Top-grade credit ratings drop to over 10-year low

PTI Posted online: Sunday, Sep 08, 2013 at 0000 hrs
Mumbai : A total of 50 corporate debt securities got the top investment grade credit ratings in the first four months of the current fiscal -- the lowest number of such high ratings for this period in over ten years.

The number of debt issues that got non-investment grade ratings between April-July period of current fiscal 2013-14 also declined to 377, from as many as 1,249 in the same period of the previous financial year, according to data compiled by Sebi, which regulates credit rating agencies (CRAs) in India.

Various CRAs assigned a total of 720 long term corporate debt securities between April-July this fiscal, including 'highest safety investment grade (AAA)' rating for 50 of them.

The 50 AAA-rated issues together involved debt securities worth about Rs 4.52 lakh crore, as against a total amount of about Rs 6,084 crore for 377 issues that were assigned 'non-investment grade' ratings.

AAA rating is assigned to highest-quality bonds that face the lowest risk of default, while 'non-investment grade' applies to the low-quality issues.

An AAA rating is followed by 'High Safety (AA)', Adequate Safety (A)' and 'Moderate Safety (BBB)'.

For April-July period, 102 issues got high-safety (AA) rating, 47 were 'adequate safety (A)' and 144 got 'moderate safety (BBB)' ratings.

Debt securities are issued by companies to raise funds for a variety of purposes such as business expansion.

In the first four months of 2013-14, CRAs assessed long-term corporate debt securities worth a total of Rs 5.80 lakh crore -- highest in terms of value in over 10 years since 2003-04.

In the April-July period of the previous fiscal, a total of 1,807 issues worth Rs 5.19 lakh crore were graded.

Of these 59 issues valuing Rs 3.50 lakh crore were categorised under the 'highest investment grade' while 1,249 issues were of 'non-investment grade' valuing Rs 20,311 crore.

Meanwhile, 38 rating downgrades worth Rs 11,623 crore were accepted by the respective companies in the first four months of current fiscal, while 69 upgraded issues amounting to Rs 11,844 crore were approved.

As per the process followed by credit rating agencies, the assigned rating is communicated to the issuer for acceptance. In the case where the issuer does not find the rating acceptable, it can appeal for a review.

The rating agencies registered in the country include CRISIL, India Ratings and Research (formerly Fitch Ratings India), ICRA, Credit Analysis & Research (CARE), Brickwork Ratings India and SME Rating Agency of India.