CREDIT RATING


CREDIT RATING


Credit rating is a comment on the relative likelihood of default of a debt instrument in comparison to other rated instruments. In other words, a rating indicates the probability of default of the rated instrument and therefore provides a benchmark for measuring and pricing credit risk. A credit rating compresses an enormous amount of diverse information into a single rating symbol.

RATING SCALE AND DEFINITIONS

Infomerics assigns credit ratings under the following five categories:

Rating categoriesDefinition
Long TermThe term ‘long term instruments’ includes bonds, debentures, other debt securities, bank loans and other fund-based facilities with an original maturity of more than one year. Long term ratings are assigned on a 20 point scale from ‘IVR AAA’ to ‘IVR D’
Short termThe term ‘short term instruments’ refers to commercial paper, short term debentures, certificates of deposit, inter-corporate deposits, working capital borrowings, and other fund based and non-fund based facilities with an original maturity of one year or less. Short term ratings are assigned on a 9 point scale from ‘IVR A1’ to ‘IVR A4’ and ‘IVR D’ denoting default.
Structured finance ratingsInfomerics assigns ratings to long term and short term structured finance instruments by using a suffix ‘SO’. Instruments with an original maturity of more than one year are rated on long term scale whereas instruments with an original maturity of one year or less are rated on short term scale. The structured finance rating categories range from ‘IVR AAA (SO)’ to ‘IVR D (SO)’ on the long term scale and ‘IVR A1 SO’ to ‘IVR A4 (SO)’ on the short term rating scale
Fixed Deposit (FD)Infomerics assigns ratings to the FD programmes of corporates, banks and financial institutions with the prefix, ‘F’.
Issuer credit ratingsInfomerics assigns corporate credit ratings to issuers on a scale ranging from ‘IVR AAA (Is)’ to ‘IVR D (Is)’.




Rating ScaleDefinition
IVR AAAInstruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk
IVR AAInstruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
IVR AInstruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
IVR BBBInstruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
IVR BBInstruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations.
IVR BInstruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
IVR CInstruments with this rating are considered to have very high risk of default regarding timely servicing of financial obligations
IVR DInstruments with this rating are in default or are expected to be in default soon.


Rating ScaleDefinition
IVR A1Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk
IVR A2Instruments with this rating are considered to have strong degree of safety regarding timely payment of financial obligations. Such instruments carry low credit risk.
IVR A3Instruments with this rating are considered to have moderate degree of safety regarding timely payment of financial obligations. Such instruments carry higher credit risk as compared to instruments rated in the two higher categories.
IVR A4Instruments with this rating are considered to have minimal degree of safety regarding timely payment of financial obligations. Such instruments carry very high credit risk and are susceptible to default.
IVR DInstruments with this rating are in default or expected to be in default on maturity in servicing of debt obligations.


Rating ScaleDefinition
IVR AAA (Is)Issuers with this rating are considered to offer the highest degree of safety regarding timely servicing of financial obligations. Such issuers carry lowest credit risk.
IVR AA (Is)Issuers with this rating are considered to offer high degree of safety regarding timely servicing of financial obligations. Such issuers carry very low credit risk.
IVR A (Is)Issuers with this rating are considered to offer adequate degree of safety regarding timely servicing of financial obligations. Such issuers carry low credit risk.
IVR BBB (Is)Issuers with this rating are considered to offer moderate degree of safety regarding timely servicing of financial obligations. Such issuers carry moderate credit risk.
IVR BB (Is)Issuers with this rating are considered to offer moderate risk of default regarding timely servicing of financial obligations.
IVR B (Is)Issuers with this rating are considered to offer high risk of default regarding timely servicing of financial obligations.
IVR C (Is)Issuers with this rating are considered to offer very high risk of default regarding timely servicing of financial obligations.
IVR D (Is)Issuers with this rating are in default or are expected to be in default soon in servicing of debt obligations.



INFOMERICS may apply ‘+’ (plus) or ‘-‘ (minus) signs for ratings assigned ‘IVR AA’ to ‘IVR C’ to indicate their relative standing within the category. INFOMERICS may apply ‘+’ (plus) sign for ratings from ‘IVR A1’ TO ‘IVR A4’ to reflect comparative standing within the category. INFOMERICS may differentiate a debt instrument rating by a prefix to the rating assigned. For Structured Obligations, INFOMERICS assigns suffix ‘(SO)’ to the rating symbol. The rating suffixed by the letters (SO), indicates presence of a credit enhancement which has been factored into the rating.