| Infomerics Ratings

SURVEILLANCE (ARCHIVE)

Surveillance

Infomerics Ratings, during the lifetime of securities/bank loans/bank facilities rated by it shall continuously monitor the rating of such securities/bank loans/bank facilities. Accordingly, all accepted ratings shall be reviewed on an ongoing basis till the maturity of the security/bank loan/bank facility. Formal on-site surveillance of accepted ratings shall be carried out after publication of annual audited/ provisional results unless regulatory requirements/specific events stipulate it to be more frequently. The rating team monitors the performance of the issuer and the economic environment in which it operates to analyze changes in the rating fundamentals, if any, based on which rating has been assigned. It shall be ensured that the time gap between two press releases of the rated entity would not exceed 12 months in the case of NCDs and 15 months in all other cases.

2. Surveillance Mechanism

The surveillance process requires the analysts team/analyst to maintain periodic contact with the issuer to collect the required information. Steps in the rating surveillance process include:

communicating with the entity at regular intervals to understand developments and trends in performance to help analysts team/analyst compare the performance of the entity against their own and the entity’s expectations/projections, as well as against peers;
checking the status of probable developments that may affect the entity’s credit quality (such as an initial public offering, follow-up public offering, raising fresh debt etc.), exploring the probability of such developments occurring in the near future and assessing the management’s perspective in respect thereof;
discussing financial performance with the entity on the declaration of interim financial results; and,
understanding strategic plans or new initiatives that could have rating implications.

Ratings are subject to change at any point in time, based on changes in the business profile or financial profile of the issuer, or the prospects for the industry in which the issuer operates.

2.1. Monthly Declaration from Client

Infomerics Ratings shall seek to obtain, by the first of every month, a ‘No Default’ declaration (in the standard format) from all clients (including INC cases) or a declaration giving details of any delay/default in debt servicing. Such declaration shall be obtained latest by the 10th day of each month. List of clients who have not furnished the declaration by 10th of every month shall be published on our website.

The rating decision or a rating revision on account of receipt of an information of default/delay from the debenture trustee/bankers of the rated entity shall be disseminated through press release within two working days from the date of receipt of such information.

2.2. Tracking of Repayment Schedules

Analyst/analyst team track the repayment of borrowing/principal or payment of interest on the rated instruments/facilities. Default shall be recognized as per Default Recognition Policy of Infomerics Ratings, listed on its website.

https://infomerics.com/pdf/Default_Rrecognition_Policy.pdf

In case no confirmation of servicing of debt obligation by the issuer is received by Infomerics from the debenture trustee within 1 day post the due date, Infomerics shall immediately follow up with the issuer for confirmation of payment. In case no response is received from the issuer within 2 days of such communication, Infomerics shall issue a press release and disseminate the same on its website and to all stock exchanges where the security is listed. In such cases, Infomerics shall also make a reference to SEBI regarding such suppression of information by the issuer/ non-cooperation of Issuer with us.

2.3. Quarterly Reviews

Quarterly reviews are quick reviews conducted internally by Infomerics Ratings and rating(s) warranting special attention shall be taken up for detailed review by the Rating Committee.

2.4. Annual Review

The annual surveillance exercise is a detailed review of the client’s performance since the previous rating involving management meeting and preparation of detailed review report. Reviews are considered by the rating committees as per the delegation of powers. The annual surveillance exercise shall be carried out after publication of audited/ provisional annual financial statements and shall be completed within the timelines mentioned earlier. In case of any delay in conducting the annual review, Infomerics Ratings shall promptly disclose on its websites the details of all such ratings mentioning therein the name of the rated entity, nature/type of debt instrument/facility, size, date of last review, reasons of delay and the same shall be hyperlinked to the last press release.

Similar to the initial rating, Infomerics Ratings will issue a rating letter and press release for surveillance of ratings. The dissemination through press release shall be made within five working days from the date of the Rating Committee meeting.

2.5. Delay in Periodic Review

This is applicable for rated instruments other than listed debt. In case PR is not published in 13 months from the last PR date, such case would fall under “Delay in Periodic Review” report which is published on the website.

Reason for the delay could be

Information has not been received from client
Part information is received, and balance sought by Infomerics is pending
Complete information received and rating is under process.

PR shall be published compulsorily within 60 days of the date of publishing the name in the above “delay in periodic review” report or 15 months from the previous PR date, whichever is earlier.

In case of listed debt

In case of listed debt, the PR shall be published compulsorily within 12 months of the date of the previous PR.

2.6. Special Review

Infomerics Ratings may initiate a special review of rating any time if the circumstances so warrant or on the happening of material events requiring a review.

3. Appeal Post-Surveillance

In case of surveillance of rating, the rated entity does not have the right not to accept the rating; however, a client may seek a review of the rating assigned based on surveillance. The same shall be considered as per Infomerics Policy on Appeal by Issuers.

https://www.infomerics.com/policies-and-procedures-details/policy-for-appeal-by-issuers

The press release of the rating decision based on such review shall be disseminated within five working days from the date of the Rating Committee meeting.

4. Non-cooperation by the issuer

In the event of non-cooperation by the rated entity (such as, not providing the information required for review/surveillance of rating, NDS (for more than 3 months) and non-payment of annual surveillance fee), Infomerics Rating shall carry out the review/surveillance exercise on the basis of best available information in public domain or otherwise as per the policy on ‘Issuer Not Cooperating’ approved by the Board and uploaded on our website. https://www.infomerics.com/policies-and-procedures-details/guidelines-on-what-constitute-noncooperation

In such cases of lack of cooperation by the issuer, if the rating is assigned based on the best available information, investor shall be advised of the fact that the rating is based on the best available information and the rating symbol shall accompany the suffix “ISSUER NOT COOPERATING”. The rating action in such cases shall be promptly disseminated through press release wherein the suffix to the rating symbol shall also be explained adequately in the press release. Such suffix shall be read as ‘Issuer did not cooperate; Based on best available information’.

5. Withdrawal of Rating

The rating already assigned and is existing in the public domain shall be withdrawn as per the “POLICY ON WITHDRAWAL OF RATING” of Infomerics Ratings, as per hyperlink to the website. https://www.infomerics.com/policies-and-procedures-details/policy-on-withdrawal-of-ratings

Updated on 21st November 2022

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Archive

Surveillance

Every credit rating agency shall, during the lifetime of securities/bank loans/bank facilities rated by it continuously monitor the rating of such securities/bank loans/bank facilities. Accordingly, all accepted ratings shall be reviewed by Infomerics on an ongoing basis till the maturity of the security/bank loan/bank facility. Formal on-site surveillance of accepted ratings shall be carried out after publication of annual audited/ provisional results unless regulatory requirements/specific events stipulate it to be more frequently. The Analysts Team/Analyst shall monitor the performance of the issuer and the economic environment in which it operates to ensure that there is no change in the rating fundamentals based on which rating has been assigned. It shall be ensured that the time gap between two press releases of rated entity would not exceed 12 months in case of NCDs and 15 months in all other cases.

2. Surveillance Mechanism

The surveillance process requires the Analysts Team/Analyst to maintain periodic contact with the issuer to collect the required information. Steps in the rating surveillance process include:

1. communicating with the entity at regular intervals to understand developments and trends in performance to help Analysts Team/Analyst compare the performance of the entity against their own and the entity’s expectations/projections, as well as against peers;
2. checking the status of probable developments that may affect the entity’s credit quality (such as an initial public offering, follow-up public offering, raising fresh debt etc.), exploring the probability of such developments occurring in the near future and assessing the management’s perspective in respect thereof;
3. discussing financial performance with the entity on the declaration of interim financial results; and,
4. understanding strategic plans or new initiatives that could have rating implications.

Surveillance also enables analysts to stay abreast of current developments, to discuss potential problem areas, be apprised of any changes in the rated entity’s plans, and to distinguish between realistic and over-optimistic management expectations. Ratings are subject to change at any point in time, based on changes in the business profile or financial profile of the issuer, or the prospects for the industry in which the issuer operates.

2.1. Monthly Declaration from client

In case of any delay/default, the Analysts Team/Analyst should immediately conduct a review and place before the ERC/IRC for a rating decision, if warranted. Such a rating decision or a rating revision on account of receipt of an information of default/delay from the Debenture Trustee/Bankers of the rated entity shall be disseminated through Press Release within the two working days from the date of receipt of such information.

2.2. Tracking of Repayment Schedules

Analyst/Analyst Team should take utmost care in tracking the repayment of borrowing/principal or payment of interest on the rated instruments/facilities. The Default shall be recognized as per Default Recognition Policy of Infomerics Ratings, as per policy available on website.

https://infomerics.com/pdf/Default_Rrecognition_Policy.pdf

In case no confirmation of servicing of debt obligation by the Issuer is received by Infomerics from the Debenture Trustee within 1 day post the due date, Infomerics shall immediately follow up with the Issuer for confirmation of payment. In case no response is received from the Issuer within 2 days of such communication, Infomerics shall issue a Press Release and disseminate the same on its website and to all stock exchanges where the security is listed. In such cases, Infomerics shall also make a reference to SEBI regarding such suppression of information by the issuer/ non-cooperation of Issuer with us.

2.3. Quarterly Reviews

Quarterly reviews are quick reviews conducted internally by Infomerics Ratings and wherever rating(s) warranting special attention shall be taken for detailed review and taken up at the ERC meeting/IRC meeting.

The Analyst shall send a formal communication to all issuers requesting for providing details of quarterly results. After receipt of the information, the Analyst shall verify and analyse the data and seek additional information, if required to monitor the rating.

Wherever information as above has been obtained from clients, Quarterly Review Note (QRN) shall be prepared by the rating team and shall cover the following areas:

Financial results of the company for the quarter.
Any major expansion plans or execution of new projects.
Any significant changes in policies, plans or operations of the company.
Any significant change in the industry front.
Change in ratings of other CRAs if any
The debt servicing history during the quarter.

Where such results are not available (mainly in case of unlisted companies), Analysts Team/Analysts shall undertake performance review, on a best effort basis, through dialogue with CFO or other responsible officer of the company and the list of such companies shall be compiled and reviewed by CRO. In such cases, analysts shall seek information from the company in writing (email/letter).

2.4. Annual Review

Annual surveillance exercise is a detailed review of the client’s performance since the previous rating involving management meeting and preparation of detailed review report. Reviews are considered by the ERC/IRC as per the delegation of powers. The annual surveillance exercise shall be carried out after publication of audited/ provisional annual financial statements and shall be completed within a maximum period of 15 months from the date of initial rating or last review. In case of any delay in conducting the annual review, Infomerics Ratings shall promptly disclose on its websites the details of all such ratings mentioning therein the name of the rated entity, nature/type of debt instrument/facility, size, date of last review, reasons of delay and the same shall hyperlinked to the last Press Release.

Annual surveillance of the rating of listed NCDs shall be completed in such a manner that the press release is published within a period of 12 months from the date of the PR of initial rating or last review.

The broad outline of these reviews shall involve:

Analysing the financial performance of the company in the last financial year vis-à-vis the earlier financial year and projected performance;
Tracing the effects of various developments in the business.
Assessing any concern on governance; and,
Analysing the impact of any change in management policy or vision.

Similar to the initial rating, Infomerics Ratings will issue a Rating Letter and Press Release for surveillance of ratings. The dissemination through Press Release shall be made within five working days from the date of ERC/IRC meeting.

2.5. Delay in Periodic Review

Reason for the delay could be

Information has not been received from client
Part information is received, and balance sought by Infomerics is pending
Complete information received and rating is under process.

Process followed:

Suppose T is the date at which the 13 months from the last PR gets over. By T-30, communication is sent to client informing him that Infomerics shall disclose on its website that the review is delayed along with the reason for the delay.

On the 10th day of every month, Infomerics shall disclose on its website a list of such cases, under the section “Delay in Periodic Review”

Details included in this report are

Name of client
Instrument/facility
Size of issue
Date of last review (PR date) with hyperlink to previous PR
Reason for delay in periodic review (a/b/c above)

The above report would be prepared on a monthly basis.

In case of Listed debt

In case of listed debt, the PR shall be published compulsorily within 12 months of the date of the previous PR.

On completion of 11 months of the previous PR, the analyst team shall send follow up mail to the client to expedite submission of information so that review gets completed in time. In case no information is received on completion of 11.1/2 months, the issue is escalated to CRO for necessary follow up with the client.

2.6. Special Review

Infomerics Ratings may initiate a special review of rating any time if the circumstances so warrant or on the happening of material events requiring a review. The material events include the following:

Announcement of Quarterly/ Half-yearly/ Annual results
Merger/ Demerger/ Amalgamation/ Acquisition
Corporate debt restructuring, reference to BIFR and winding-up petition or reference to IBC filed by any party.
Significant decline in share prices of the issuer
Significant increase in debt level or cost of debt of the issuer company
Losses, sharp revenue de-growth etc. based on publicly disclosed financial statements, which are not in line with Infomerics’ earlier estimates
Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals.
Disruption/ commencement/ postponement of operations of any unit or division of the listed entity.
Any attachment or prohibitory orders against the Issuer
Any rating action taken by an International Rating Agency with respect to rating assigned to the Issuer/ Instruments issued by the Issuer.
Any rating action by domestic CRA such that the rating falls below rating outstanding of Infomerics.

Delegation of powers with respect to each of the above events is given below

Particulars	IG/ NIG	Authority authorized to review
Particulars	IG/ NIG	CRO	IRCM	ERCM
Financial Results	IG		Annual 10 – 20% under achievement in PAT or TOI or GCA compared to projections Quarterly Q-o-Q decline of less than 20% in PAT or TOI or GCA	Annual >20% adverse variation or loss for the year Quarterly Q-o-Q decline of 20% or more in PAT or TOI or GCA
Financial Results	NIG		Annual >20% under achievement in PAT or TOI or GCA compared to projections Quarterly Q-o-Q decline of 20% or more in PAT or TOI or GCA	-
Merger/ Demerger/ Amalgamation/ Acquisition	IG	-	-	All cases
Merger/ Demerger/ Amalgamation/ Acquisition	NIG	-	All cases	-
Corporate debt restructuring, and winding-up petition or reference to IBC filed by any party.	IG	-	-	All cases
	NIG	-	All cases	-
Decline in share prices.	IG		Decline in share price by 20% over last traded price considered during last review	Decline in share price by 50% over last traded price considered during last review
Decline in share prices.	NIG	Decline in share price by 20% over last traded price considered during last review	Decline in share price by 50% over last traded price considered during last review
Significant increase in debt level	IG	-	Debt level higher than projected by 10-20%	Debt level higher than projected by over 20%
Significant increase in debt level	NIG	Debt level higher than projected by 10-20%	Debt level higher than projected by over 20%	-
Significant increase in cost of debt of the issuer	IG			Cost of debt higher than projected by 200 bps
Significant increase in cost of debt of the issuer	NIG		Cost of debt higher than projected by 200 bps
Variation in spread in bond yields	IG			Bond Spread more than 200 bps of market spread
Variation in spread in bond yields	NIG	-	-	-
Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals.			NIG - Licenses/ regulatory approvals so, granted, withdrawn, surrendered, cancelled or suspended pertains to a product/ service / unit which accounts for 25% of entity’s income.	IG - Licenses/ regulatory approvals so, granted, withdrawn, surrendered, cancelled or suspended pertains to a product/ service / unit which accounts for 25% of entity’s income.

Disruption/ commencement/ postponement of operations of any unit or division of the entity.			NIG – If such unit contributes to 25% of the rated entity’s turnover	IG – If such unit contributes to 25% of the rated entity’s turnover
Attachment or prohibitory orders against the Issuer			In NIG cases	IG cases
Any rating action taken by an International CRA with respect Issuer/ Instruments issued by the Issuer.			NIG cases wherever such instances occur	IG cases wherever such instances occur
Any rating action (including assigning rating) by domestic CRA such that the rating falls below rating outstanding of Infomerics.			NIG cases wherever such instances occur	IG cases wherever such instances occur

Note: Whenever IG or NIG is referred to, it corresponds to rating assigned by Infomerics

3. Appeal Post-Surveillance

The Press Release of the rating decision based on such review shall be disseminated within five working days from the date of rating committee meeting.

4. Non-cooperation by the issuer

In such cases of lack of cooperation by the issuer, if the rating is assigned based on the best available information, investor shall be advised of the fact that the rating is based on the best available information and the rating symbol shall accompany the suffix “ISSUER NOT COOPERATING”. The rating action in such cases shall be promptly disseminated through Press Release wherein the suffix to the rating symbol shall also be explained adequately in the Press Release. Such suffix shall be read as ‘Issuer did not cooperate; Based on best available information’.

5. Withdrawal of Rating

Surveillance Process (Version II) approved in the BM dated 01st February 2022.

SURVEILLANCE (Archive)

1.1 As per SEBI regulations, every credit rating agency shall, during the lifetime of securities rated by it continuously monitor the rating of such securities. Accordingly all accepted ratings shall be reviewed on an ongoing basis till the maturity of the instrument. Formal surveillance of accepted ratings/gradings shall be carried out at after publication of annual audited results, unless regulatory requirements stipulate it to be more frequently. The Analysts Team/Analyst shall monitor the performance of the issuer and the economic environment in which it operates to ensure that there is no change in the rating fundamentals based on which rating has been assigned.

SURVEILLANCE MECHANISM

1.2 The surveillance process requires the Analysts Team/Analyst to maintain periodic contact with the issuer to collect the required information. Steps in the rating surveillance process include:

• communicating with the entity at regular intervals to understand developments and trends in performance to help Analysts Team/Analyst compare company performance against their own and the company’s expectations, as well as against peers;
• checking the status of issues that may affect the entity’s credit quality (such as an initial public offering or follow-up public offering), exploring the probability of such issues arising in the near future and assessing the management’s perspective on such issues;
• discussing financial performance with the entity on the declaration of interim financial results; and,
• understanding strategic plans or new initiatives that could have rating implications.

1.3 Surveillance also enables analysts to stay abreast of current developments, to discuss potential problem areas, be apprised of any changes in the rated entity’s plans, and to distinguish between realistic and over-optimistic management expectations. Ratings are subject to change at any point in time, based on changes in the business profile or financial profile of the issuer, or the prospects for the industry in which the issuer operates.

REVIEW OF RATINGS

MONTHLY DECLARATION FROM CLIENT

1.4 Infomerics Ratings on the first day of each month shall obtain a ‘No Default’ declaration from clients or a declaration giving details of any delay/default in debt servicing. In case of any delay/default, the Analysts Team/Analyst should immediately conduct a review and place before the ERC/IRC for a rating decision, if warranted. Such a rating decision or a rating revision on account of receipt of an information of default/delay from the Debenture Trustee/Bankers of the rated entity shall be disseminated through Press Release within the two working days from the date of receipt of such information.

1.5 Analyst should take utmost care in tracking the repayment of borrowing/principal or payment of interest on the rated instruments/facilities. The Default shall be recognised as per Default Recognition Policy of Infomerics Ratings, as detailed in this Operation Manual.

QUARTERLY REVIEWS

1.6 Quarterly reviews are quick reviews conducted internally by Infomerics Ratings and wherever necessary cases warranting special attention shall be taken for detailed review and taken up at the ERC meeting/IRC meeting. Quarterly review notes prepared by the rating team shall cover the following areas:

• Financial results of the company for the quarter.
• Any major expansion plans or execution of new projects.
• Any significant changes in policies, plans or operations of the company.
• Any significant changes in the industry front.
• The debt servicing history during the quarter.

1.7 Quarterly review of ratings shall be triggered by the quarterly results published by the companies. Where such results are not available (mainly in case of unlisted companies), Analysts Team/Analysts shall undertake performance review through dialogue with CFO or other responsible officer of the company. The Analyst shall send a formal communication to all issuers requesting for providing details of quarterly results. After receipt of the information, the Analyst shall verify and analyse the data and seek additional information, if required to monitor the rating. The review report shall be finalised by the Chief Rating Officer.

ANNUAL REVIEW

1.8 Annual surveillance exercise is a detailed review of the client’s performance since the previous rating involving management meeting and preparation of detailed review report. Reviews are considered by the ERC/IRC as per the delegation of powers. The annual surveillance exercise shall be carried out after publication of audited annual financial statements and shall be completed within a maximum period of 15 months from the date of initial rating or last review. In case of any delay in conducting the annual review, Infomerics Ratings shall promptly disclose on its websites the details of all such ratings mentioning therein the name of the rated entity, nature/type of debt instrument/facility, size, date of last review, reasons of delay and the same shall hyperlinked to the last Press Release.

1.9 The broad outline of these reviews shall involve:

• Analysing the financial performance of the company in the last financial year vis-à-vis that of in the earlier financial year and projected performance;
• Tracing the effects of various developments in the business;
• Assessing any concern on governance; and,
• Analysing the impact of any change in management policy or vision.
3.10 Similar to the initial rating, Infomerics Ratings will issue a Rating Letter, Rating Rationale and Press Release for surveillance of ratings. The dissemination through Press Release shall be made within five working days from the date of ERC/IRC meeting.

SPECIAL REVIEW

3.11 Infomerics Ratings may initiate a special review of rating any time if the circumstances so warrant or on the happening of material events requiring a review, as specified by SEBI. However if specific events have happened which may warrant a revision in rating, Infomerics Ratings may place the rating under rating watch till the review is completed. Rating watch to indicate that an event has occurred or there is deviation from the expected trend that has increased the probability of rating change and additional information is necessary to take rating action. Such immediate reviews may be mostly event-driven and be performed as the need arises. The Press Release pertaining to such review shall be disseminated within seven working days from the date of occurrence of such event.

3.12 The requirement of ensuring periodic surveillance until the rating is withdrawn and the publication of surveillance reports signal to the market that the rating is current and accurate, and can be relied upon for investment/lending decisions.

APPEAL POST-SURVEILLANCE

3.13 In case of surveillance of rating, the rated entity does not have the right to not accept the rating; however, a client may seek a review of the rating assigned based on surveillance. The same shall be considered forthwith. The Press Release of the rating decision based on such review shall be disseminated within five working days from the date of ERC/IRC meeting.

NON-COOPERATION BY THE ISSUER

3.14 In the event of non-cooperation by the rated entity (such as, not providing the information required for review/surveillance of rating and non-payment of annual surveillance fee), Infomerics Rating shall carry out the review/surveillance exercise on the basis of best available information in public domain or otherwise.

3.15 In such cases of lack of co-operation by the issuer, if the rating has been assigned based on the best available information, investor shall be advised of the fact that the rating is based on the best available information and the rating symbol shall accompany the suffix “ISSUER NOT COOPERATING”. The rating action in such cases shall be promptly disseminated through Press Release wherein the suffix to the rating symbol shall also be explained adequately in the Press Release. Such suffix shall be read as ‘Issuer did not cooperate; Based on best available information’.

WITHDRAWAL OF RATING

3.16 The rating already assigned and is existing in the public domain shall be withdrawn as per the Policy on Withdrawal of Rating of Infomerics Ratings, as contained in this Operation Manual and uploaded in the website of the company.