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Credit Analysis & Research Ltd. (CARE Ratings) is a full service rating company that offers a
wide range of rating and grading services across sectors. CARE has an unparallel depth of
expertise. CARE Ratings methodologies are in line with the best international practices.

CARE Ratings has completed over 8488 rating assignments having aggregate value of about
Rs.26609 billion (as at Sep 2010), since its inception in April 1993. CARE is recognised by
Securities and Exchange Board of India (Sebi), Government of India (GoI) and Reserve Bank of
India (RBI) etc.

CARE was promoted by major Banks/FIs (financial institutions) in India. The three largest
shareholders of CARE are IDBI Bank, Canara Bank and State Bank of India. CARE, is set-up
with two divisions:

 
 

The ratings division of CARE has over a decade long experience in rating debt
instruments/Enterprise ratings covering the full spectrum of Universe comprising:

aY Industrial Companies
aY Service companies
aY Infrastructure companies
aY Banks
aY Financial Institutions (FIs)
aY -on-Bank Finance companies(-BFCs)
aY Dublic Sector Undertakings (DSUs)
aY State Government Undertakings
aY [unicipal Corporations
aY Structured Finance Transactions
aY Securitization Transactions
aY S[Es
aY SSI
aY [icro Finance Institutions

In addition to debt ratings CARE Ratings has experience in providing the following specialized
grading/rating services:

aY Corporate Governance ratings

aY ID grading
aY [utual Fund Credit quality Ratings
aY Insurance Claims Daying Ability Ratings
aY Issuer Ratings
aY Grading of Construction entities
aY Grading of [aritime training institutes
aY LDG/SK Ratings
CARE Ratings is well equipped to rate all types of debt instruments like Commercial Daper,
Fixed Deposit, Bonds, Debentures, Hybrid instruments, Structured bligations, Dreference
Shares, Loans, Asset Backed Securities(ABS), Residential [ortgage Backed securities(R[BS)
etc.

CARE Ratings has been recognized by statutory authorities and other agencies in India for rating
services. The authorities/agencies include: Securities and Exchange Board of India (Sebi),
Reserve Bank of India (RBI), Director General, Shipping and [inistry of Detroleum and -atural
Gas ([oD-G), Government of India (GoI), -ational Housing Bank (-HB), -ational Bank for
Agriculture and Rural development (-ABARD), -ational Small Scale Industries Commission
(-SIC). CARE Ratings has also been recognized by RBI as an Eligible Credit Rating Agency
(ECRA) for Basel II implementation in India.

CARE Ratings has significant presence in all sectors including Banks / FIs, Corporate, Dublic
finance. Coverage of CARE Ratings has extended to more than 2811 entities over the past
decade and is widely accepted by investors, issuers and other market participants. CARE Ratings
have evolved into a valuable tool for credit risk assessment for institutional and other investors,
and over the years CARE has increasingly become a preferred rating agency.

CAREµs 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. CARE
rates rupee denominated debt of Indian companies and Indian subsidiaries of multinational
companies. CARE ratings are not recommendations to buy/sell or hold any security.

 


The Research and Information division of CARE provides contemporary
research and information covering various industries and financial markets. Dublications include
Industry Research Reports with Updates, Debt [arket Review, Budget Analysis, other policy
impact analysis, and special commentaries on topical issues.

CARE Research offers both subscription based reports and also customised reports on request.
The division has an established network of primary and secondary sources, which enable the
analyst to form unbiased opinion on the industry segments. It has also developed different
methodologies for forecasting the future demand-supply situation in a particular industry.


 







aY CARE has over a decade of experience and track record of rating various types of debt
instruments covering varied sectors. CARE has all along built its rating methodologies in
congruence with international best practices in the sector. CARE constantly tracks
international developments in rating analytics and research and incorporates the latest
tools and techniques of analysis in its methodologies. As a founder member of ACRAA,
CARE is regularly in dialogue with international rating agencies to understand the latest
developments in the field of ratings. CARE analysts regularly attend international
training conferences on ratings / research to assimilate and incorporate the best practices
in our ratings.
 aY CARE ratings are followed by a large number of domestic and international investors.
This gives us an opportunity for dialogue with users of ratings and, based on their
feedback, we constantly strive towards analytical excellence.




 

CARE is a Board managed independent and professional company. CARE¶s Board consists of
professionals with experience in industry, capital markets and Government.

CARE analysts are pre-dominantly post-graduate professionals such as [BAs with engineering
background, finance professionals with engineering / economics background, chartered
accountants, economists and chartered financial analysts.

The business development team reaches out to the corporate world to explore new business
opportunities in the realm of rating.

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CARE Research & Information Services is an independent division of CARE. CARE Research
services a variety of business research needs with credible, high quality research and analysis on
various facets of the Indian Economy and Industries. It provides an insightful input on industry
performances by assessing trends and predicting their impact on the future.

The research division has a two pronged objective of providing an in-house support to the ratings
division as also high quality sectoral research to financial intermediaries, corporates, analysts,
policy makers etc, as an aid to their decision making process. CARE Research draws its
strengths from CARE¶s decade long experience and in-depth understanding of the Indian
economy/industries, use of rigorous analytical methods and its knowledge team. CARE Research
has an in-house team of qualified, experienced analysts. CARE Research is committed to provide
accurate, reliable research to its clients with consistent updates in timeframe.

The research division is growing steadfastly, capturing new avenues apart from providing
contemporary research and information covering various industries and Indian financial markets.

CARE Research has established a network of primary and secondary sources, which enable the
team of analysts to form unbiased opinions on industry segments. CARE Research has also
developed different methodologies for forecasting the future demand-supply situation in a
particular industry. These forecasts are deliberated with industry experts and then the
methodologies for the same get validated and finalised.

CARE Research offers both subscription-based reports as also customised reports on request by
customers. The reports by CARE Research provide insightful data and analysis on various
industry sectors and CARE¶s outlook on the same.







The rising level of volatility in complex markets with lots of opportunities to tap necessitates
thorough understanding and guidance provided by a well known research firm. To address such
needs CARE Research offers need-based solutions by completely checking the facts, market
scenario, past trends, etc to help you realise your futuristic goals and transform your businesses.
Customised Research involves business analysis and position in the market, financial analysis,
and future outlook etc. It helps the clients to make better credit / investment decisions







In depth analysis of business environment of industry, trends, future direction, coverage on

sectors in India, including updates at regular intervals for a year forward. A dedicated team of
sector specialists track various industries on daily basis.









SW T analysis of the industry alongwith three year forward analysis and free updates one year
forward. The industry research report incorporates demand/supply situation, price variations,
cost estimation, analysis on new and existing policies, business trends, etc.

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aY We are independent research company

aY We stress on facts
aY Trend Analysis
aY Extent of competition
aY Global competition
aY Key Dlayers
 aY Cyclicity/ Seasonality
aY Ecomonic Scenario
aY Latest Developments
aY Future Derspective
aY We trace five year track record for each industry
aY We meet the top people of that industry for inputs.
aY Information from primary and secondary sources is used
aY Government Rules & Dolicies adhering to that business are studied
aY [arket survey, wherever necessary is conducted






 


CARE Research is known as a leading provider of value research. Investors, bankers, analyst, etc
use CARE Research reports for in-depth understanding of present situation, issues etc to arrive at
opinion. The reports contain high quality data, trends, opinions and outlook. The services are
today subscribed to by a vast number of clients.

The updates provide quarterly /half-yearly review of issues/environment, updated information

about the significant changes that occurred during the period along with review of outlook. The
clients can talk to our analysts regarding any clarifications in the report purchased.



 

The rating process takes about three to four weeks, depending on the complexity of the
assignment and the flow of information from the client. Rating decisions are made by the Rating
Committee.
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aY The rating assigned is communicated to the client along with a detailed rationale.
aY The ratings accepted by the clients are published and then monitored on a continuous
basis over the life of the instrument.
aY CARE has a comprehensive in-house data base which facilitates surveillance of the
various industries and companies operating in these industries.
aY Each rating is reviewed formally at least once a year, when analysts meet the issuer's
management.
aY A review can also be triggered by a major development in the company or in the industry,
which may have a significant bearing on the credit-worthiness of the company.
aY As a part of the review exercise, actual financial performance is analysed in the light of
the estimates made earlier and deviations are examined.
aY CARE puts the rating under Credit Watch, when any event or deviation from the
expected trend has occurred or is expected and additional information is necessary to take
rating action.
aY The rating may be retained, upgraded or downgraded based on the changed prospects for
the issuer. A rating change is at the absolute discretion of CARE, without concurrence of
the client.

Rating Criteria/[ethodology
CARE undertakes rating exercise based on

aY information provided by the company

aY In-house database and data from other sources that CARE considers reliable. CARE does
not undertake unsolicited ratings.
aY The primary focus of the rating exercise is to assess future cash generation capability and
their adequacy to meet debt obligations in adverse conditions.
aY The analysis attempts to determine the long-term fundamentals and the probabilities of
change in these fundamentals, which could affect the credit-worthiness of the borrower.
aY The analytical framework of CARE's rating methodology is divided into two
interdependent segments. The first deals with the operational characteristics and the
second with the financial characteristics.
aY Besides quantitative factors, qualitative aspects like assessment of management
capabilities play a very important role in arriving at the rating for an instrument.
aY The relative importance of qualitative and quantitative components of the analysis vary
with the type of issuer.
aY Rating determination is a matter of experienced and holistic judgement, based on the
relevant quantitative and qualitative factors affecting the credit quality of the issuer.

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CARE defines default as any missed payment on its rated instrument. As an exception, however,
cases of missed payments attributable to technical reasons e.g. procedural delays caused by
government machinery etc. which are likely to be rectified within a short time, are not placed in
the default grade immediately. If, however, such delays are not rectified within a short time,
ratings are placed in the default grade.

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It is important to emphasise the limitations of credit ratings. They are not recommendations to
invest. They do not take into account many aspects which influence an investment decision.
They do not, for example, evaluate the reasonableness of the issue price, possibilities for capital
gains or take into account the liquidity in the secondary market. Ratings also do not take into
account the risk of prepayment by issuer. Although these are often related to the credit risk, the
rating essentially is an opinion on the relative quality of the credit risk.

Rating [ethodologies
[anufacturing Ratings Financial Sector Ratings
a [anufacturing Companies(General) a Banks
a Cement Companies a -on Banking Finance companies
a Shipping Companies a Housing Finance Companies
a Fertilizer Companies a ABS and [BS
a Desticide Companies a Fund Credit Quality Ratings
a Commercial Vehicle Industry a Capital Drotection riented Schemes
a Cotton Yarn Industry a [arket Linked -otes
a Steel Companies
Infrastructure Ratings thers / Sub-sovereign Ratings
a Drivate Dower Drojects a [unicipal Bonds
a Urban Infrastructure Drojects a State Governments
a Debt issues of Toll Road Drojects a S[E Rating
a Dort Drojects a Short-term Instruments
a Issuer Rating
a Recovery Rating
a rganized Retail Companies
a [obile Service Droviders
CARE¶s Rating Committee [embers1 include:

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 Instruments with this rating are considered to be of the best credit quality,
offering highest safety for timely servicing of debt obligations. Such
instruments carry minimal credit risk.
 Instruments with this rating are considered to offer high safety for timely
servicing of debt obligations. Such instruments carry very low credit risk.
 Instruments with this rating are considered to offer adequate safety for
timely servicing of debt obligations. Such instruments carry low credit
risk.
 ///Instruments with this rating are considered to offer moderate safety for
timely servicing of debt obligations. Such instruments carry moderate
credit risk.
 //Instruments with this rating are considered to offer inadequate safety for
timely servicing of debt obligations. Such instruments carry high credit
risk.
 /Instruments with this rating are considered to offer low safety for timely
servicing of debt obligations and carry very high credit risk. Such
Instruments are susceptible to default.
 Instruments with this rating are considered to be having very high
likelihood of default in the payment of interest and principal.
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Instruments with this rating would have adequate capacity for timely
payment of short-term debt obligations and carry higher credit risk as
compared to instruments rated higher.
2
Instruments with this rating would have moderate capacity for timely
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higher credit risk as compared to instruments rated higher.
3
Instruments with this rating would have inadequate capacity for timely
payment of short-term debt obligations and carry very high credit risk.
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C RD RATE DEBT RATI-G

An ICRA Rating is a symbolic indicator of ICRA's current opinion on the relative capability of
the corporate entity concerned to timely service debts and obligations, with reference to the
instrument Rated. The Rating is based on an objective analysis of the information and
clarifications obtained from the entity, as also other sources considered reliable by ICRA. The
independence and professional approach of ICRA ensure reliable, consistent and unbiased
Ratings. Ratings allow investors to factor credit risk in their investment decision. ICRA Rates
long-term, medium-term, and short-term debt instruments. ICRA offers its Credit Rating services
to a wide range of issuers including:

- [anufacturing companies
- Banks and financial institutions
- Infrastructure sector companies
- Service companies
- [unicipal and other local bodies
- State governments
- -on-banking finance companies
- Small and medium sector entities


  


ICRA's Rating process is initiated on receipt of a formal request (or mandate) from the
prospective issuer. A Rating team, which usually consists of two analysts with the expertise and
skills required to evaluate the business of the issuer, is involved with the Rating assignment. An
issuer is provided a list of information requirements and the broad framework for discussions.
These requirements are worked out on the basis of ICRA's understanding of the issuer's business,
and broadly cover all aspects that may have a bearing on the Rating. ICRA also draws on
secondary sources of information, including its own Research Division, while working on the
Rating assignment. The Rating involves assessment of a number of qualitative factors with a
view to estimating the future earnings of the issuer. This requires extensive interactions with the
issuer's management, specifically on subjects relating to plans, outlook, competitive position, and
funding policies.
In the case of manufacturing companies, plant visits are made to gain a better understanding of
the issuer's production process, make an assessment of the state of equipment and main facilities,
evaluate the quality of technical personnel, and form an opinion on the key variables that
influence the level, quality and cost of production. These visits also help in assessing the
progress of projects under implementation. After completing the analysis, a Rating Report is
prepared, which is then presented to the ICRA Rating Committee. A presentation on the issuer's
business and management is also made by the Rating Team. The Rating Committee is the final
authority for assigning Ratings. The assigned Rating, along with the key issues, is communicated
to the issuer's top management for acceptance. -on-accepted Ratings are not disclosed and
complete confidentiality is maintained on them unless such disclosure is required under any
laws/regulations.

If the issuer does not find the Rating acceptable, it has a right to appeal for a review. Such
reviews are usually taken up if the issuer provides certain fresh inputs. During a review, the
issuer's response is presented to the Rating Committee. If the inputs and/or fresh clarifications so
warrant, the Rating Committee would revise the initial Rating decision. As part of a mandatory
surveillance process, ICRA monitors all accepted Ratings over the tenure of the Rated
instruments. The Ratings are generally reviewed once every year, unless the circumstances of the
case warrant an earlier review. The Rating outstanding may be retained or revised (that is,
upgraded or downgraded) on surveillance.


 

ICRA considers all relevant factors that have a bearing on the future cash generation of the
issuer. These factors include: industry characteristics, competitive position of the issuer,
operational efficiency, management quality, commitment to new projects and other associate
companies, and funding policies of the issuer. A detailed analysis of the past financial statements
is made to assess performance under "real world" business dynamics. Estimates of future
earnings under various sensitivity scenarios are drawn up and evaluated against the claims and
obligations that require servicing over the tenure of the instrument being Rated. Drimarily, it is
the relative comfort level on the issuers' cash flows to service obligations that determines the
Rating.


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