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A
CPP Report
Titled

‘Credit Analysis & Research Ltd’

For fulfilling the requirement of the award of degree of BBA
Subject CPP (IMS-306)
Under the Supervision of
Dr. Jai Kishan Chandel
Assistant Professor
Submitted to:

Submitted by:

The director

Name

: Beena devi

Roll No. : 44
Registration No:14UMI16
Batch

: 2014-15

Institute of Management Studies
Kurukshetra University, Kurukshetra
(SEPTEMBER,2015)

1

ACKNOWLEDGEMENT
It is great pleasure to express my sense of gratitude to MR.J.K CHANDEL, I.M.S
K.U.K , Kurukshetra , without whose valuable guidance generous help and constant
enthusiastic inspiration this assignment titled “Credit analysis research ltd” would
have never been a success.
I was almost convinced that I was aware of the business & market forces that drive the
Banking industry. However, once I started out working on the same, I realized how
grossly inadequate my knowledge had been. I thank sir for giving me all the valuable
inputs all along and guiding me to once again explore the sector I so much feel a part of.
BEENA DEVI
MBA (5yrs) 2nd sem.

Roll No. 44

2

Declaration

I Beena Devi, hereby declare that the project entitled “CARE Ltd.”, assigned by
Institute of Management Studies for the fulfilment of MBA 5 year course from
Institute of Management Studies Kurukshetra University.

It is original work done by me with the help of my teachers and friends.

This project report has not been submitted to any other Institute or University for
award of any other degree.

Beena Devi
Roll No. 44

3

CONTENTS
Chapter No.

Title of the Chapter
Introduction

1
2

A. Status of the Credit Rating Sector
B. Major Players in this credit Rating Sector
C. Other information
Name of the Company
A.
B.
C.
D.

3

Introduction: History, Vision, Mission etc.
Organizational Structure
Product and Services
Awards

Analysis And Discussion
A. Operational Analysis
B. Human Resource Strategies
a. Recruitment, Selection & Training

C. Financial Analysis
a. Profit & Loss analysis
b. Capital analysis
c. Assests & Liabilities analysis
D. Other important Information
a. Achievements

4
5

SWOT Analysis and Conclusion
Learning From the Reports

6

Reference

CHAPTER: 1
4

Page No.

CREDIT RATING SECTOR
1.1(Status of the Credit…….Sector ( Banking)
(a). History of Credit Rating Agencies and How They
Work

Credit rating agencies have been around for the better part of the 20th century, and have
played a key role in the financial world by providing ratings on the creditworthiness of
bonds and other debt instruments.
These ratings are invaluable tools for investors looking to get a better sense of whether
a debt instrument is worth investing in. Therefore, when assessing the level of risk
associated with a bond, investors will typically look at its credit rating.
Since most investors are looking for a tradeoff between risk and return on their
investments, they are typically going to demand a higher interest rate for bonds that
have poorer credit ratings. As a result, rating agencies play an important role in setting
interest rates on debt securities.

5

1. Fitch

The Fitch Publishing Company was founded in 1913 by John Knowles Fitch, a 33-yearold entrepreneur who had just taken over his father’s printing business. Fitch had a
unique goal for his company: to publish financial statistics on stocks and bonds.
In 1924, Fitch expanded the services of his business by creating a system for rating debt
instruments based on the company’s ability to repay their obligations. Although Fitch’s
rating system of grading debt instruments became the standard for other credit rating
agencies, Fitch is now the smallest of the “big three” firms.

6

2. S&P

Henry Varnum Poor was a financial analyst with a similar vision to John Knowles
Fitch. Like Fitch, Poor was interested in publishing financial statistics, which inspired
him to create H.V. and H.W. Poor Company.
Luther Lee Blake was another financial analyst interested in becoming a financial
publisher. In order to achieve this dream, Blake founded Standard Statistics in 1906, just
a year after Poor’s death. Standard Statistics and H.V. and H.W. Poor published very
similar information.
Hence, it made sense for the two companies to consolidate their assets, and they merged
in 1941 to form the Standard and Poor’s Corporation.
Today, Standard and Poor’s not only provides ratings but also offers other financial
services, such as investment research, to investors. They are now the largest of the “big
three” rating agencies.
7

3. Moody’s

John Moody founded the financial holding company, Moody’s Corporation, in 1909.
Although Moody’s provides a number of services, one of their largest divisions is
Moody’s Investor Services. While Moody’s has conducted credit ratings since 1914,
they only conducted ratings of government bonds until 1970.
Moody’s has grown significantly over the years. Presently, Moody’s is the second
largest of the “big three” firms.
Purpose of Credit Rating Agencies
Credit rating agencies assign ratings to any organization that issues debt
instruments, including private corporations and all levels of government. Due to the fact
that investors need to know they are receiving adequate compensation for the risk they
are taking by holding an investment, the ratings the agencies issue are essential to the
financial industry.
8

The interest rate attached to a debt is inversely related to its level of risk. Therefore,
since investors use the opinions of rating agencies as metrics for the level of risk
attached to a debt instrument, credit ratings play a key role in the interest rates of
different debt securities.
How Credit Rating Agencies Work
Debtors want investors to have a good idea of how creditworthy their securities are.
Of course, investors are looking for an unbiased idea of a company’s ability to repay
debt. Therefore, companies will often hire a credit rating agency to rate their debt.
After the company solicits a bid, the credit rating agency will evaluate the institution
as carefully as possible. However, there is no magic formula to determine an
institution’s credit rating; the agency must instead conduct a subjective evaluation of the
institution’s ability to repay its debts.
When conducting their assessment, the credit rating agencies will look at a number of
factors, including the institution’s level of debt, its character, a demonstration of its
willingness to repay its debt, and its financial ability to repay its debt. Although many of
these factors are based on information found on the institution’s balance sheet and
income statements, others (such as an attitude towards repaying debt) need to be
scrutinized more carefully.
For example, in the recent national debt ceiling debacle, S&P downgraded the U.S.
sovereign debt rating because they felt the political brinkmanship of the federal
government was not consistent with the behavior of a AAA institution.
When they assess an institution’s credit rating, the agencies will classify the debt as one
of the following:
1. High grade
2. Upper medium grade

9

3. Lower medium grade
4. Non-investment grade speculative
5. Highly speculative
6. Substantial risks or near default
7. In default
High grade investments are considered the safest debt available. On the other hand,
investments that are listed as in default are the riskiest debt instruments, as they have
already demonstrated that they are unable to repay their obligations. Hence, investments
in default will need to offer a much higher interest rate if they intend to invest money in
them.

Advantages of Credit Agencies
1.

They Help Good Institutions Get Better Rates Institutions with higher grade credit

ratings are able to borrow money at more favorable interest rates. Accordingly, this
rewards organizations that are responsible about managing their money and paying off
their debt. In turn, they will be able to expand their business at a faster rate, which helps
stimulate the economy’s expansion as well.

10

2 . They Warn Investors of Risky Companies Investors always want to know the level
of risk associated with a company. This makes rating agencies very important, as many
investors wish to be forewarned of particularly risky investments.
3.

The Provide a Fair Risk-Return RatioNot all investors are opposed to buying risky

debt securities. However, they want to know that they are going to be rewarded if they
take on a high level of risk. For this reason, credit rating agencies will inform them of
the risk levels for every debt instrument and help ensure that they are properly
compensated for the level of risk they take on.
4.

They Give Institutionsan Incentivet Improve A poor credit rating can be a wake-

up call for institutions that have taken on too much debt or haven’t demonstrated that
they are willing to be responsible about paying it back. These institutions are often in
denial of their credit problems, and need to be alerted of any potential problems from an
analyst before they make the necessary changes.
Disadvantages of Credit Rating Agencies
Unfortunately, although credit rating agencies serve a number of purposes, they are not
without flaws:
1.

Is Highly Subjective There are no standard formulas to establish an institution’s

credit rating; instead, credit rating agencies use their best judgement. Unfortunately,
they often end up making inconsistent judgments, and the ratings between different
credit rating agencies may vary as well.
For example, there was much talk about the S&P downgrade when the United States
lost its AAA credit rating. Regardless of the S&P decision, the other two major credit
rating agencies still give the U.S. the highest grade rating possible.
2.

There can be conflict of interest .The credit rating agencies usually provide ratings

at the request of the institutions themselves. Although they sometimes conduct

11

unsolicited evaluations on companies and sell the ratings to investors, they usually are
paid by the very same companies they are rating.
Obviously, this system can lead to serious conflicts of interest. Since the company pays
the rating agency to determine its rating, that agency might be inclined to give the
company a more favorable rating so as to retain their business. The Department of
Justice has started investigating the credit rating agencies for their role in the mortgagebacked securities that collapsed in 2008.
3.

Ratings Aren’t Always Accurate Although credit rating agencies offer a consistent

rating scale, that does not mean that companies are going to be rated accurately. For
many years, the credit ratings of these agencies were rarely questioned. However, after
rating agencies provided AAA ratings for the worthless mortgage-backed securities that
contributed to the recession, investors don’t have nearly as much faith in them. Their
ratings are still referenced by almost everyone, but their credibility has taken a serious
hit

MEANINGS

12

Treasury Bonds are not rated because they are backed by the "full faith and credit" of
the United States government. They are considered the safest of investments because
the government has the power to levy taxes in order to pay its debts.

Final Word
Credit rating agencies have played a significant role in the financial community over the
past century. Throughout their existence, they have helped investors identify levels of
risk; otherwise, the investing community would be in a world of chaos as it tried to
determine risk levels and appropriate interest rates. However, at the end of the day,
rating agencies’ evaluations need to be taken with a grain of salt. Although their
opinions are based off of highly educated professionals, they are still opinions.
Investors should take a credit rating under advisement, but they should also use their
own judgment when they decide whether to purchase a debt instrument at a certain price
or interest rate. If you are investing in a security, consider how much debt the firm
13

holds, its revenue, and the assets it has withstanding. Although these are some of the
same factors a rating agency looks at, investors should come to their own conclusion on
the level of investment risk associated with a security.

1.2 CORPORATE PLAYERS IN THE SECTORS

14

1.Crisil Limited

Corporate office – Mumbai, Maharashtra | Establishment – 1987 |
Business – Credit Rating, Risk & Policy Advisory | Website – www.crisil.com |
CRISIL headquartered at Mumbai is India’s largest and first credit rating agency;
and a global leader in research, ratings and risk & policy advisory services. It is one
of the top credit rating agency in India which has won many prestigious awards in
the credit rating category and had assessed more than 61000 entities.

15

2 | Credit Information Bureau India Limited -(CIBIL)

Corporate office – Mumbai, Maharashtra | Establishment – 2000 |
Business – Credit Rating information | Website – www.cibil.com |
CIBIL headquartered at Mumbai is an Credit Information Company which maintains
records of an individual‘s payments related to credit cards and loans. The information
about users credit cards and loans is later used by the CBIL to generate Credit
information reports which are used to approve loan applications.

16

3.Fitch Ratings India Private Ltd.

Corporate office – New York, USA | Establishment – 1913 |
Business – Financial Information Services | Website – www.fitchratings.com |
Fitch Ratings, a Fitch Group company is a among the top credit rating agencies in India
incorporated in 1913 in New York, USA. Fitch Ratings provides financial information
services in more than 30 countries and has over 2000 employees working at 50+ offices
worldwide.
4. Equifax

Corporate office – Atlanta, United States | Establishment – 1899 |
Business – Credit rating | Website – www.equifax.co.in |
17

Equifax Inc started operations in 1899 and has managed to be among the top credit
rating agencies in India and at global level. Equifax Inc provides information
management services that process thousands of records of its members which can
be used by them for various purposes and to supply risk management solutions,
credit risk management and analysis, fraud detection triggers, decision
technologies, marketing tools etc.

5 .Credit Analysis & Research Ltd. (CARE)

Corporate office – Mumbai, Maharashtra | Establishment – 1993 |
Business – Credit Rating | Website – www.careratings.com |
CARE Ratings is second-largest among the credit rating agencies in India as far as
Indian origin company is concerned. CARE’s rating businesses can be divided into
various segments like for banks, IPO grading and sub-sovereigns. Company’s
shareholders includes leading domestic banks and financial institutions in India.

18

6.ICRA Limited

Corporate office – Gurgaon, Haryana | Establishment – 1991 |
Business – Investment Information and Credit Rating | Website – www.icra.in |
ICRA limited is a joint venture between Moody’s Investors and various financial
services companies is a part of ICRA group which was founded in 1991. It is a Credit
rating agency listed on the National Stock Exchange and Bombay Stock Exchange.
ICRA has four subsidiaries ICRA Management Consulting Services Ltd, ICRA Techno
Analytics Ltd, ICRA Online Ltd, PT. ICRA Indonesia and ICRA Lanka Ltd.

7. ONICRA

19

Corporate office – Gurgaon, Haryana | Establishment – 1993 |
Business – Research, Risk & Ratings | Website – www.onicra.com |
Onicra Credit Rating Agency is a Credit and Performance Rating company based in
Gurgaon and founded in 1993. Onicra is among the top 10 credit rating agencies in
India offering smart and innovative solutions like risk assessment, analytical
solutions and ratings to MSMEs, corporate and individuals.
8.High Mark Credit Information Services

Corporate office – Mumbai, Maharashtra | Establishment – 2005 |
Business – Financial Services | Website – www.highmark.in |
20

High Mark Credit Information Services is a recognized credit rating company in
India. It provides bureau services, analytic solutions and risk management to banks
and financial institutions operating in Micro-finance, Retail consumer finance,
MSME, Rural & Cooperative Sectors.

9.SME Rating Agency of India Ltd. (SMERA)

Corporate office -Mumbai, Maharashtra | Establishment – 2005 |
Business – | Website – www.smera.in |
SMERA Ratings Ltd a Mumbai based company now expanded to 13 more
locations was founded in year 2005. SMERA a joint venture of SIDBI, several
private sector banks in the country and Dun & Bradstreet Information Services
India Pvt. Ltd. (D&B). Since 2005 SMERA rated over 23,000 MSMEs pan India.

10.Brickwork Ratings India Private Ltd
21

Corporate office – Bengaluru, Karnataka | Establishment – 2007 |
Business – | Website – www.brickworkratings.com |
Brickwork Ratings was established in 2007 by Sangeeta Kulkarni as a credit rating firm.
ndThe company is registered with SEBI, RBI & NSIC and operates in wide range of
areas such as NCD, Bank Loan, Commercial paper, MSME ratings. It is among the
leading credit rating companies in India having already rated Rs 200,000 crores of
bonds and bank loans.

1.3(C) OTHER IN FORMATION

22

How to check your credit report
Have you ever wondered how a bank or lender decides whether or not to give
you credit? One of the tools they use is your credit report (or file). This tells them
about your credit history and helps them assess how much of a risk lending to you
will be.
Who compiles credit reports?
In the UK, there are three main companies that compile information on how well
you manage credit and make your payments. They are:


Experian



Equifax



Call credit
What’s in your credit report?
Your credit report typically holds the following information.



A list of all your credit accounts. This includes bank and credit card accounts as
well as other credit arrangements such as outstanding loan agreements or those with
your utility company. They will show whether you have made repayments on time
and in full. Items such as missed or late payments will stay on your credit report
for at least six years. So too do court judgments for non-payment of debts,
bankruptcies and individual voluntary arrangements.



Details of any people who are financially linked to you, which means you’ve
taken out joint credit

23



Public record information such as County Court Judgments (called ‘Decrees’ in
Scotland), house repossessions and bankruptcies for six years after they occur



Your current account provider, but only details of overdrafts



Whether you are on the electoral register



Your name and date of birth



Your current and previous addresses, and



If you’ve committed a fraud (or someone has stolen your identity and committed
fraud) this will be held on your file under the CIFAS section
Your credit report doesn’t carry other personal information such as your salary,
religion or any criminal record.

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CHAPTER:2
CREDIT ANALYSIS AND RESEARCH LIMITED
2.1 INTRODUCTION
CARE Ratings commenced operations in April 1993 and over nearly two
decades, it has established itself as the second-largest credit rating agency in India. With
the rating volume of debt as Rs. 68.08 lakh crore (as of March 31st, 2015), CARE
Ratings is proud of its rightful place in the Indian capital market built around investor
confidence. CARE Ratings has also emerged as the leading agency for covering many
rating segments like that for banks, sub-sovereigns and IPO gradings.
CARE Ratings provides the entire spectrum of credit rating that helps the
corporates to raise capital for their various requirements and assists the investors to
form an informed investment decision based on the credit risk and their own risk-return
expectations. Our rating and grading service offerings leverage our domain and
analytical expertise backed by the methodologies congruent with the international best
practices.
With majority shareholding by leading domestic banks and financial institutions in
India, CARE’s intrinsic strengths have also attracted many other investors.
CARE’s registered office and head office, is located at 4th floor, Godrej Coliseum,
Somaiya Hospital Road, Sion (East), Mumbai 400 022. In addition, CARE has regional
offices at Ahmedabad, Bangalore, Chennai, Hyderabad, Jaipur, Kolkata, New Delhi,
Pune and international operation in Male in the Republic of Maldives. With independent
and unbiased credit rating opinions forming the core of its business model, CARE
Ratings has the unique advantage in the form an External Rating Committee to decide
on the ratings. Eminent and experienced professionals constitute CARE’s Rating
Committee.

25

2.2 Vision, Mission & Value

VISION
"To be
a respected company that provides best - in its field - quality and value services”
MISSION


To offer a range of high-quality services to all the stakeholders in the capital



market
To build a pre-eminent position for ourselves in India in securities analysis,



research and information services and to be an international credit rating agency
To earn customer satisfaction and investor confidence through fairness and




professional excellence
To remain deeply committed to our internal and external stakeholders
To apply the best possible tools & techniques for securities analysis aimed to



ensure efficiency and top quality
To ensure globally comparable quality standards in our rating, research and
information services.

VALUE


Integrity and Transparency: Commitment to be ethical, sincere and open in our



dealings.
Pursuit of Excellence: Committed to strive relentlessly to constantly improve






ourselves.
Fairness: Treat clients, employees and other stakeholders fairly.
Independence: Unbiased and fearless in expressing our opinion.
Thoroughness: Rigorous analysis and research on every assignent that we take.
What is Corporate Governance Rating

26

CARE’s Corporate Governance Rating (CGR) is an opinion on relative
standing of an entity with regard to adoption of corporate governance practices. It
provides information to stakeholders about the level of corporate governance practices
of the entity. It enables corporate entities to obtain an independent and credible
assessment of the quality and extent of their corporate governance. The rating process
would also determine the relative standing of the entity vis-à-vis the best practices
followed in the domestic as well as international arena. Companies can also use these
ratings as reference and set benchmarks for further improvements. Investors and other
stakeholders get benefited as they are able to differentiate companies based on degree of
corporate governance.
Methodology
CARE, under the CGR exercise, assesses seven key parameters which are identified
as under:








Board composition & functioning;
Ownership structure;
Organization structure and Management Information System;
Shareholder relationship;
Disclosure & transparency;
Financial prudence; and,
Statutory and regulatory compliance.
Good Corporate governance also helps ensuring that corporations take into

consideration the interests of a wide range of constituencies, as well as of the
communities within which they operate. Good corporate governance aims at value
creation for its stake holdersThe composite rating is called as “Corporate Governance
and Value Creation Rating“. Wealth creation by a company based on sound business
strategy and practices adopted by its management as also maintaining financial and
operational discipline would promote enhancing stakeholder value. The quality of
management and its capabilities under stress, corporate strategy & philosophy and
succession planning would be examined by CARE to assess wealth management

27

practices. Creation and distribution of wealth to the stakeholders would be evaluated
with reference to, inter-alia,







Shareholder;
Employees;
Lenders/ Creditors;
Suppliers;
Customers; and
Society.

The emphasis will be to assess sustainable value creation and distribution and hence
the analysis will not only examine the past but evaluate the future as well.

2.2 HISTORY

28

The Company was incorporated as Credit Analysis and Research Limited on
April 21, 1993 at Mumbai, Maharashtra as a public limited company under the
Companies Act. Our Company commenced its business activities subsequent to
receipt of certificate for commencement of business dated May 27, 1993.
Our Company has acquired 6,020,540 equity shares of face value of Rs. 10
each of Kalypto representing 75.13% of the issued and paid-up share capital of
Kalypto, pursuant to a share sale and purchase and shareholders’ agreement
dated November 22, 2011.

Major events of the Company
1993-94 :
Commenced rating operations
1996-97 :
Expansion of ratings operations to rating of toll roads, electricity board,
municipal corporations, structured instruments. Completed nine studies on
central public sector undertakings selected for disinvestment for the
Disinvestment Commission.
1997-98:
Launched ‘CARE Loan Rating’ for rating term loans.
1998-99:
Started rating of debt mutual funds.
1999-2000;
Launched rating for two structured products: bonds backed by real-estate

29

receivables and collateral of shares.
Obtained registration with SEBI under the CRA Regulations.
2001-02:
Founding member of ACRAA
2002-03:
Launched corporate governance and value creation rating
2004-05:
Signed MoU with NSIC for empanelment as an approach rating agency for
SSIs
2005-06 :
Launched new products such as rating of SMEs, SSIs, mutual funds, issuer
rating and IPO grading
2006-07:
Developed grading methodology for ultra mega power projects, urban local
bodies, infra projects at pre-bid and post-bid stages and micro financial
institutions.
2007-08 :
Executed MoUs with 19 banks to provide rating facilities under Basel II
framework
Commenced providing technical assistance to a rating agency in Mexico
Received mandate from Ministry of Urban Development for rating of 13 urban
local bodies under Jawaharlal Nehru National Urban Renewal Mission

30

2009-10 :
Established CARE Knowledge Centre at Ahmedabad Commenced providing
technical assistance to credit rating agency in Ecuador
2010-11:
Acquired license to operate credit rating operations in Maldives. Launched
new products including equigrade, ESCO grading, RESCO grading and
financial strength grading of shipyards, edugrade and real estate project star
ratings
Rated a perpetual bond issued by a non financial services corporate company.
2012 :
Acquisition of 75.13% of the issued and paid up equity share capital of
Kalypto. -Acquired indirect recognition as an external credit assessment
institution from Hong Kong Monetary Authority
2013:
Credit Analysis and Research Ltd has proposed a Final Dividend of Rs. 8 per
share and have declared an Interim Dividend of Rs. 6/- per equity share of Rs.
10/- each.
2014 :
CARE Ratings as knowledge partner @ CIMSME - MSME Banking
Excellence Awards in Delhi on 9th Jan 2014.

31

2.3 PRODUCTS AND SERVICES
Services offered by CARE are:


Credit rating



Information services



Equity research, and



Advisory services

1. Advisory Services:
Credit Reports - CARE offers credit reports on companies based on published
information and CARE's in-house data base. These confidential credit reports are useful
to entities considering financing options, joint ventures, acquisitions and collaborations
with Indian companies.
Sector Studies - CARE from time to time conducts studies on select sectors of the
Indian economy, particularly those which were largely government controlled and
funded till recently, but have been thrown open for private investment. Studies on the
Indian Power Sector, Fertilizer Industry and Municipal Finances have been completed.
CARE has also prepared reports on twelve of the larger states of the Indian Union,
which account for the bulk of foreign direct investment into India. CARE also regularly
prepares reports on important segments of the Indian economy. These reports are used
by industry participants, financial intermediaries and also by analysts in CARE for their
rating reports.
Project Advisory Services - For financing its infrastructure, India is increasingly
relying on private sector participation. CARE uses the expertise gained in evaluating the
32

credit risk of projects in areas such as roads, ports, power and telecom to advise
investors and banks about the regulatory framework, the specific project risks and the
ways of risk mitigation. CARE has helped independent power producers in India
understand the functioning of the principal power purchasers, the State Electricity
Boards and evaluate options for mitigating purchaser risk. CARE has also worked
closely with project sponsors to structure their debt securities based on estimates of cash
flows.
Financial Restructuring - The business risk faced by Indian companies increased
following the liberalisation of Indian economy in 1991. To compete in the changed
environment, companies have had to reassess their capital structures. CARE uses its
knowledge about various industry sectors to advise companies about the optimal capital
structure and the financial restructuring options.
Valuation - CARE carries out enterprise valuations for company managements,
prospective and exisiting business partners or large investors. The Disinvestment
Commission, Government of India, has used CARE's services for valuing 20 state
owned enterprises.
Credit Appraisal Systems - CARE helps banks and non banking finance companies to
set up or modify their credit appraisal systems.
Debt Market Review - CARE's Advisory division also publishes a monthly bulletin
"debt market review" on the happenings in the debt market and general development in
the economy in the previous month.
Credit Rating Services
CARE's Credit Rating is an opinion on the relative ability and willingness of an
issuer to make
timely payments on specific debt or related obligations over the life of the instrument.

33

CARE rates rupee denominated debt of Indian companies and Indian subsidiaries of
multinational companies.
CARE undertakes credit rating of all types of debt and related obligations (all types
of medium and long term debt securities such as debentures, bonds and convertible
bonds and all types of short term debt and deposit obligations such as commercial
paper, inter-corporate deposits, fixed deposits and certificates of deposits).
CARE also rates quasi-debt obligations such as the ability of insurance companies to
meet policyholders obligations.
CARE's preference share ratings measure the relative ability of a company to meet its
dividend and redemption commitments.
Other Rating / Grading Services : IPO Grading
CARE's IPO grading is a service aimed at facilitating the assessment of equity issues
offered to public.
CARE's IPO grading is an independent and professional opinion on the fundamentals of
the issuer.
The grade assigned to any individual issue represents a relative assessment of the
'fundamentals' of that issuer.
Utility to market participants
- CARE’s IPO grading would help the investors particularly the retail investors better
appreciate the meaning of the disclosures in the issue document to the extent that
they affect its fundamentals. IPO grading is expected to be one of the inputs in the
investor’s decision making process.
- Moreover, such a service would be particularly useful for assessing the offerings of
companies accessing the equity markets for the first time where there is no track
34

record of their market performance. Issuers would also benefit from CARE's IPO
grading as it would help them in benchmarking themselves in the market place.

2.4 ORGANISATIONAL STRUCTURE
S. Mainak
Non-Executive Independent Chairman of the Board
D. Dogra
Chief Executive Officer, Managing Director, Non- Independent Executive Director
Navin Jain
Compliance Officer, Company Secretary
Rajesh Mokashi
Deputy Managing Director, Whole-Time Director
S. Ananthakrishnan
Additional Non-Executive Director
B. S. Keshava Murthy
Additional Non-Executive Director
Ashima Goyal

35

Additional Non-Executive Independent Director
Board of Directors (BoD)
Mr. A.K. Bansal
Mr. A.K. Bansal is the Chairman and an Independent Director of our Company. He worked
as Executive Director of Indian Overseas Bank between 2010-13. Born on 22nd May 1953, Shri A.
K. Bansal is a Post Graduate in Agriculture from the renowned G B Pant Agriculture University, Pant
Nagar, Nainital and recipient of ICAR Junior Research Scholarship. He joined Union Bank of India
as Agricultural Field Officer at the age of 23 years in the year 1976. He has had a highly successful
and rewarding career path at Union Bank during which he was awarded Super Achiever and Star
Performer status, conferred with the Chairman Club Membership and was entrusted with some of the
most challenging and coveted assignments of the Bank. He was also the driving force for setting up
the Bank’s Capital Market Cell at Mumbai and establishing the Bank’s first museum at M S M branch
in Mumbai. At Indian Overseas Bank, among other portfolios, he had exclusive charge of Large
Corporate, International, MSME, Planning, NPA management, Agriculture & Priority Credit,
Inspection & Audit, Public Relations, Customer Service & Vigilance. He has been conferred the
“Indira Super Achiever Award” for the year 2010-11 by the Indira Group of Institutions, Pune in
recognition of his high contribution value to the field of Banking and Finance during his banking
career. He is also on the Board of Directors of Canara HSBC Oriental Bank of Commerce Life
Insurance Company Limited.

Mr. Venkataraman Srinivasan
Venkatraman Srinivasan is an Independent and Non-Executive Director of our Company. He
holds a Bachelor's degree in Commerce from University of Mumbai and is a qualified Chartered
Accountant. He has more than 26 years of experience as a practicing Chartered Accountant. He is
currently a partner of V. Sankar Aiyar & Co., Chartered Accountants. He is on Board of Directors for
Chennai Petroleum Corporation Ltd., UTI Retirement Solution Ltd. & Shriram Properties Pvt. Ltd.
36

He has been associated with our Company as an Independent Director since May 12, 2006.

Ms. Bharti Prasad

Bharti Prasad is an Independent and Non-Executive Director of our Company. She holds a
Master's degree in Arts and an M.Phil degree from Punjab University, Chandigarh. She has more than
39 years of experience in finance, accounts, audit, oversight and administration. She was a member of
the Indian Audit & Accounts Service and retired as Deputy Comptroller & Auditor-General. She has
held various positions including Principal Accountant-General, West Bengal, Joint Secretary
Department of Expenditure, Ministry of Finance, Director, National Academy of Audit & Accounts,
Shimla and Accountant-General, Uttar Pradesh. She has also worked with United Nations Children
Fund, New York. She was a member of the Advisory Group on Evaluation and Audit of the
International Civil Aviation Organization, Montreal, Canada and, member of the International Public
Sector Accounting Board (IPSASB), New York. She is Independent Monitor to the Ministry of
Defence and to the Ministry of Food Processing Industries. She has been associated with our
company as an Independent Director since July 29, 2010.

Mr. D. R. Dogra
D. R. Dogra is the Managing Director and Chief Executive Officer of our Company. He holds a
Bachelor's and a Master's degree in agriculture from Himachal Pradesh University and a Master's
degree in business administration (FMS), from University of Delhi. He is a certified associate of the
Indian Institute of Bankers. He has more than 35 years of experience in the financial sector and in
credit administration. Prior to joining our Company, he was associated with Dena Bank. He is a
member of Western Region Economic Affairs, Sub-Committee of Confederation of Indian Industry,
Federation of Indian Chamber of Commerce and Industry, executive body of Swayam Siddhi College
of Management & Research and board of governance of Universal Business School, Mumbai. He is
37

an expert member of Academic Advisory Committee in Finance at Dr. L Ramani Birla Institute of
Technology. He is on Board of Directors with Association of Credit Ratings Agencies in Asia, Manila,
Philippines, ARC Ratings Holdings Pvt Ltd, Singapore, CARE Kalypto Risk Technologies and
Advisory Services Pvt Ltd., Public interest Director at MCX Stock Exchange Ltd. and ARC Ratings,
SA, Portugal. He has been associated with our Company since 1993 and was appointe
the Board on June 30, 2008

Mr. Rajesh Mokashi
Rajesh Mokashi is the Deputy Managing Director of our Company. He holds a Bachelor's
degree in Mechanical Engineering from VJTI, Mumbai and a Master of Management Studies degree
from University of Bombay. He is a qualified Chartered Financial Analyst and has also cleared Level
III of the CFA Program conducted by the CFA Institute, USA. He has obtained a Diploma in Import
and Export Management from Indian Institute of Materials Management. He has more than 27 years
of experience in finance, commerce and credit risk sectors. He has been associated with OTIS
Elevators Company (India) Limited, DSP Financial Consultants Limited and Kotak Mahindra
Finance Limited in the past. He is on Board of Directors with CARE Kalypto Risk Technologies and
Advisory Services Pvt. Ltd., He also Member-Empanellment Committee of NISM. He has been
associated with our Company since 1993 and was appointed on the Board on August 22, 2009.

38

CHAPTER : 3
ANALYSIS AND DISCUSSION
3.1 OPERATIONAL ANALYSIS

PROCESS
The rating process takes about two to three weeks, depending on the complexity of
the assignment and the flow of information from the client. Ratings are assigned by the
Rating Committee.

39

3.2) HR STRATEGIES
RECUITMENT, SELECTION AND TRAINING
CARE Ratings commenced operations in April 1993 and over nearly two decades,
it has established itself as the second-largest credit rating agency in India. With the
rating volume of debt of around Rs.45,901 bn (as on December 31, 2012) , CARE
Ratings is proud of its rightful place in the Indian capital market built around investor
confidence. CARE Ratings has also emerged as the leading agency for covering many
rating segments like that for banks, sub-sovereigns and IPO gradings.CARE Ratings
provides the entire spectrum of credit rating that helps the corporates to raise capital for
their various requirements and assists the investors to form an informed investment
decision based on the credit risk and their own risk-return expectations. Our rating and

40

grading service offerings leverage our domain and analytical expertise backed by the
methodologies congruent with the international best practices.
With majority shareholding by leading domestic banks and financial institutions in
India, CARE’s intrinsic strengths have also attracted many other investors.CARE’s
registered office and head office, is located at 4th floor, Godrej Coliseum, Somaiya
Hospital Road, Sion (East), Mumbai 400 022. In addition, CARE has regional offices at
Ahmedabad, Bangalore, Chennai, Hyderabad, Jaipur, Kolkata, New Delhi, Pune and
international operation in Male in the Republic of Maldives. Eminent and experienced
professionals constitute CARE’s Rating Committee

Table 3.3(a)

Net Current Assets
Mar’14

Mar’13 Mar’12

Mar’11

Mar’10
Net current assets
Current assets, loans & advances

58.95

75.83

104.94

35.78

30.48

Less : current liabilities & provisions

93.84

93.19

51.05

29.17

30.84

Total net current assets

-34.89

-17.35

53.89

6.61

-0.36

-

-

-

-

-

484.31

423.90

377.11

302.75

213.50

Miscellaneous expenses not written
Total

3.3)FINANCIAL ANALYSIS

41

Table: 3.3 (B)

Capital structure (2010-14) (Rs crore)
Paid Up
From

To

Class Of Authorized

Issued

Paid Up

Year

Year

Share

Capital

Shares (Nos) Value

Capital

Face

Paid Up
Capital

Equity
2013

2014

Share

30.00

29.00

28999122

10

29.00

30.00

28.55

28552812

10

28.55

30.00

28.55

28552812

10

28.55

Equity
2012

2013

Share
Equity

2011

2012

Share

It is interpreted from the above table 3.3B that the issued capital in 2013 -2014 has
increased by 0.45. The no. of paid up shares has increased by 446,310 in 2013-2014 .
42

3.4 ACHIEVMENTS
1997-2000
Launched ‘CARE Loan Ratings’ for rating term loans
Ventured into Advisory business and bagged 13 assignments
Initially started rating for Debt Mutual Funds
Obtained registration with SEBI when rating agencies came under its purview

2001-2004
Founding member of Association of Credit Rating Agency in Asia (ACRAA)
Launched Corporate Governance and Value Creation Rating
Signed MOU with NSIC for empanelment as an approach rating agency for small scale
industries

2005-2008
Founding member of Association of Credit Rating Agency in Asia (ACRAA)
43

Launched Corporate Governance and Value Creation Rating
Signed MOU with NSIC for empanelment as an approach rating agency for small scale
industries

2009-2012
Founding member of Association of Credit Rating Agency in Asia (ACRAA)
Launched Corporate Governance and Value Creation Rating
Signed MOU with NSIC for empanelment as an approach rating agency for small scale
industries

2013-ONWARDS
Obtained a license for doing business in Mauritius and will operate under the banner
of CARE Ratings (Africa) Private Limited (CRAF). CRAF was launched on 3rd August
2015.
Empanelled by Government of Karnataka for rating of Tourism sector in the state
Rated the first Green Infrastructure bond
Launched rating of Real Estate Investment Trusts (REITs)
Developed and launched a Debt Quality Index called CDQI. The Index denotes the
quality of debt in the country that can be interpreted over time and juxtaposed with
other developments in the financial sector.
In terms of rating business penetration attained highest share in BS top 1000 companies
(45%), ET top 500 companies (54%) and FE top 500 companies (52%).

44

Partnered with four other domestic credit rating agencies in Brazil, Malaysia, Portugal
and South Africa, to form an international credit rating agency called ARC
Ratings.ARC Ratings was launched on January 2014 in London
Assigned rating to India’s first Alternate Investment Fund (AIF)
Rated India’s First Securitization Transaction backed by Mortgage Guarantee

Chapter: 4
SWOT Analysis, Suggestions and Conclusion
4.1 SWOT Analysis
4.1(A) Strengths




Strong Management
Customer Loyaltyx
Brand Name

Strong management
Strong management can help reach its potential “Strong Management "has a significant
impact, so an analyst should put more weight into it.
Customer Loyalty
When given a choice, customers are loyal to CARE Instead of targeting all customers
CARE, only needs to target new customers in order to grow their business.
Brand Name
45

A strong brand name is a major strength of CARE. This gives CARE the ability to
charge higher prices for their products because consumers place additional value in the
brand…

4.1 ( b)Opportunities




Emerging Markets
New Markets
New Products

Emerging Markets
Emerging markets are fast growing regions of the world that enable CARE to quickly
expand.

New Markets
New markets allow CARE to expand their business and diversify their portfolio of
products and services.

New Products
New products can help CARE to expand their business and diversity their customer
base.

4.1(c) Weakness


Tax structure
Tax structure
Tax structure has been increasing continuously from 2007 to 2014 (59.35 in

2007,
46

131.10 in 2010, 265.48 in 2011, 372.68 ion 2012 and 429.51 in 2015).

4.1(d)Threats



Bad Economy
Intense Competition

Bad Economy
A bad economy can hurt CARE’s business by decreasing the number of potential
customers

Intense Competition
Intense completion can lower CARE’s profits, because competitors can entice
consumers away with superior products.

47

4.2 CONCLUSION
Credit analysis is the method by which one calculates the creditworthiness of a business

or organization. In other words, It is the evaluation of the ability of a company to honor
its financial obligations. The audited financial statements of a large company might be
analyzed when it issues or has issued bonds. Or, a bank may analyze the financial
statements of a small business before making or renewing a commercial loan. The term
refers to either case, whether the business is large or small.
The objective of credit analysis is to look at both the borrower and the lending facility
being proposed and to assign a risk rating. The risk rating is derived by estimating the
probability of default by the borrower at a given confidence level over the life of the
facility, and by estimating the amount of loss that the lender would suffer in the event of
default.
Credit analysis involves a wide variety of financial analysis techniques,
including ratio and trend analysis as well as the creation of projections and a detailed
analysis of cash flows. Credit analysis also includes an examination of collateral and
other sources of repayment as well as credit history and management ability. Analysts
attempt to predict the probability that a borrower will default on its debts, and also the
severity of losses in the event of default. Credit spreads—the difference in interest rates
between theoretically "risk-free" investments such as U.S. treasuries or LIBOR and
48

investments that carry some risk of default—reflect credit analysis by financial market
participants.
Before approving a commercial loan, a bank will look at all of these factors with the
primary emphasis being the cash flow of the borrower. A typical measurement of
repayment ability is the debt service coverage ratio. A credit analyst at a bank will
measure the cash generated by a business (before interest expense and
excluding depreciation and any other non-cash or extraordinary expenses). The debt
service coverage ratio divides this cash flow amount by the debt service (both principal
and interest payments on all loans) that will be required to be met. Commercial bankers
like to see debt service coverage of at least 120 percent. In other words, the debt service
coverage ratio should be 1.2 or higher to show that an extra cushion exists and that the
business can afford its debt requirements.

49

4.3 SUGGESTION
The weakest point discovered in care is the heavy tax imposed by it on their employees.
Tax structure has been increasing continuously from 2007 to 2014 (59.35 in 2007,
131.10 in 2010, 265.48 in 2011, 372.68 ion 2012 and 429.51 in 2015). As CARE
Ratings provides the entire spectrum of credit rating that helps the corporates to raise
capital for their various requirements and assists the investors to form an informed
investment decision based on the credit risk and their own risk-return expectations

50

LEARNING FROM THE REPORT
Firstly, I had learnt a lot through this report like how to prepare a report. How to
analyze the things like various operational, financial, and marketing aspects of ‘Credit
analysis research ltd.’
Secondly, I also came to know about ‘Credit Resarch ltd’ and the sector from
which it belongs. Its full company profile, its history, its features, its products and
services etc.
Before starting this report, I had never known about how to prepare it. But now,
after preparing it, I understood a lot of things like necessary concepts and aspects of
preparing a report and I also understood how to analyze a report.

51

At last, I want to thank Mr. J.K Chandel(prof.) IMS, KUK, for giving me the
opportunity to prepare report. This report provided me a complete study about Credit
analysis research ltd.

REFERNCES




http://www.careratings.com
http://www.mindtools.com
http://www.careratings.com/market-segments/corporates-governancerating.aspx

52

ANNEXURE

Table3.3(A)
Profit loss account(2010-14)
(Rs crore)

Mar ' 14

Mar ' 13

Mar ' 12

Mar ' 11

Mar ' 10

Income
Operating income

229.46

198.77

178.08

170.87

136.20

Material consumed

-

-

-

-

-

Manufacturing expenses

-

1.05

-

-

-

60.60

50.65

42.24

30.51

21.57

Expenses

Personnel expenses

53

Mar ' 14
Selling expenses

Mar ' 13

Mar ' 12

Mar ' 11

Mar ' 10

-

-

-

-

-

22.23

13.18

12.65

9.90

6.79

-

-

-

-

-

82.83

64.88

54.89

40.41

28.36

146.64

133.88

123.18

130.46

107.84

35.66

28.63

28.21

5.76

15.82

182.30

162.51

151.39

136.22

123.66

-

-

-

-

-

2.89

2.63

1.88

2.21

1.40

-

-

-

-

-

179.40

159.88

149.51

134.01

122.26

50.73

46.55

41.97

43.15

36.57

128.67

113.33

107.54

90.86

85.69

Non recurring items

-

-

-

-

-

Other non cash adjustments

-

-

-

0.09

-

Reported net profit

128.67

113.33

107.54

90.96

85.69

Earnigs before appropriation

401.30

354.17

286.03

205.67

85.69

67.18

57.11

23.92

5.18

-

Adminstrative expenses
Expenses capitalized
Cost of sales
Operating profit
Other recurring income
Adjusted PBDIT
Financial expenses
Depreciation
Other write offs
Adjusted PBT
Tax charges
Adjusted PAT

Equity dividend

54

Mar ' 14

Preference dividend
Dividend tax
Retained earnings

Mar ' 13

Mar ' 12

Mar ' 11

Mar ' 10

-

-

-

-

-

13.75

9.44

4.63

1.00

-

320.37

287.62

257.47

199.49

85.69

Table 3.3(B)
Balnace sheet(2010-2014)
(Rs crore)
Mar '

Mar '

Mar '

Mar '

Mar '

14

13

12

11

10

Sources of funds
Owner's fund
Equity share capital

29.00

28.55

28.55

9.52

9.52

Share application money

-

-

-

-

-

Preference share capital

-

-

-

-

-

455.32

395.34

348.56

293.24

203.98

Reserves & surplus
Loan funds

55

Mar '

Mar '

Mar '

Mar '

Mar '

14

13

12

11

10

Secured loans

-

-

-

-

-

Unsecured loans

-

-

-

-

-

484.31

423.90

377.11

302.75

213.50

61.26

58.88

54.36

46.50

27.82

-

-

-

-

-

7.72

6.02

4.44

-

51.50

51.16

48.34

42.05

27.82

-

0.04

-

-

-

467.70

390.06

274.88

254.09

186.03

Current assets, loans & advances

58.95

75.83

104.94

35.78

30.48

Less : current liabilities & provisions

93.84

93.19

51.05

29.17

30.84

-34.89

-17.35

53.89

6.61

-0.36

-

-

-

-

-

484.31

423.90

377.11

302.75

213.50

Total
Uses of funds
Fixed assets
Gross block
Less : revaluation reserve
Less : accumulated depreciation

9.76

Net block
Capital work-in-progress
Investments
Net current assets

Total net current assets
Miscellaneous expenses not written
Total

56

Mar '

Mar '

Mar '

Mar '

Mar '

14

13

12

11

10

Notes:
Book value of unquoted investments

117.39

111.52

173.27

227.96

61.39

Market value of quoted investments

358.40

292.18

106.37

26.29

126.93

1.14

2.29

2.66

1.26

-

289.99

285.53

285.53

95.18

95.18

Contingent liabilities
Number of equity sharesoutstanding
(Lacs)

57

58

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