a 'Grade B'. The
grading reflects a Good Quality of delivered patient care. The

healthcare institution graded in this category has facilities,

equipment, manpower and service quality levels which are
consistent with high standards in the Indian healthcare
industry."
CRISIL RATING SYMBOLS FOR CREDIT ASSESSMENTS
1
Very Strong Capacity - This indicates that the capacity for
timely payment of interest and principal is very strong.
2, 3, 4
Strong Capacity - This indicates that the capacity for timely
payment of interest and principal is strong. However, the
capacity is not as strong as for borrowers with Credit
Assessment "1".
5, 6, 7

Adequate Capacity - This indicates that the capacity for

timely payment of interest and principal is satisfactory.
Changes in circumstances can affect the capacity of the
borrower more than those in the stronger Credit Assessment
categories.
8, 9, 10
Inadequate Capacity - This indicates inadequate capacity for
timely payment of interest and principal. Such borrowers are
less susceptible to default than borrowers with Credit
Assessments below this category, but the uncertainties that
the borrower faces could lead to inadequate capacity to make
timely interest and principal payment.
11, 12, 13
Poor Capacity - This indicates that the capacity for timely
payment of interest and principal is doubtful. Such borrowers

face circumstances at present that make them vulnerable to

default; adverse business or economic conditions would lead to
lack of capacity to pay interest or principal.
14
Default - This indicates that the borrower is either in default
or is expected to be in default upon maturity of the debt.
CRISIL RATING FOR COLLECTIVE INVESTMENT SCHEME
INVESTMENT GRADE
Grade

(High Certainty)
This rating indicates high certainty that the Collective
Investment Scheme will provide the assured returns in the
form of produce and/or cash.
Grade
(Adequate Certainty)

II

This rating indicates adequate certainty that the Collective

Investment Scheme will provide the assured returns in the
form of produce and/or cash.
Grade

III

(Moderate Certainty)
This rating indicates moderate certainty that the Collective
Investment Scheme will provide the assured returns in the
form of produce and/or cash.
NON-INVESTMENT GRADE
Grade

IV

(Inadequate Certainty)
This rating indicates inadquate certainty that the Collective
Investment Scheme will provide the assured returns in the
form of produce and/or cash. Risk factors for the scheme are
high and the scheme is prone to default.

Grade

(High Uncertainty)
This rating indicates high uncertainty that the Collective
Investment Scheme will provide the assured returns in the
form of produce and/or cash. Risk factors for the scheme are
extremely high leading to high expectation of default on
obligations.
High Investment Grades
AAA(fso)
(Triple A)*
Highest Safety - This rating indicates highest degree of
certainty regarding timely payment of financial obligations on
the instrument. Any adverse changes in circumstances are
most unlikely to affect the payments on the instrument.

AA(fso)
(Double A)*
Highest Safety - This rating indicates high degree of certainty
regardin timely payment of financial obligations on the
instrument. This instrument differs in safety, from "AAA(fso)"
instruments only marginally.
Investment Grades
A(fso) *
Adequate Safety -This rating indicates adequate degree of
certainty regarding timely payment of financial obligations on
the instrument. Changes in circumstances can adversely
affect such instruments. Changes in circumstances can
adversely affect such instruments more than those in the
higher rated categories.

BBB(fso)
(Triple B) *
Moderate Safety - This rating indicates a moderate degree of
certainty regarding timely payment of financial obligations on
the instrument. However, changing circumstances are more
likely to lead to a weakened capacity to meet financial
obligations than for instruments in higher rated categories.
Speculative Grades
BB(fso)
(Double B) *
Inadequate Safety - This rating indicates inadequate degree of
certainty regarding timely payment of financial obligation on
the instrument. Such instruments are less susceptible to
default than instruments rated below this category.
B(fso)

High Risk - This rating indicates high risk and greater

susceptibility to default. Any adverse business or economic
conditions would lead to lack of capability or willingness to
meet financial obligations on time.
Secure Ratings
AAA
Reflects Highest Financial Strength to meet policyholder
obligations.

Though

the

circumstances

providing

this

strength are likely to change, such changes as can be

envisaged

are

most

unlikely

to

affect

adversely

the

fundamentally strong position.

AA
Reflects High Financial Strength to meet policyholder
obligations. Though the circumstances providing this degree
of strength are likely to change, such changes as can be

envisaged

are

most

unlikely

to

affect

adversely

the

fundamentally strong position. Companies in this category

differ

only

companies.

marginally

from

the

'AAA'

rated

insurance

A
Reflects Adequate Financial Strength to meet policyholder
obligations. However, change in circumstances can adversely
affect such companies more than those in the higher rated
categories.
BBB
Reflects Moderate Financial Strength to meet policyholder
obligations. However, changing circumstances are more likely
to lead to a weakened capacity to meet policyholder obligations
than the higher rated categories.
Vulnerable Ratings
BB
Reflects

Inadequate

Financial

Strength

to

meet

policyholder obligations. While companies rated in this

category are less susceptible to default than other speculative

grade companies in the immediate future, the uncertainties
that they face could lead to inadequate capacity to meet their
policyholder obligations.
B
Reflects Greater Susceptibility to default on policyholder
obligations. While current obligations are met, adverse
business or economic conditions would lead to lack of ability
or willingness to meet policyholder obligations.
C
Vulnerable to default. Ability to meet policyholder obligations
is possible only if favourable circumstances prevail.
D

Indefault. Current policyholder obligations are in default.

Insurance companies rated "D" are extremely speculative and
policyholder obligations may be realised only on reorganisation
or liquidation.
Financial strength ratings from "AA" to "BB" may be modified
by use of a plus (+) or (minus (-) sign to show the relative
standing of the insurance / reinsurance company within the
rating categories.
CRISIL BOND FUND RATING SYMBOLS
AAAf
The funds portfolio holdings provide very strong protection
against losses from credit defaults.
AAf
The funds portfolio holdings provide strong protection against
losses from credit defaults.

Af
The funds portfolio holdings provide adequate protection
against losses from credit defaults.
BBBf
The funds portfolio holdings provide moderate protection
against losses from credit defaults.
BBf
The funds portfolio holdings provide inadequate protection
against losses from credit defaults.
Cf
The funds portfolio holdings have factors present which make
them vulnerable to credit defaults.
CRISIL RATING SCALES FOR REAL ESTATE DEVELOPERS
DA1

Excellent
The developer's past track record in executing real estate
projects as per specified quality levels and transferring clear
title within stipulated time schedule is excellent.
DA2
Very Good
The developer's past track record in executing real estate
projects as per specified quality levels and time schedules and
transferring clear title, is very good.
DA3
Good
The developer's past track record in executing real estate
projects as per specified quality levels and time schedules and
transferring clear title, is good.

DA4
Unsatisfactory
The developer's past track record in executing real estate
projects as per specified quality levels and time schedules and
transferring clear title, is unsatisfactory.
DA5
Poor
The developer's past track record in executing real estate
projects as per specified quality levels and time schedules and
transferring clear title, is poor.

CRISIL RATING SYMBOLS FOR REAL ESTATE PROJECTS

PA1
Highest Ability
Projects rated PA1 indicate highest ability of the developer to
specify and build to agreed quality levels and transfer clear
title within stipulated time schedules.
PA2
High Ability
Projects rated PA2 indicate that the developers ability to build
the project to specified quality levels, time schedules and
transfer clear title is high. Project risks are marginally higher
in this category when compared to projects in the PA1
category.
PA3

Adequate Ability
Projects rated PA3 indicate adequate ability of the developer to
build to reasonable quality levels and time schedules and
transfer

clear

title

for

the

present.

However,

changing

circumstances are likely to adversely affect these projects more

than those in the higher rated categories.
PA4
Inadequate Ability
Projects rated PA4 indicate that the developers ability to build
to specified quality levels and adhere to time schedule is
inadequate. Uncertainties facing the project could result in
inability/unwillingness to complete projects.
PA5
Inability

Projects rated PA5 indicates inability of the developer to

complete projects or transfer clear title.
Note:
CRISIL may apply "+" (plus) sign for ratings PA1 to PA3 to
reflect comparative standing within the category.
Crisil's Grading Scale for Governance and Value Creation
Level 1:
The capability of firms rated CRISIL GVC Level-1 with respect
to wealth creation for all their stakeholders while adopting
sound corporate governance practices is the highest.
Level 2:
The capability of firms rated CRISIL GVC Level-2 with respect
to wealth creation for all their stakeholders while adopting
sound corporate governance practices is high.

Level 3:
The capability of firms rated CRISIL GVC Level-3 with respect
to wealth creation for all their stakeholders while adopting
sound corporate governance practices is strong.

SIGNIFICANCE OF THE STUDY

The banking industry encompasses Public sector private and
foreign banks. The public sector Banks Accounts maintain in
proper way. But there is a lot of competition in private sector.
So private company cannot private original information about
there assets and liabilities. They give bribe to the auditors so
May significance of the study is that how CRISIL do there jobs
related to show correct real asset and liabilities of private
company.

REVIEW OF EXITING LITERATURE

The cost of welfare
The literatures in business today October 24, 2004 write.
Guess who will foot the bill for the Rs.120500 cr. That will go
into the employment scheme [E G S] over the next four years?
The tax players, who else ?If the government goes ahead and
lives the E G S cess, it be the second add-on the tax burden of
salary man;A2 percent education cess was levied in the 200405 budget more of the same ,and as the government moves
closer to its ideal as a welfare state people will move further up
the laffer curve and lose interest in earning more (Simple post
tax

returns

will

not

really

warrant

the

incremental

effort)There need to flexibility to let the market will create its

own job ,Says subir gokar chief of the

economist, CRISIL,

who argue that ridiculous labor laws have resulted in the

normal economic process not generating enough job. The
guarantee should only be targeted as residual if any.

CONCEPTUALIZATION
Credit rating is a boon to the companies as well as the
investor. It facilitates the company in raising funds in the
capital market and helps the investor to select their risk return
tradeoff. Credit rating essentially indicated the risk involved in
a debt instrument. It essentially reflects the timely probability
repayment of principal and interest by a borrower company.

FOCUS OF THE PROBLEM

The main focus of the problem is to that what the job of the
CRISIL is. How can it be effective for investors and company?

OBJECTIVES
Some of the broad objectives of the study are:
To help clients mitigate and manage their business
and financial risk.
To make markets function better.
To shape public policy.

HYPOTHESIS
CRISL supports these through its unique width of
offerings. Ratings and risk assessment, infrastructure
advisory, financial news services, economic research and
advisory, industry and company research fund services
and risk consulting.

RESEARCH METHODOLOGY
It is a way to systematically solve the research problem. It may
be understood as a science of studying. How research is done
systematically we study the various steps that are generally
taken by a researcher in studying the research problem along
with the logic behind it.

RESEARCH DESIGN
Collection of data

Secondary data collected

Research method

descriptive method

ANALYSIS & INTERPRETATIONS

Current Ratio
Current Ratio =

Current assets/Current Liabilities

Year

CA

CL

CR

2000-01

23232736

22029109

1.5

2001-02

38336495

31070500

1.23

2002-03

42763723

25080119

1.71

As in year 2000-01 the current ratio is low as only 1.5

according to the idle to the of 2:1 and in year 2001-02 is also
low as only 1.23.in 2002-03 it is 1.71, which is also low due to
the company Harvest Gold, is a seasonal industry.

Quick Ratio
Quick

Ratio =

Year

Liquid assets/current liabilities

LA

CL

QR

2000-01

9785666

22029109

0.44

2001-02

19777496

31070500

0.64

2002-03

20608606

25080119

0.82

As the idle ratio is said to be 1:1 if it is more it is consider to

be better but hear in 2000 -2001 liquid ratio is 0.44 and in
2001-2002is 0.64 and in 2002 -2003itis 0.82. The ratio is less
due to the company Harvest Gold a seasonal industry.

Working Capital Ratio

Working Capital ratio

working capital/turnover

Year

WC

Turnover

WCR

2001-01

1203627

43603200

0.03478

2001-02

7265995

36803500

0.19742

2002-03

17683604

40572400

0.43585

The working capital ratio of 2001-01 is 0.03478 and in 200102it is 0.197427 and in 2002-03 it is 0.43585. The ratio is less
due to the company Harvest Gold is a seasonal industry.

Cash Turnover ratio

Year

Cash

Turnover

Ratio

2000-01

6874326

34603200

0.000503

2001-02

16999413

36803500

0.000216

2002-03

19042064

40572400

0.000213

The cash turnover ratio of 2000-01 is 0.000503& ind2001-02

is 0.000216 and in 2002-03 it is 0.000213. The ratio is less
due to the company harvest gold is a seasonal industry

Debtors turnover ratio / receivable ratio

Year

Debtors

Turnover

Ratio

34603200

0.08413

2000-01

9785666

2001-02

19777496

36803500

0.07548

2002-03

20608606

40572400

0.03861

Note:-

These ratios are very much helpful for knowing about the
sound position of any company. These are basically short term
ratios which show the firm ability to pay their debt in short
term period. Thus credit rating agency must analyze these
ratios of the companys before provide them the ratings.

SWOT ANALYSIS OF CRISIL

STRENGTHS:
CRISIL credit rating is an autonomous body in
India.
CRISIL provides the reliable data.
CRISIL has various rights.
CRISIL provides rating to the industry.
Its rating is very much helpful for the investors.

WEAKNESS:

Like wise other public institution government

interfere is more in the CRISIL working.

Government change affects the functioning of

CRISIL.

OPPORTUNITY:
Many companies registered under CRISIL in coming
future.

THREATS:
More competition among rating agency

CONCLUSION
Credit rating agency is such rating agency that provides
rating to various commercial, public companies on the basis
of their past performance.
CRISIL is one of the most important credit rating agencies
in India, which provide rating to the companys.
CRISIL have their own process for how to rate the various
companys on the basis of their performance
Credit rating have developed their own standards on the
basis of which they provides the ratings.

SUGGESTIONS &
RECOMMENDATIONS
FOCUS ON VARIOUS ISSUES:
Credit rating agency must focus on the various issues
related to the company before providing the rating to them.

EXPANSION OF RIGHTS FROM GOVERNMENT:

Credit rating agency should also get more right from the
government.
FINANCIAL HELP FROM FINANCIAL INSTITUTIONS:
Financial institutions should also provide financial help to
these agencies for the efficient use of their resources.
FOCUS ON FINANCIAL RECORDS:
Credit rating agency must also focus the financial records of
the companys before providing rating to them.

LIMITATION
Credit rating doesnt provide the sound rating to the
investor because they are influence by the various
external factors.
Government interfere also affect their functioning.
They mainly rely on the financial documents produce by
the companys
Much private companys get good rating from these
agencies for the purpose of collecting money form the
public.

ANNEXURE
BALANCE SHEET OF HARVEST GOLD LTD.
SCHEDULE-6
CURRENT ASSETS, LOANS AND
ADVANCES
A. Current Assets
Inventories
Raw Material
Packing Material
Finished Goods
Goods in Transit
Bread moulds & trays
Store & spares
Assets held for disposal
Sub total(1)
Receivables
Unsecured and considered good by
management more than six months
Other debts
Debts considered doubtful not
provided for more six months other
debts
Sub total(2)
Cash & Bank Balances
Cash in hand
Scheduled bank
Sub total(3)

2003(Rs.)

2002(Rs.)

8311657
2819509
741106
1117408
1288694
5212203
2664539
22155116
17627

12453650
2307771
643869
352021
1159590
1641099
0
1855900
0

1548915
0
0

2563391
109121
105571

1566542
2278083
3464299
5105390
2905076
1394023
12672689 10500000
19042064 16999413

Total (A)
B. loan & advances
Advance recoverable in cash
Value to be received
Interest receivable
Advance payments
Security deposits

42763723 38336495

Total(B)
Total(A+B)

11119659
9711699
53883381 48048194

2533945
646738
4652205
3286771

3388716
561229
4320423
1441031

SCHEDULE-7
Current liabilities & Provisions
A. Current Liabilities
Sundry creditors
Creditors for capital goods
Security deposit from customer
Other liabilities
Total(A)
A. Provisions
For gratuity
For dividend
For taxation
Total(B)
Total(A+B)

SCHEDULE -8

2003(Rs.)

2002(Rs.)

17168903 23543382
17608
33935
1406403
1491103
6487204
80
25080119 31070500
694134
1383699
4662286

343221
0
4700000

6740119
5043221
31820238 36113721

Other Income
Miscellaneous Receipts
Profit on sale
Inters on bank deposit
Depreciation
Excess provision
Discount received
Sundry balances
Total

2003(Rs.)
2571704
360508
826772
72256
43042
1800
231715
4107797

2002(Rs.)
2715544
52581
576432
0
0
2702
65808
3413667

SCHEDULE-9
Increase in stocks
Closing stock of
finished goods
Less: opening stock
Increase

2003(Rs.)
741106
64386

2002(RS.)
643869
35899

97237

607970

2003(Rs.)
28729541
1356194
737181
62873
29321960
60207749

2002(Rs.)
26846264
1044948
620095
126256
25525668
54163232

SCHEDULE-10
Direct expenses
Power & fuel
Stores & Supplies
Consumption
Carriage
Packing material
Total

BIBLIOGRAPHY
Financial Management

Ravi M. Kishore

Management of Financial Services Financail Services

Capital Market -

Magazine

www.cii.com
www.crisil.com
www.google.com
www.ficci.com

V.K. Bhalla

M.Y. Khan