PROJECT REPORT

ON

MARKET STUDY ON CORPORATE CREDIT RATINGS

Project report submitted in partial fulfillment of the requirement for the award of the degree of

Masters program in international business

Under the guidance of

Mr. SYED MUZAMMILUDDIN

PROFESSOR

RAKESH REDDY B.V : 09-44

BADRUKA INSTITUTE OF FOREIGN TRADE

KACHIGUDA, HYDERABAD
2009-2011

1
2
 CERTIFICATE

This is to certify that the Project Report titled “MARKET STUDY ON

CORPORATE CREDIT RATINGS” submitted in partial fulfillment for award
of degree of Master’s Program in international business was carried out by
RAKESH REDDY B.V under my guidance. This has not been submitted to any
other University or Institution for the award of any Degree / Diploma/ Certificate.

Name and address of supervisor

Mr. SYED MUZAMMILUDDIN Professor G.S. RAO

PROFESSOR& GUIDE DIRECTOR
BIFT BIft

3
 DECLARATION

I hereby declare that this Project Report titled “MARKET STUDY ON

CORPORATE CREDIT RATINGS” is been submitted by me to the
Department of BADRUKA INSTITUTE OF FOREIGN TRADE is a bonafied
work undertaken by me and it is not submitted to any other University or
Institution for the award of any Degree / Diploma / Certificate or published any
time before

RAKESH REDDY B.V: 09-44

4
 ACKNOWLEGDGEMENT

The satisfaction and euphoria that accompany the successful completion of any
task would be but incomplete without the mentioning of the people who made it
possible, whose constant guidance and encouragement crowned my effort with
success.

I am greatly thankful to Mr. G.S. RAO, director of Bhadruka institute of

foreign trade for kindly considering our request and graciously permitting me to
do project work of our MPIB course. I take this opportunity to profusely thank
him.

I express my profound gratitude to Mr. SURYANARAYANA MANGINA

(REGIONAL HEAD), my external guide, FITCH TRATINGS for his kind
acceptance in providing me project training in their prestigious company. I
express my profound gratitude of our professor & guide Mr. SYED
MUZAMMILUDDIN, who provide us with the necessary facilities and
encouragement that held us in completing the project within time, and providing
guidance throughout.

RAKESH REDDY B.V(09-44)

5
 S.No Topic Page No.
1 Executive Summary 11
2 Objectives & Limitations 12
3 Credit ratings 09
4 Basel II 10
5 About Fitch Ratings 15
7 Fitch Ratings in India 22
8 Types of ratings 23
9 Ipo gradings 24
10 Pharma sector Outlook 25
11 Aurobindo pharma Rating Rationale 27
12 Healthcare sector Outlook 29
13 Mittal hospitals Rating Rationales 31
14 Marketing Of Bank Loan Rating 36
15 Data analysis 38
16 Conclusion&Project findings 40
17 Annexure 42

EXECUTIVE SUMMARY

This project is focusing on one of the famous rating agency namely – Fitch Ratings.
The company is already established very well in the global competitive market and spreading
its wings into Indian corporate sector.
6
 The study was conducted from 24 th June to 7th August of 2010.
The objectives of this study were to find the present status of credit rating in the corporate
world. Other Objectives includes marketing about our own firm i.e. Fitch Ratings India Pvt Ltd
also getting the financial information of the corporates and finding the rating opportunity with
those companies. Research was conducted by meeting the financial heads of the companies,
with Questionnaire as tool of data collection.

OBJECTIVES
 .To study and understand the credit ratings process & its importance
 To perform B to B marketing
 .Market mapping of Fitch Ratings in pharma and health care sectors
 .To promote ratings,its importance and penetration in the SME’s.

7
LIMITATIONS
 The study is limited to few companies according to the availability of primary data
source such as monthly fact sheets and web sites.
 This study is limited with in various rating processes done bu Fitch Ratings alone.It
does not include the rating processes and evaluations of other credit rating agencies.

Credit Rating:

A credit rating estimates the credit worthiness of an individual,

corporation, or even a country. It is an evaluation made by credit bureaus of
a borrower’s overall credit history.[1] A credit rating is also known as an
evaluation of a potential borrower's ability to repay debt, prepared by a
credit bureau at the request of the lender (Black's Law Dictionary). Credit
ratings are calculated from financial history and current assets and
liabilities. Typically, a credit rating tells a lender or investor the probability
8
of the subject being able to pay back a loan. However, in recent years,
credit ratings have also been used to adjust insurance premiums, determine
employment eligibility, and establish the amount of a utility or leasing
deposit.

A poor credit rating indicates a high risk of defaulting on a loan, and thus
leads to high interest rates, or the refusal of a loan by the creditor.

Rating Agencies in India

1. Fitch Ratings India

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

3. Credit Analysis & Research Limited (CARE)

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

Basel II

Basel II is a revised framework on Capital Adequacy by Basel Committee on

Banking and Supervision. Under this system the balance sheets, non-
funded exposures are assigned prescribed risk weights and banks have to
maintain the minimum capital funds equal to the prescribed ratio on the
aggregate risk weighted assets and exposures on an going basis. With a
view to have consistency and harmony with International standards, RBI has
decided that all commercial banks in India shall adopt standardized
approach for measuring credit risk under Basel II.

9
All Indian Banks having operational presence outside India and Foreign
Bank in India will
have to migrate to Basel II by March 31, 2008 and all other banks by
March 31, 2009.So
depending upon who you might be banking with, you may to get rated
before March 31, 2008.

The underlying philosophy while prescribing the Basel II principles for the
Indian banking sector was that this must not result in further segmentation
of the sector.Accordingly, it was decided that all scheduled commercial
banks in India, both big and small, shall implement the standardized
approach for credit risk and the basic indicator approach for operational
risk with effect from March 31, 2007. However, the existing three-tier
structure in respect of SCBs, the cooperative banks and RRBs may
continue. Currently, the commercial banks are required to maintain capital
for both credit and market risks as per Basel I framework; the
cooperative banks, on the second track, are required to maintain capital for
credit risk as per Basel I framework and through surrogates for market
risk; the Regional Rural Banks, on the third track, have a minimum
capital requirement which is, however, not on par with the Basel I
framework.
By opting to migrate to Basel II at the basic level, the
Reserve Bank has
considerably reduced the Basel II compliance costs for the system. In a way,
the elementary approaches which have been identified for the Indian
banking system are very similar to the

Basel I methodology. For instance,

a) there is no change in the methodology for computing capital
charge for
market risks between Basel I and Basel II;
b) the computation of capital charge for operational risk under the

10
 BIA is
very simple and will not involve any compliance cost;
c) the computation of capital charge for credit risk will involve
compilation
of information in a marginally more granular level, which is
expected to
be achieved with a slight re-orientation of the existing MIS.

In the above circumstances, it might not be an entirely correct

assessment that implementation of the elementary levels of Basel II
significantly increases the cost of regulatory compliance. No doubt some
additional capital would be required, but the cushion available in the
system, which at present has a Capital to Risk Assets Ratio (CRAR) of
over 12 per cent, provides for some comfort.

What is the benefit to my organization for getting rated under

Basel II?
Getting rated has multiple benefits:
• Lower borrowing cost, arising from the lending bank’s savings in its
capital charges.
• Visibility to the rated entity, to reach broad investor base.
• Easier and faster loan sanction.
• Increased credit worthiness among investors and lenders, resulting in
increased negotiation capacity for the rated entity.

 How does it affect my organization?

As banks have to set aside higher capital for exposures having higher credit
risk, or lower credit
rating means increased borrowing costs. Banks will have to pass on the cost
of higher capital
requirement to exposures that are unrated or having higher credit risk. This
may effect your

11
organization’s borrowing costs.

 Why do I have to get rated?

Recent RBI guidelines on Basel II require that banks use external credit
rating agencies such as Fitch to largely support measurement of credit risk.
Banks will have to get all their current
exposures/claims rated in order to arrive at amount of capital required for
the amount of credit risk they are exposed to. The ratings need to be
solicited and has to be accepted by the borrower. More ever, it has been
prescribed that all fresh sanctions and renewals of unrated exposures in
excess of Rs.50 crore will attract risk weight of 150% from March 31, 2008
and all similar risk weight for unrated exposures in excess of Rs.10 crores
from March 31, 2009. This means increased borrowing costs. Hence you
need to get your organizations’ all claims rated at the earliest

 Which claims have to be rated? Do Guarantees and Letter of

Credits have to be rated?
RBI guidelines include all fund based and non-fund based exposures. This
includes all funded, off balance sheet and market exposures. Hence,
guarantees and L.Cs too have to be rated. All
claims with contractual maturity of more than one year have to be mapped
to the long term
rating scale and claims with contractual maturity of less than year to be
mapped on to a short tem scale. Cash credit facilities are rolling facilities
and are perennial, hence, mapped to a long term scale.

12
About Fitch Ratings

Fitch Ratings is a global rating agency dedicated to providing the world’s

credit markets
With independent and prospective credit opinions, research, and data.
With 49 offices
worldwide, Fitch Ratings’ global expertise, built on a foundation of
local market
experience, spans across capital markets in over 150 countries. Fitch
Ratings is widely
recognized by investors, issuers, and bankers for its credible,
transparent, and timely
coverage.

Fitch Ratings currently maintains coverage on more than 6,000

financial institutions,
including 3,213 banks and 2,414 insurance companies. Finance &
Leasing companies,
broker-dealers, managed funds and covered bonds all compose the
remainder of Fitch
Ratings’ coverage universe for financial institutions.

Additionally, Fitch rates approximately 1,700 corporate issuers, 106

sovereigns, 177 sub-
sovereigns and 95,841 U.S. municipal transactions. Fitch also maintains
surveillance on
more than 7,200 U.S., 1,700 European and 730 Asia-Pacific structured
finance
transactions.

Fitch Ratings is headquartered in New York and London and is part of the
Fitch Group.

13
In addition to Fitch Ratings, the Fitch Group also includes Fitch Solutions, a
provider of
data, analytics and related services including Fitch Training, which
offers high-quality
analytical training for financial professionals. The Fitch Group also
includes
Algorithmics, a world leading provider of enterprise risk management
solutions.

The Fitch Group is a majority-owned subsidiary of Fimalac, S.A.,

headquartered in Paris,
France.

Fitch Ratings India

Fitch Ratings India is a 100% subsidiary of Fitch Ratings and rates

over 400 entities/
structures in India. Some of the leading corporates including Hindalco
Industries Ltd,
Reliance Industries Limited, Gujarat Ambuja Cements Limited, ACC,
Hindustan Lever
Ltd. Ashok Leyland Limited, Mahindra and Mahindra, Indo Gulf Fertlisers,
Tata
Metaliks Ltd,Tata projects, TRF Limited, Bajaj Hindusthan Limited, Ballarpur
Industries
Limited. Fitch also rates some of the large banks such as State Bank
of India, HDFC
Bank, ING Vysya Bank, Bank of Baroda, Andhra Bank, Federal Bank, Kotak
Mahindra

14
Bank etc. Fitch also rates structured finances including mortgage-backed
securitizations,
asset backed securitizations and public finance deals.

 Why should I get myself rated from Fitch?

Fitch provides you with:
• Quality research, clarity of opinion
• Superior surveillance, calling split/ recovering credits
• Access to experienced analytical team with product expertise
• Transparent ratings analysis
• Explaining the credit story more clearly
• Methodologies consistent with international standards
• Ratings reflect global trends
• Global Rating Committee
• Worldwide distribution of rationales and India research
• Global templates used for ratings and rationales and more
importantly…ability to
provide domestic and international ratings under the same brand!

Types of Ratings By FITCH

1. Bank loan rating

2. IPO ratings

3. CP rating

4. NCD rating

5. International ratings

15
The Process

Typically, Fitch receives for its review a detailed information package

(comprising both
qualitative and quantitative information) from the entity being rated. This is
followed by
meeting(s) with the entity’s senior management, which assists the
Fitch analysts in
understanding the credit’s operational, financial, and strategic goals.
Fitch views
management practices as one of the most important factors in a credit
rating and believes
the opportunity to spend time with management is essential. The goal of
the meeting with
members of the management team is to develop an understanding of
its management
philosophy, mission, and strategic goals. Timely and adequate information
is the key for
a fast and accurate delivery of the assessment.

16
Information Requirement: ABC Limited
Confidentiality: The information provided by the applicant shall remain
strictly confidential and be used for the
purpose of rating only.
Organizational Details
1.Group structure including details of holding /subsidiary /group companies.
Shareholding

pattern as on date.
17
2.Organisation Chart showing functional divisions of the company including
resume of key executives
3.List of Board of Directors as on date (giving breakup of promoter,
institutional, employee and independent
directors), including details of qualifications, age, experience and
shareholding, if any.
4.Details of any delays, defaults, LC devolvement, guarantee invocation and
restructuring (business or financial)
implemented in the past 5 years
Business Details
5.Segment wise details of cost of production (including cash cost of
production) for the last 5 years
6.Linkages for raw materials viz. contracts for sourcing and pricing. Copy of
raw material contracts, if any.
7.Product flow chart, details of technical collaboration, if any and terms and
conditions of the contracts including
tenure, rights and obligations coupled with financial terms.
8.Customers profile. Break up of revenues from top 10 customers during the
past 5 years. Details of any long
term contracts, if any, with end customers. Copy of sample contracts with
end consumers
9.Terms of credit to customers, both domestic and export
Financial Market Risks
10. Does the company have a policy for managing financial market/
commodity risk? When was it last reviewed?
The analytical team would like to review this document
11. What are the risk limits set by the policy in respect to:
- Covered and open positions (capital and revenue, for forex, interest
rate and commodity risks)
- Stop-loss on open positions
- Counter-party exposures
12. How is compliance with the policy monitored?

- Segregation of front office and back office

18
 - Middle office for risk monitoring
- MIS
- Approval authority for materially large hedging contracts, and
policy on leveraged positions
13. Is the treasury subject to any risk audit? If so, at what frequency?
14 Hedging – Derivatives Outstanding, their nature (plain vanilla or
structured), are they marked to market, how
are these reported/monitored? Accounting treatment
15 Total Value at Risk of hedging contracts with details of potential
liabilities as at the date of the balance sheet
for the past three years
Financial Details
16.Copy of the printed annual reports for the past 5 years (standalone and
consolidated financials), copy of
recent offer document (FCCB, ECB etc)
17.Segment wise profitability (if not provided in the annual report) for the
key divisions of the company
18.Monthly cash flow statement for the past 12 months and projected for
next 12 months including utilization of
fund based and non-fun based limits
19.Details of sundry debtors written off and debtors beyond six months for
the past 3 years. Please provide an
age wise profile of debtors for this period.
20.Details of related party transactions with group companies including
loans and advances made, guarantees
provided, received and the terms and conditions thereof in the last 3
years. Please provide financials of these
entities, in case not provided in the annual report
21.Details of any off balance sheet transactions including leases
22.Debt repayment schedule for (loan wise) the total interest bearing
liabilities outstanding as

on 31 March 2007
23.Break up of current assets/ liabilities between trade and those

19
attributable to other affiliate/ group companies
technically not covered as related parties
24.Please specify if there are any cross-default provisions/ letters of
comfort outside contingent liabilities for of
loans taken by other group/ affiliate/ JV entities of the company, and
indicate the amount of the underlying
obligation
Projected Plans
25.Proposed business plan for next 5 years including inorganic, organic and
merger/divestment plans
26.Projected Profit & Loss Account, Cash flow statement and Balance Sheet
for the next 5 years together with
detailed workings and assumptions both on standalone and on
consolidated basis (in an electronic form)
Additional requirements for Basel II
27. Details of fund-based and non-fund based limits enjoyed from Banks
(please indicate if there is any amount
untied in relation to the assessed limits), giving exposure of all the banks
separately, along with their rates of
interest. Please also furnish copy of the sanction letters for the latest
limits from the respective banks. We may
also require copies of the agreements for working capital and term loans
proposed to be rated under Basel II.

Types of Ratings

The suffix ‘(ind)’ refers to National Ratings assigned by Fitch India. Fitch’s
National ratings provide a relative measure of creditworthiness for

20
rated entities in countries with sub- or low-investment grade
international sovereign ratings. The best risk within a country is rated ‘AAA’
and other credits are rated only relative to this risk. National ratings are
designed for use mainly by local investors in local markets and are signified
by the addition of an identifier for the country concerned, such as ‘AAA
(ind)’ for National ratings in India. Specific letter grades are not therefore
internationally comparable. An additional suffix of ‘(SO)’ refers to structured
obligations.
Long-Term
Credit Ratings
Investment Grade

AAA(ind)
‘AAA’ national ratings denote the highest rating assigned in its national
rating scale. This rating is assigned to the “best” credit risk relative to all
other issuers or issues in the country.

AA(ind)
‘AA’ national ratings denote a very strong credit risk relative to other
issuers or issues in the country. The credit risk inherent in these financial
commitments differs only slightly from the country’s highest rated issuers
or issues.

A(ind)
‘A’ national ratings denote a strong credit risk relative to other issuers or
issues in the country. However, changes in circumstances or economic
conditions may affect the capacity for timely repayment of these financial
commitments to a greater degree than for financial commitments denoted
by a higher rated category.
BBB(ind)
‘BBB’ national ratings denote an adequate credit risk relative to other
issuers or issues in the country. However, changes in circumstances or
economic conditions are more likely to affect

21
the capacity for timely repayment
of these financial commitments than for financial commitments denoted by
a higher rated category.

Speculative Grade

BB(ind)
‘BB’ national ratings denote a fairly weak credit risk relative to other issuers
or issues in the country. Within the
context of the country, payment of these financial commitments is
uncertain to some degree and capacity for timely repayment remains more
vulnerable to adverse economic change over time.

B(ind)
‘B’ national ratings denote a significantly weak credit risk relative to other
issuers or issues in the country. Financial commitments are currently being
met but a limited margin of safety remains and capacity for continued
timely payments is contingent upon a sustained, favorable business and
economic environment.

C(ind)
This rating denotes an extremely weak credit risk relative to other issuers or
issues in the country. Capacity for meeting financial commitments is solely
reliant upon sustained, favourable business or economic developments.

D(ind)
This rating is assigned to entities or financial commitments which are
currently in default.
Within a band of rating symbols from ‘AA(ind)’ to ‘B(ind)’, the modifers “+”
or “-” may be appended to a rating to denote relative status within
the rating category.

22
Short-Term
Credit Ratings

F1(ind)
Indicates the strongest capacity for timely payment of financial
commitments relative to other issuers or issues in the country. Under the
national rating scale, this rating is assigned to the “best” credit risk relative
to all others in the country.

F2(ind)
Indicates the satisfactory capacity for timely payment of financial
commitments relative to other issuers or issues in the country. However,
the margin of safety is not as great as in the case of the higher ratings.

F3(ind)
Indicates an adequate capacity for timely payment of financial
commitments relative to other issuers or issues in the country. However,
such capacity is more susceptible to near-term adverse changes than for
financial commitments in higher rated categories.

F4(ind)
Indicates a highly uncertain capacity for timely payment of financial
commitments relative to other issuers or issues in the country. Capacity or
meeting financial commitments is solely reliant upon a sustained,
favourable business and economic environment.

F5(ind)
Indicates actual or imminent payment default. Only short-term ratings of
‘F1(ind)’ and ‘F2(ind)’ will carry the modifier “+”.

23
Relation Between Long Term and Short Term Ratings

24
IPO Grading Scale

The IPO grade scale as arrived at by SEBI is a 5 point scale with Grade 1
denoting poor fundamentals and Grade 5 indicating strong fundamentals.
The grade assigned to any individual issue represents a relative assessment
of the ‘fundamentals’ of that issue in relation to the universe of other listed
equity securities in India.

IPO Grading Scale

Grading Category
Fitch IPO Grade 5 (ind)
Fitch IPO Grade 4 (ind)
Fitch IPO Grade 3 (ind)
Fitch IPO Grade 2 (ind)
Fitch IPO Grade 1 (ind)
Definitions
Strong fundamentals
Above average fundamentals
Average fundamentals
Below average fundamentals
Poor fundamentals

25
Indian Pharma industry outlook
Overview
Fitch Ratings takes a stable outlook on the India pharmaceutical sector
in 2010. A rising global acceptance of generics, coupled with
increased outsourcing of manufacturing by “Global Pharma” to low‐
cost locations, will benefit the exports focused Indian pharma
companies. This has led to increased contract manufacturing volumes
outsourced to India, as well as certain alliances by international
pharma companies with quality Indian majors. Companies such as
Aurobindo Pharma Ltd (APL, ‘A+(ind)’/Stable/‘F1+(ind)’) and
ClarisLifesciences Ltd (Claris, ‘BBB+(ind)’/‘F2+(ind)’/Stable) have
entered into alliances with large pharma Strides Arcolab Limited.
India‐focussed pharma companies will continue to benefit from steady
domestic growth, with a consequent overall growth in volumes and
capacity utilisation. Fitch notes that pricing pressures due to a greater
than expected increase in competition could moderate the anticipated
improvements in profitability.
Competition could arise from both existing players as well as new
entrants into the generics space. This remains a key risk factor for future
margins. Regulatory issues could have an impact, primarily with regard
to approvals for new products and any
tightening in quality controls.
The majority of the entities within Fitch’s rated national pharma
portfolio have completed
he majority of their capacity expansion programmes, and will likely
spend the next one to two years consolidating their recently expanded
facilities.
Large future capacity additions appear unlikely over the near term, and
Fitch will continue to view any large debt‐led capex programme with
concern from a rating perspective. Although refinancing risks remain on
account of foreign currency convertible bonds

26
 (FCCBs) outstanding on many Indian pharma companies’ books, the
improved liquidity

scenario, coupled with the improved cash flows over the near term,
should partly offset
this risk. Some companies bought back a portion of their FCCBs in 2009
at a discount, which also partly mitigates refinancing risks. Some of the
major FCCB buybacks include those conducted by APL and Bilcare Ltd.

Fitch notes that with the arrival of Global Pharma into the generic
market, thealready‐competitive market is likely to face further strain.
Indian companies,by contrast,are much smaller and do not have the
financial strength to absorb high price cuts or deep discounts. Indian
companies’ distribution networks in regulated markets is also far
below that of Global Pharma. Fitch expects that Indian companies
will have to work harder to manage costs and maintain profitability in
order to compete effectively.
Any delay in product approvals from the US Food and Drug
Administration (FDA).

Increased Demand from both the Export and Domestic

Markets
The global pharmaceutical industry is facing a period of significant
drug patent expiries, which substantially expands the addressable
market for generics companies. Regulatory steps taken by developed
countries towards curtailing growing healthcare budgets has also
contributed to the increase in demand for generics. The sharpened
focus of Global Pharma on the generics market will also lead to
greater outsourced manufacturing volumes in order to control costs.
This could be either through higher contract manufacturing volumes, or
through longer‐term relationships/alliances. India is well‐placed to
benefit from this shift, with the country’s strong manufacturing base
both in formulations, as well as in key inputs (bulk drugs and APIs).
India has the highest number of US FDA‐approved plants outside of

27
the US. Fitch expects revenue growth in both these segments over the
medium term.
The domestic pharma industry is expected to continue to grow at
11%‐12% per annum in 2010. Fitch notes that rising purchasing power
and the increasing penetration penetration of health insurance will support strong
growth in the domesti formulations business in the long term.

Rating Rationales

Aurobindo Pharma Ltd

The affirmation of Aurobindo Pharma ltd’s (APL) ratings reflects the
strong growth in revenues and operating profit,and the subsequent
improvement in credit metrics during the financial year ended march
2009(FY09).Higher capacity utilization of formulation units and a
favourable US dollar/indian rupee exchange rate resulted in a 20%
growth in APL’s top line.Furthrmore,higher contributions from the high
margin formulation business (percentage of total sales:46% in FY09,39%
in FY08)and dossier sales/license income resulted in a higher operating
profit and operating margin of 18% versus 15% in FY08.
Fitch Ratings notes that given APL’s established business, strong
formulation product profile, and agreement with Pfizer Inc.
(‘AA-’/StabLe), future growth and profitabiLity should continue to
remain robust. In addition, lack of any major capex plans wouLd resuLt
in a sustained improvement in credit metrics.
Recent Events

In March 2009, Pfizer entered into a 15-year expanded collaboration with

APL to commercialize off-patent products for US/Europe and emerging
markets. APL has approved a proposal to acquire a
100% stake in Trident Life Sciences Limited (TLSL), valued at
INR1,349.5m.

28
Future Plans
In August2009,APL’s board approved a proposal to acquire a 100% stake
in Trident Life Sciences Limited (TLSL). The total expected expenditure
for the acquisition including capex would be INR1.8bn.
TLSL has a Clinical Research Organizations (CRO) business,and was in
the process of implementing a liquid injectibles facility near
Hyderabad.However,due to management’s intention to focus on its core
business of CRO,it demerged the CRO business into a separate
company,leaving it with just the injectibLe pLant this w ill be used to meet
Term Loans
Bank (INRm) Rating

Andhra Bank 2,000 A+(ind)

Bank of India 1,083 A+(ind)
Total 3,083

Source: Company

APL’s injectable requirements.

The injectable facility specializes in manufacturing a range of general

injectible formulation products including glass vials for sterilepowder
and liquids, pre-filled syringes and bLow-filled seals. As of November
2009,
75% of the facility was complete, and commencement of operations is
expected in April 2011.

Bank (INRm) Rating

ICICI Bank 500 A+(ind)/F1+(ind)
Nova Scotia 375 A+(ind)/F1+(ind) 29
Deutsche Bank 500 A+(ind)/F1+(ind)
IDBI Bank 500 A+(ind)/F1+(ind)
Total 1,875
India Health Care Outlook 2010
Overview
Fitch Ratings’ outlook on India’s healthcare sector is stable for 2010. The
agency expects the industry to expand by 10%‐15%: revenues will
increase as occupancy rates rise for existing hospitals,and newly
commissioned facilities become operational.As healthcare is a high‐
operating‐leverage business, EBITDA margins are likely to improve with
capacity utilisation, and also due to hospitals increasing their focus on
high‐margin tertiary and quaternary services. Expansion will continue to
be driven by a persistent demand/supply gap and significant investments
funded by privatesources.

However, the credit profiles of many players will remain affected by their
dependence on debt for capex and acquisition plans. Increasing
concentration of reputed players in metropolitan cities should see many
established players chalking out plans to spread to Tier 1 and Tier 2
cities to increase their catchment area. Meanwhile, however, a limited
supply of doctors and trained medical staff will continue to restrict
industry growth.
Rising Revenues and Improved Profitability
Demand for healthcare facilities in 2010 should arise from more
frequent instances of lifestyle‐related diseases, a greater awareness of
healthcare issues, generally higher income levels, an improved health
insurance business, and an escalating theme of “medical tourism”.

The higher demand and an existing under‐supply situation will help

healthcare providers to record robust revenue growth rates; as
occupancy metrics improve for existing hospitals, and in‐patient traffic
starts catching up in recently commissioned facilities. Cardiac, oncology
and diabetes are expected to continue to remain front‐ runners in terms
of revenue from hospitalisation cases.

30
Among Fitch‐rated players, Alchemist Hospitals Limited (AHL, ‘BB‐
(ind)’/Stable) and Fateh Chand Charitable Trust (FCCT, ‘BB+
(ind)’/Stable) are both expected to benefit as revenues start accruing
from recently deployed capex. FCCT’s revenues will further i

increase with a rise in the number of student batches in its medical

college. Dayanand Medical College and Hospital Managing Society
(DMCH, ‘A‐ (ind)’/Stable) and Mittal Hospitals Limited (‘BB‐(ind)’/Stable)
should witness relatively lower — though significant — revenue
addition.

Average revenue per occupied bed (ARPOB) is only likely to improve for
established players with an increased focus on higher‐margin tertiary
and quaternary (specialised, highly technical and advanced levels of
healthcare) in‐patient procedures. Companies providing hospital
management and consultation services will also benefit, as smaller
players try to streamline their processes to enhance gains from the
booming market. With a considerably high portion of healthcare
providers’ costs being of a fixed nature, more revenue will directly
translate into enhanced EBITDA margins and improved cash flow from
operations (CFO).
Government Initiatives
The Government of India launched the National Rural Health Mission
(NRHM) in 2005 with a view to providing quality healthcare to all,
and to increase healthcare expenditure to 2%‐3% of GDP by 2012.
Government made significant investments in the sector in 2009, eg the
central government allocated USD2.4bn for the NRHM in the 2009
interim budget; while the Tamil Nadu state government allocated
USD698m for heath and family care for financial year 2009‐10 (FY10, to
March 2010). Fitch expects considerable government spending in 2010,
and also an increase in public/private partnership projects. The
recently proposed Bachelor of Rural Medicine and Surgery course
(rural MBBS) will greatly benefit the rural population, where the
doctor/patient ratio remains five to six times lower than in cities.
31
 Impediments to Growth
Rising real estate costs, and the limited availability of doctors and
trained medical staff, will continue to be the strongest deterrents to
growth. High upfront capital investment and long execution periods
will also mean that players have to cautiously strategise their
expansion plans.

Mittal Hospitals Limited

Rating Rationale
The ratings reflect MittaL HospitaLs Limited’s (MHL) Lack of track
record, given its relatively short operational history, and the company’s
stretched financial, profiLe, owing to initiaL debt-
fundedcapital&expenditure.
The ratings are also constrained by semi-urban clientele, who prefer
low-cost health care solutions. This limits the scope of growth into high-
end services, and restricts the size of operations.
The occupancy rates remain low, with only 55%-60% of beds used daily;
the hospital faces competition from nursery homes which are able
to provide healthcare solutions at a lower price. However, as operations
pick up, MHL management expects the number of
referralcases for specialized treatments to increase, thereby benefit
in utilization levels.
The ratings draw comfort from MHL’s ability to tie-up with various
entities for empanelments under these contracts, the hospital is
authorized to treat employees of the tie-up entity, with payments made
by the employer.
In FY09, tie-ups with the Central Government Health Scheme (CGHS) and
Rajasthan Diary, along with the creation of the Cardiac department in
December, Led to an increase in revenues.
MHL is in the process of finalising more empanelments which, if
successfull,will add to the predictability of revenues and provide further
growth to existing revenues.

32
The ratings are supported by revenue growth and EBITDA-level
profitability which the company has been able to achieve in a relatively
short time period (MHL started operations in November 2005). A
substantial portion of its expenditures are of a fixed nature, and the
company was not profitable at the EBITDA until 2007. Hospital revenues
increased to INR141m in FY09 (FY06: INR14m), while the EBITDA margin
improved to 4.2% in FY08 and 17.2% in FY09 (from negative EBITDA
levels in FY06 and FY07).
Key Rating Drivers

A demonstration of the envisaged company pLan, with operations

picking up to the desired levels and an increase in the occupancy
rates — Leading to a stabiLisation of the EBITDA margins and cash
flow from operations — would act as a positive rating

trigger.

Slower than anticipated growth and/or continued Losses at the PAT

LeveL, coupLed with
an erosion of its net worth, could act as a negative rating trigger.
Business Overview
MittaL Hospitals Limited (MHL) was originally incorporated as a
private Limited company in December 1993 and was converted into a
public limited company in May
2002. The company was promoted by the MittaL Group of
Ajmer.

The company initiated a hospital project in 2004 (MittaL HospitaL and

Research Centre) with the objective of establishing a muLti-speciality
hospital to provide preventive, diagnostic, curative, and rehabilitation
health services, at a tota l project cost of INR124m.

The company commenced health services in November 2005 with 150

beds. Most of the initial business took the form of indoor patients

33
availing cashless facilities under various medical insurance schemes;
payment for the same is settled through various agencies and
Government Departments. The process of settlement and recovery of
such bills requires considerable time. The hospital also has a pharmacy
shop for the sale of various medicines, for which stock of medicines and
other items is required.

MHL has tie-ups with various entities for empanelments; under these

contracts the hospital is authorised to treat employees of the tie-up

entity, with payments made by the employer. In FY09, tie-ups with the
Central Government Health Scheme (CGHS) and Rajasthan Diary, along
with the setting up of the Cardiac department in December, led to an
increase in revenues. MHL is aLso in the process of finalising more
empanelments which, if successfull, w ill add to the predictability of
revenues and provide further growth to existing revenues.

Financial Overview
Revenues & Profitability
The hospitaL has shown a substantiaL increase in the number of patients
over the past four years. Revenues have grown continuousLy since the
inception of the hospitaL, from INR14m in FY06 to INR141m in FY09. This
growth in revenues at FY09 can be expLained by the tie-up with CGHS —
in which aLL government empLoyees and there dependents are
reimbursed expenses incurred as part of their treatment at MHS — and
the tie-up with Rajasthan Diary (which has an insurance poLicy for
empLoyees). Another factor contributing to the revenue growth is the
avaiLabiLity of super-speciaLised treatment which is not avaiLabLe in
the nearby geographicaL Locations.

Operating Metrics

Patient traffic

34
The total number of patients has increased from 17,819 in FY06 to 76,182
in FY09.The IPD has fewer patients (mostLy there for sophisticated
treatments) whiLe the out- patient department (OPD) is more voLume-
driven and consequentLy has more patients.

Increased Margin with volume increase

A substantial portion of expenditures are of a fixed nature; hence the

company was not profitable, even at the EBITDA level, untill 2007. With
the planned empanelments, the company expects sales to improve, thus
improving profitability. The EBITDA margin of the company has also
improved, from a negative EBITDA level in FY06 and FY07 to 4.2% in FY08
and 15.5% in FY09.

Capital expenditure

The cash flow from operations for the company also turned positive for
the first time in FY09 (NR12m). Management does not envisage any
further capital expenditure.

35
Financial Summary
(INRm) 2009 2008 2007 2006

Revenues 141 95 71 14

EBIT 8 -12 -19 -12

Net income -3 -24 -29 -14

Balance sheet

TotaL assets 160 136 149 151

Senior Long-term debt 82 89 85 83

TotaL debt 82 89 85 83

TotaL adjusted debt 82 89 85 83

Common equity 33 4 46 45

Operating EBITDAR (op. EBITDAR) 22 4 -1 -6

Cash tax paid 0 0 0 0

Other changes before funds from operationsa 2 0 0 0

Working capitaL -4 -2 -4 6

Non-operationaL cash fLow 0 0 0 0

Dividends paid 0 0 0 0

Receipts from asset disposaL s 0 0 0 0

Business divestments 0 0 0 0

Net cash in/outfLow -19 -10 -24 -104

FX movement 0 0 0 0

Net cash fLow avaiLabL e for financing -3 -3.9 1.3 -58.4

Op. EBITDAR/revenues (%) 15.5 4.2 -1.4 -42.9

FFO return on adjusted capitaL (%) 17.18 3.2 -0.7 -4.3

Credit ratios

FFO fixed charge cover (x) 2.0 0.3 -0.1 -3

Adjusted Leverage/FFO (x) 3.4 22.3 -85 -13.8

TotaL adjusted debt/totaL adjusted capitaLisation (%) 59.3 71.8 61.2 58.9

36
MARKETING METHODOLOGIES

There are different methods when it comes to marketing. This includes direct marketing,
relationship marketing, advertising, public relations, and positioning.

Direct marketing is a form of advertising that reaches its audience without using traditional
formal channels of advertising, such as TV, newspapers or radio. Businesses communicate
straight to the consumer with advertising techniques such as fliers, catalogue distribution,
promotional letters, and street advertising.

Guerrilla marketing was invented as an unconventional system of promotions

that relies on time, energy and imagination rather than a big marketing budget.
Typically, guerrilla marketing campaigns are unexpected and unconventional;
potentially interactive and consumers are targeted in unexpected places

Relationship Marketing was first defined as a form of marketing developed from direct
response marketing campaigns which emphasizes customer retention and satisfaction, rather
than a dominant focus on sales transactions.

As a practice, Relationship Marketing differs from other forms of marketing in that it

recognizes the long term value of customer relationships and extends communication beyond
intrusive advertising and sales promotional messages.

Viral marketing and viral advertising refer to marketing techniques that use pre-existing social
networks to produce increases in brand awareness or to achieve other marketing objectives
(such as product sales) through self-replicating viral processes, analogous to the spread of
pathological and computer viruses. It can be word-of-mouth delivered or enhanced by the
network effects of the Internet Viral promotions may take the form of video clips, interactive
Flash games, advergames, ebooks, brandable software, images, or even text messages.

APPROACH DEPLOYED AND ANALYSIS

BUSINESS MARKETING
Business Marketing is the practice of individuals, or organizations, including
commercial businesses, governments and institutions, facilitating the sale of their
products or services to other companies or organizations that in turn resell them,
use them as components in products or services they offer, or
37
use them to support their operations. Also known as industrial marketing,
business marketing is also called business-to-business marketing, or B2B
marketing, for short.

People (Target Market)

Quite often, the target market for a business product or service is smaller and has more
specialized needs reflective of a specific industry or niche.[3] A B2B niche, a segment of the
market, can be described in terms of firmographics which requires marketers to have good
business intelligence in order to increase response rates.I were very well defined about our
target market,fitch serves top notch corporates of all the sectors,it decided its placing in small
and mid-range corporates which having CC ratio more than 10 crores.

Pricing

The structure of pricing plays an important role.pricing strategies differs from one service to
another service provided by fitch.negotiations regarding pricing will be done befor signing a
mandate.here competition plays a major role,ultimately quality defines pricing

Promotion

Promotion planning is relatively easy when you know the media, information seeking and
decision making habits of your customer base, not to mention the vocabulary unique to their
segment.Extensive promotion was made by organising seminars on july 16th titled as FITCH
FRIDAY.Several corporate dignitaries have been invited and created vast awareness about
fitch,its products services.This helped us a lot to penetrate into all the sectors with ease.Market
establishment was achieved successfully by this promotional events

PROCESS&TOOLS USED
From the given resources of fitch ratings database of several companies was
acquired,preparation of appropriate message was done by using the literature obtained from
company.Strong message was made without any misconceptions in the form of
brochures.these are issued accoding to the interest of companies
Through the relevant data made such as brochures and outlooks of different sectors I started
approaching companes.Appointments have been taken according to the interest of the
companies.
38
COLLECTION OF DATA
Hence spread of my message was done successfully,now we started collecting relevant
information from the companies of Pharma &Healthcare sectors.Tools such as questionnaire
helped me a lot.This data was analysed and report was made which gives detailed
oppurtunities and possibilities of getting business with several companies.

DATA ANALYSIS
Data has been refined and a report was made.

39
40
CONCLUSION

 .Successfully achieved the above mentioned objectives

 .Learned corporate etiquette

 .Wide range of publicity has been given regarding Ratings and its
importance among small and medium entities in and around
Hyderabad.
 .Done negotiations with several entities regarding ratings procedure
of Fitch Ratings
 .Earned and refinement of database has been done to find out
potential customers for Fitch Ratings
 .Required financial details have been collected from the interested
small and medium range companies through appropriate
questionnaire.

41
  .Market mapping has been achieved for Fitch ratings effectively

PROJECT FINDINGS

 The versatility of ratings among the SME’s, the presence of ratings and its
importance is very scarce.

 Credit rating market share in Hyderabad is yet to be exploited, Fitch ratings with its
international standards can become a major player.

 Fitchratings with its rigid background , reliability, and vividness can establish a
strong base of clients

 Wide range of publicity should be given to provide requied awareness regarding

ratings Partial in-depth detail of corporate functions has come to understanding.

 Fitch ratings has helped me recognize potential in the field of marketing ,as a boost
of confidence in providing a real time project

Bibliography:

http://www.fitchindia.com
http://www.fitchratings.com
http://google.com

42
ANNEXURES.
Questionaire
Summer Internship Programme

Questionnaire

A COMPANY DETAILS

1 Name of the Company :

2 Industry /Sector :

3 Name of the Promoters /MD :

4 Name of the Finance Head:

5 Address1:

Address2:

Contact Telephone No:

Fax No :

6 Group Companies details a.

b.

c.

B COMPANY LATEST FINANCIALS

1 Turnover :

2 EBITA Margins:

4 Net Profit :

5 Net Profit Margins :

5 Networth :

C CREDIT RATING DETAILS

1 Existing Rating Agency :

2 Short term Rating - Domestic :

3 Long term- Rating - Domestic :

4 International Rating :

5 Any other Ratings :

43
D BANKING DETAILS

1 Details of exiting Bankers

a. d.

b. e.

c. f.

2 Main / Lead Bank :

Fund based exposure ( Cash credit + Short (Rs. In

3 term loans): Crs.)

a. Cash Credit limit

b. interest on Cash credit

4 Non Fund based Exposure (BG/LC):

a. Bank Gurantee Limits

b. Letter of Credit

(Rs. In
5 Details of Term Loans : Crs.)

a. Term loan

b.interest on term loans

c. tenor of term loan

E OPPORTUNITIES

1 Bank loan rating :

2 IPO Rating :

3 International rating:

4 CP/NCD Rating:

44