CHAPTER 1

1.1 1.2 1.3 1.4 1.5 1.6 1.7 INTRODUCTION DEFINITION ORIGIN CONCEPT FUNCTIONS OF CREDIT RATING AGENCIES GUIDELINES FOR INDIAN RATING AGENCIES CREDIT RATING AGENCIES IN INDIA

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1.1 INTRODUCTION:
With the increasing market orientation of the Indian economy, investors value a systematic assessment of two types of risks, namely business risk arising out of the open economy and linkages between money, capital and foreign exchange markets and payments risk. With a view to protect small investors, who are the main target for unlisted corporate debt in the form of fixed deposits with companies, credit rating has been made mandatory.

India was perhaps the first amongst developing countries to set up a credit rating agency in 1988. The function of credit rating was institutionalized when RBI made it mandatory for the issue of Commercial Paper (CP) and subsequently by SEBI. When it made credit rating compulsory for certain categories of debentures and debt instruments. In June 1994, RBI made it mandatory for Non-Banking Financial Companies (NBFCs) to be rated. Credit rating is optional for Public Sector Undertakings (PSUs) bonds and privately placed nonconvertible debentures upto Rs. 50 million. Fixed deposits of manufacturing companies also come under the purview of optional credit rating.

1.2 DEFINITION:
A credit rating is a simple number which many lenders use to determine whether or not they will give a loan or line of credit to an individual. One's credit rating is impacted by a number of factors, some of which are controllable, others of which are not. A published ranking, based on detailed financial analysis by a credit bureau, of one's financial history, specifically as it relates to one's ability to meet debt obligations. The highest rating is usually AAA, and the lowest is D. Lenders use this information to decide whether to approve a loan.

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1.3 ORIGIN:
The following table clearly brings out the history and growth of credit rating agencies the world over chronologically:

Year

Credit rating Agencies

1841

Mercantile credit agency

1900

Moodys Investors Service

1916

Poor Publishing Company

1922

Standard Statistics Company

1924

Fitch

Publishing

Company

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1933

Dun &Bradstreet

1941

Standard & Poor

1966

McGraw Hill

1972

Canadian Bond Rating Service

1974

Thomson Bank watch

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1975

Japanese Bond Rating Institute

1975

McCarthy Crisanti & Maffei

1977

Dominician Bond Rating Service

1978

IBCA Limited

1980

Duff and Phelps Credit Rating Company

1987

CRISIL

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1991

ICRA

1994

CARE

1996

Duff and Phelps Credit Rating India (P) Limited

1.4 CONCEPT OF CREDIT RATING:

Credit rating is the rate of the rating company on the ability and finance position as well as history finance position to pay off the debts. Credit rating estimates all the finance position such as assets and liabilities, balance sheets, long terms assets and liabilities, debt-equity ratio and past of the company to pay the debts. With all these financial instruments, credit rating company gives the rating to the company of which it is rating and tell the investors as well as lenders about the financial position with its rating. Like normally credit rating gives company point 1 to 5 and 5 indicates that company has sound financially position whereas 1 indicates that company has poor financial position.

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1.5

FUNCTIONS OF CREDIT RATING AGENCIES IN INDIA:

The credit rating agencies in India offer varied services like mutual consulting services, which comprises of operation up gradation, risk management. They have special sections to carry on research and development work of the industries. They provide training to the employees and executives of the companies for better management. They examine the risk involved in a new project, chalk out plans to fight with the problem successfully and thus ameliorate the percentage of risk to a great extent. For this they carry on thorough research into the respective industry. The major industries currently graded by the credit rating agencies include agriculture, health care industry, infrastructure, and maritime industry.

1.6

GUDELINES FOR CREDIT RATING AGENCIES IN INDIA:

The Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 offers various guidelines with regard to the registration and functioning of the credit rating agencies in India: The registration procedure includes application for the establishment of a credit rating agency, matching the eligibility criteria and providing all the details required. They have to undergo the strict examination procedure with regard to the details furnished by them. They are required to prepare internal procedures, abidance with circulars. They are offered guidelines regarding the credit rating procedure, by the Act. The credit rating agencies are provided with compliance officers. They are required to show their accounting records.
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1.7

CREDIT RATING AGENCIES IN INDIA:

In India, at present, there are four credit Rating Agencies: Credit Rating and Information Services of India Limited (CRISIL). Investment Information and Credit Rating Agency of India Limited (ICRA). Credit Analysis and Research Limited (CARE). Fitch ratings.

1.7.1

CRISIL:
CRISIL was set up in the year 1987 in order to rate the firms and then entered into the field of assessment service for the banks. Highly skilled members manage the agency. Ms. Roopa Kudva who acts as the Managing Director and Chief Executive Officer of the company heads it. The company has set up large number of committees to look after dispersal of various services offered by the company for example, investor grievance committee, investment committee, rating committee, allotment committee, compensation committee and so on. The head office of the company is located at Mumbai and it has established offices outside India also.

1.7.2

ICRA:
ICRA was established in the year 1991 by the collaboration of financial institutions, investment companies, and banks. The company has formed the ICRA group together with its subsidiaries. The company is headed by Mr. Piyush G. Mankad and offers products like short-term debt schemes, Issue-specific long-term rating and offers fund based as well as non-fund based facilities to its clients.

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1.7.3

CARE:
CARE is a credit rating and information services company promoted by IDBI jointly with investment institutions, banks and finance companies. The company commenced its operations in October 1993. 'In January 1994, CARE commenced publication of CAREVIEW, a quarterly journal of CARE ratings. In addition to the rationale of all accepted ratings, CAREVIEW often carries special features of interest to issuers of debt instruments, investors and other market players.

1.7.4

Fitch Rating:
John Knowles Fitch founded the Fitch Publishing Company in 1913. Fitch published financial statistics for use in the investment industry via "The Fitch Stock and Bond Manual" and "The Fitch Bond Book." In 1924, Fitch introduced the AAA through D rating system that has become the basis for ratings throughout the industry. With plans to become a full-service global rating agency, in the late 1990s Fitch merged with IBCA of London, subsidiary of Fimalac, S.A., a French holding company. Fitch also acquired market competitors Thomson BankWatch and Duff & Phelps Credit Ratings Co.

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CHAPTER 2
WORLD OF CREDIT RATING

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2.1

Nature of Credit Rating

1. Rating is based on information: Any rating based entirely on published information has serious limitations and the success of a rating agency will depend, to a great extent, on its ability to access privileged information. Cooperation from the issuers as well as their willingness to share even confidential information are important pre-requisites. The rating agency must keep information of confidential nature possessed during the rating process, a secret.

2. Many factors affect rating: Rating does not come out of a predetermined mathematical formula. Final rating is given taking into account the quality of management, corporate strategy, economic outlook and international environment. To ensure consistency and reliability a number of qualified professionals are involved in the rating process. The Rating Committee, which assigns the final rating, consists of specialised financial and credit analysts. Rating agencies also ensure that the rating process is free from any possible clash of interest.

3. Rating by more than one agency: In the well developed capital markets, debt issues are, more often than not, rated by more than one agency. And it is only natural that ratings given by two or more agencies differ from each other e.g., a debt issue, may be rated AA+ by one agency and AA or AA- by another. It will indeed be unusual if one agency assigns a rating of AA while another gives a BBB . 4. Monitoring the already rated issues: A rating is an opinion given on the basis of information available at particular point of time. Many factors may affect the debt servicing capabilities of the issuer. It is, therefore, essential that rating agencies monitor all outstanding debt issues rated by them as part of their investor service. The rating agencies should put issues under close credit watch and upgrade or downgrade the ratings as per the circumstances after intensive interaction with the issuers.
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5. Publication of ratings: In India, ratings are undertaken only at the request of the issuers and only those ratings which are accepted by the issuers are published. Thus, once a rating is accepted it is published and subsequent changes emerging out of the monitoring by the agency will be published even if such changes are not found acceptable by the issuers.

2.2

Advantages of Credit Rating

Different benefits accrue from use of rated instruments to different class of investors or the company. These are explained as under:

A.

Benefits to Investors

1. Safety of investments. Credit rating gives an idea in advance to the investors about the degree of financial strength of the issuer company. Based on rating he decides about the investment. Highly rated issues gives an assurance to the investors of safety of Investments and minimizes his risk.

2. Recognition of risk and returns. Credit rating symbols indicate both the returns expected and the risk attached to a particular issue. It becomes easier for the investor to understand the worth of the issuer company just by looking at the symbol because the issue is backed by the financial strength of the company.

3.

Freedom of investment decisions. Investors need not seek advise from the stock brokers, merchant bankers or the portfolio managers before making investments. Investors today are free and independent to take investment decisions themselves. They base their decisions on rating symbols attached to a particular security. Each rating symbol assigned
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to a particular investment suggests the creditworthiness of the investment and indicates the degree of risk involved in it. 4. Wider choice of investments. As it is mandatory to rate debt obligations for every issuer company, at any particular time, wide range of credit rated instruments are available for making investment. Depending upon his own ability to bear risk, the investor can make choice of the securities in which investment is to be made.

5.

Dependable credibility of issuer. Absence of any link between the rater and rated firm ensures dependable credibility of issuer and attracts investors. As rating agency has no vested interest in issue to be rated, and has no business connections or links with the Board of Directors. In other words, it operates independent of the issuer company, the rating given by it is always accepted by the investors.

B.

Benefits of Rating to the Company

A company who has got its credit instrument or security rated is benefited as follows;

1.

Easy to raise resources. A company with highly rated instrument finds it easy to raise resources from the public. Even though investors in different sections of the society understand the degree of risk and uncertainty attached to a particular security but they still get attracted towards the highly rated instruments.

2. Reduced cost of borrowing. Investors always like to make investments in such instrument, which ensure safety and easy liquidity rather than high rate of return. A company can reduce the cost of borrowings by quoting lesser interest on those fixed deposits or debentures or bonds, which are highly rated.

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3.

Reduced cost of public issues. A company with highly rated instruments has to make least efforts in raising funds through public. It can reduce its expenditure on press and publicity. Rating facilitates best pricing and timing of issues.

4.

Rating builds up image. Companies with highly rated instrument enjoy better goodwill and corporate image in the eyes of customers, shareholders, investors and creditors. Customers feel confident of the quality of goods manufactured, shareholders are sure of high returns, investors feel secured of their investments and creditors are assured of timely payments of interest and principal.

5. Recognition to unknown companies. Credit rating provides recognition to relatively unknown companies going for public issues through wide investor base. While entering into market, investors rely more on the rating grades than on name recognition.

C. Benefits to Intermediaries
Stock brokers have to make less efforts in persuading their clients to select an investment proposal of making investment in highly rated instruments. Thus rating enables brokers and other financial intermediaries to save time, energy costs and manpower in convincing their clients.

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2.2

Disadvantages of Credit Rating

Credit rating suffers from the following limitations

1. Non-disclosure of significant information. Firm being rated may not provide significant or material information, which is likely to affect the investors decision as to investment, to the investigation team of the credit rating company. Thus any decisions taken in the absence of such significant information may put investors at a loss.

2. Static study. Rating is a static study of present and past historic data of the company at one particular point of time. Number of factors including economic, political, environment, and government policies have direct bearing on the working of a company. Any changes after the assignment of rating symbols may defeat the very purpose of risk indicativeness of rating.

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3. Rating is no certificate of soundness. Rating grades by the rating agencies are only an opinion about the capability of the company to meets its interest obligations. Rating symbols do not pinpoint towards quality of products or management or staff etc. In other words rating does not give a certificate of the complete soundness of the company. Users should form an independent view of the rating symbol.

4.

Rating may be biased. Personal bias of the investigating team might affect the quality of the rating. The companies having lower grade rating do not advertise or use the rating while raising funds from the public. In such a case the investors cannot get the true information about the risk involved in the instrument.

2.3 Credit Rating System-Growth Factors:

This section focuses on the ingredients essential for rating system to function effectively, and to serve the interests of all market participants and regulators. Capital Market Mechanism

Disclosure Requirements

Credibility and Independence

Growth Factors

Creation of Debt Market Fig. 2 (a)

Credit Education

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2.4

Global Credit Rating Agencies:

Name of the Agency Moodys Service

Home Country

Ownership

Principal Areas

Rating

Investors USA

Dun and Bradstreet

Full Service

Fitch Service Canadian

Investors USA

Independent

Full Service

Bond Canada

Independent

Full Service (Canada)

Rating Service

Japan Bond Rating Japan Institute

Japan Jorunal

Economic Full Service (Japan)

Japanese Rating Agency IBCA Ltd.

Credit Japan

Financial Institutions

Full Service (Japan)

United Kingdom

Independent

Financial Institutions

Duff

and

Phelps USA

Duff

and

phelps Full Service

Credit Rating

Corporation

Table 2.1

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2.5

Equtiy Grading:
The rating of equity issues of companies is known as Equity Grading. The need for

equity grading arises due to following reasons shown in the chart below:

Quality of Information

Wiser Choice

NEED

Lesser-Known Entrepreneurs Availability of international Rating Agencies

Lack of Benchmark

Fig. 2 (b)

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2.6

Flow Chart of CRISILs Rating Process

Borrower/Issuer

CRISIL
Assigns analytical team, conducts basic research Collection of Information

Request for a Rating

Documentation Preparation

Plan visit followed by Management meetings

Rating Committee assign rating Appeal Communication of rating to Issuers

Publication of rating

Annual Review

Fig. 2

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2.7
2.7.1

IPO Grading:
What is IPO grading?

It is a service aimed at facilitating the assessment of equity issues offered to public.such grading is assignd on a 5 point scale with a higher score indicating stronger fundamentals.

2.7.2

How is IPO grading different from an investment recommendation?

Expressed as buy, hold or sell and are based on a specific comparisionof its assessed fundamental factors. Expressed on a 5 point scale. Does not take cognizance of the price of security.

2.7.3

What is the requirement for IPO grading?

Role in investor protection. It is positioned as a service that provides an independent assessment would prove useful as an investment tool for investors.

2.7.4 How will IPO grading meet this requirement? It represents a relative assessment of the fundamentals. As a tool to make investment decision. Help investor. It is an additional investor information and investment guidance tool.

2.7.5 Who will carry out IPO grading? ICRA, being one of the four agencies registered with SEBI.
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2.7.6 Does SEBI have a role in the grading exercise? No, it does not play any role.

2.7.7

Is this IPO grading mandatory?

No, its optional.

2.7.8

How would the grading be indicated? Grades 5 4 3 2 1 Table 2.2 Particulars Strong fundamentals Above average fundamentals Average fundamentals Below fundamentals Poor fundamentals

2.7.9

For how long would the assigned grade be valid?

It would be one time assessment done at the time of IPO. The grade will not have any ongoing validity.

2.7.10

How can a company get its IPO graded?

Seek information for the grading from the company. On receipt of required information, have discussions with the companys management. Analytical report. Present the analysis. Communicate the grades.

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CHAPTER 3

LITERATURE REVIEW

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http://www.unibg.it/dati/bacheca/530/36104.pdf The authors thank officers of Securities and Exchange Board of India (SEBI), Vidhu Shekhar and Sunil Gawde (National Stock Exchange of India), Saurabh Vijayvergia, Abhishek Goel and Aseem Goel (DSP Merrill Lynch), Kaushal Shah and Prateek Diwan (Kotak Investment Banking), Arun Panicker (CRISIL), Prithvi Haldea (PRIME Database) and M.T. Raju (Indian Institute of Capital Markets) for their help with details of the institutional features of the Indian IPOs. Alok Pande wishes to acknowledge the financial support received from the University of Bergamo.

Literature Review (1)

While debt grading is a universally pervasive concept in the world of finance, equity grading is a relatively unknown concept which has not been tried anywhere, to the best of our knowledge. In this paper, we analyze the possibly first application of equity grading. A number of agencies in the private domain carry out equity ratings and provide buy, hold, sell recommendations to investors. However a Grade which just signifies the fundamentals of the firm with respect to the listed peers without any investment recommendation and is carried out compulsorily, by an independent agency, is a unique feature of the Indian regulatory set up. In India, the Initial Public Offerings (IPOs) coming to the market are compulsorily graded on a scale of 1 to 5 by regulation with 1 signifying poor fundamentals and 5 signifying very strong fundamentals. The rating agencies in India claim that the grade is not a recommendation on the price of the IPO or a buy, hold, sell recommendation. We try to find out whether this unique concept of grading adds any value to the issuers, investors and the regulators for book built IPOs. Historically, India was a regulated economy and there were no Institutional players in the capital markets. This was because the economy was tightly controlled by the Government and there was little incentive for the private sector to set up banks, mutual funds and other financial institutions. In such a scenario, the retail investors were the only source of funds for firms who wanted to go public. Gradually as the economy liberalized, and the Institutional players became important, there were some compulsory allocations to be made to Institutional players. However the retail investors continued to receive the attention of the regulators in terms of protection of their interests.

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Literature Review (2)

Certification-backed IPOs are those that are perceived to be of better quality due to the reputation of the certifier or the certification strategy in question. This certification can come in many forms, including a good track record of the company before the IPO, the use of a reputable underwriter, venture capital backing, group affiliation, institutional backing, and analysts following, among others. However, the previous theoretical literature suggests that the pricing of certification-backed IPOs can go either way. Chemmanur and Fulghieri (1999) suggest that investors incur a lower cost of information accumulation if an IPO has some backing that signals better quality. However, Allen and Faulhaber (1989), Grinblatt and Hwang (1989), Welch (1989), and Chemmanur (1993) suggest that underpricing should be greater for higher quality IPOs as they use underpricing as a signalling cost to drive low-quality issuers out of the market. Barry, Muscarella and Vetsuypens (1990) and Megginson and Weiss (1991) find that underpricing is lower for IPOs of firms with a strong venture capital participation than for those without such investors. These results are consistent with the assumption of cost of information accumulation borne by investors. In contradiction to these findings, Lee and Wahal (2004), based on a somewhat larger sample, over a longer time period, uses a more robust statistical methodology to find higher underpricing in venture-backed IPOs. These authors explain that the contradiction between the two conclusions could be the result of incentives received by venture capitalists from investment bankers to leave more money on the table. This may happen in exchange for preferential allocation by investment bankers involved in other underpriced IPOs to the venture capitalists. Loughran and Ritter (2002) also reach a similar conclusion. There is evidence, some of it mixed, regarding underwriter reputation and its effect on IPO performance. Beatty and Ritter (1986), Titman and Trueman (1986), Masksimovic and Unal (1993) and Cater, Dark and Singh (1998) find that the under-pricing of IPOs brought to the market by reputable underwriters is lower than those brought by non-reputable underwriters. The evidence holds both on a short term and a long-term basis. Rajan and Servaes (1997) find that, in the long run, IPOs have better stock performance when analysts predict low growth potential rather than high growth potential before the offering. Chemmanur and Paeglis (2005) test the certification hypothesis by using management quality as a proxy for certification. They find that good management quality is negatively related to the extent of underpricing.

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(3) Basudev Sen21 (1997) ( http://shodhganga.inflibnet.ac.in/bitstream/10603/274/9/09_chapter%203.pdf

as on 17th oct, 2011) disclosed the implications of risk management in the changed environment and

the factors constraining the speed of risk management technology up-gradation. He opined that the perception and management of risk is crucial for players and regulators in a market oriented economy. Investment managers have started upgrading their risk management practices and systems. They have strengthened the internal control systems including internal audit and they are increasingly using equity research of better quality. He observed that risk measurement and estimation problems constraint the speed of up-gradation. Also, inadequate availability of skills in using quantitative risk management models and lack of risk hedging investments for the domestic investors are major constraints. He concluded that with the beginning of derivative market, new instruments of risk hedging would become available.

(4) Avijit Banerjee28 (1998)( http://shodhganga.inflibnet.ac.in/bitstream/10603/274/9/09_chapter%203.pdf

as on 17th oct, 2011) reviewed Fundamental Analysis and Technical Analysis to analyse the worthiness

of the individual securities needed to be acquired for portfolio construction. The Fundamental Analysis aims to compare the Intrinsic Value (I..V) with the prevailing market price (M.P) and to take decisions whether to buy, sell or hold the investments. The fundamentals of the economy, industry and company determine the value of a security. If the 1.V is greater than the M.P., the stock is under priced and should be purchased. He observed that the Fundamental Analysis could never forecast the M.P. of a stock at any particular point of time. Technical Analysis removes this weakness. Technical Analysis detects the most appropriate time to buy or sell the stock. It aims to avoid the pitfalls of wrong timing in the investment decisions. He also stated that the modern portfolio literature suggests 'beta' value p as the most acceptable measure of risk of scrip. The securities having low P should be selected for constructing a portfolio in order to minimize the risks.

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(5) CRISIL Report on Risk Management42 (2000) (http://shodhganga.inflibnet.ac.in/bitstream/10603/274/9/09_chapter%203.pdf as on 17th oct, 2011)stated that the loss potential from market risk will increase in the absence of strong risk management tools. The banks which adopt a pro-active approach to upgrading risk management skills which are currently unsophisticated as compared to internationally best practices, would have a competitive edge in future. The report commented that in the increasingly deregulated and competitive environment, the risk management strategies of banks would hold the key to differentiation in their credit worthiness.

(6) Literature Review

Credit ratings reduce information asymmetry in the financial markets by disseminating important information about firmvalue to uninformed investors. Sufi (in press) shows that borrowers who obtain syndicated loan ratings by Moody's and Standard & Poor's gain access to the capital of less-informed investors, and they are able to raise more funds in debt financing. Consistent with the notion that credit ratings reduce information asymmetry between the lead arranger and participant lenders in the original syndication, Sufi (2007) finds that lead bank has to retain a larger share of the loan when the borrowing firms do not have credit ratings. In contrast, when the borrowers have credit ratings, the syndicate loans are dispersed among more loan participants. Faulkender and Petersen (2006) show that credit ratings reduce the credit constraints faced by public firms by enabling firms with ratings to raise more debt. Boot et al. (2006) provide a rationale for credit ratings and show in their model that credit ratings serve as a focal point in that all investors rationally base their investment and pricing decisions on the rating. The objective of this paper is to examine the effects of credit ratings on IPO pricing. We extend the work of Liu and Malatesta (2006) from the SEO to the IPO markets. Specifically,we investigate whether credit ratings can significantly lower the magnitude of IPO underpricing and price revision by reducing the value uncertainty about the issuing firm, as well as the information asymmetry among the players in the IPO markets.

A large volume of literature has shown the existence of IPO underpricing, starting from Logue (1973), Ibbotson (1975), Ritter(1984), among others. In general, the literature suggests that many companies leave substantial money on the table when they go public. The shares offered to investors are underpriced compared to the closing price on the first trading day. According to Ljungqvist (2007), the average IPO underpricing has been about 19% in the U.S. since the 1960s.3 3 http://people.usd.edu/~Hunter.An/papers/JCF_IPO.pdf
Ritter and Welch (2002) and Ljungqvist (2007) offer comprehensive reviews of the IPO literature.

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CHAPTER 4

RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
Research Methodology plays an important role in the process of marketing. Starting with market component of the total marketing talks, it helps the firm to acquire the better understanding of the consumers, the competition and the marketing environment. DATA SOURCE

Primary Data

In primary data the information is obtained from the original source by the researcher. Here, information needed is related to the Assignment of Ranking on IPO and Equity

Secondary Data

In secondary data the information is obtained from the other sources such as magazines, Newspapers, Journals, Internet, Literature etc. Here the various information is obtained from such sources so it is secondary data source. RESEARCH ON The research is conducted to know people preferences on Credit Rating and their importance. JUSTIFICATION FOR THE RESEARCH This study will helpful to know about the importance of Credit Rating and its assignment on IPO and Equity shares.
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RESEARCH DESIGN
Descriptive Studies: The descriptive research design has been used because it described the phenomena under the study and recommendations were specific under this study. Descriptive studies are undertaken in many circumstances. When the researcher is interested in knowing the characteristics of certain groups such as age, sex, occupation, income, attitude towards investments etc a descriptive study may be necessary. Sampling Design:

Research Approach: Survey Research Instrument: Questionnaire

Population: Ahmedabad city Sampling Procedure: Convenience based sampling Contact Method: Personal interview method Data Source: Primary data Sample Size: 40 sample of customer

Confidence Level: 95%

As per the calculation and taking help of sample size calculator the researchers had taken sample size of 40.
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CHAPTER 5

DATA ANALYSIS AND DATA INTERPRETATION

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(1) Based on Sex: Male or Female

25

20

15 Total

10

0 Male Female

5(a)

The research based on sex ratio and under which more preference is given to males as compared to females but it is worth to know that female investors are also increasing day by day.

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(2)Aware of the Credit Rating Aware

Aware
25 20 15 10 5 0 Yes No Aware

5 (b)

It is known that more people should be aware of the term Credit rating so that they can avail benefit from such services and increase the earnings to a certain extent by making proper search on it.

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(3) Credit Rating Agencies in India

Number
12% 45% One 43% More than one None

5 It can be concluded that people to the great extent are knowing about the Credit Rating agencies identity and from those who are knowing of such agencies are equipped with more than one agencies and for those knowing only one rating agency is CRISIL.

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(4) Rating of IPO

25 20 15 10 5 0 Yes No

Total

5(d)

People are availing rating of IPO while making investments in new issue but such people are not to a large extent hence more people should be make aware of such services so that one can secure its hard earned earnings.

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(5) Equity Grading Knowledge

Number
30 25 Axis Title 20 15 10 5 0 Number Yes 29 No 11

5 (e) From the research it can be known that most of the people are not knowing of about equity grading and it is surprised to know that even to those who are regular players of market are not knowing about equity grading on a large scale.

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CHAPTER 6

FINDINGS

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FINDINGS:
People are not aware about the term Credit Rating to a great
number.

Some people are not having any idea about the term credit rating
and those who are knowing it are not aware about the rating agencies operating in India.

Most of people used to take ratings into consideration only at the

time of IPOs while ratings on other instruments are avoided to a great extent.

People to a great extent are not aware about the equity grading
and it was surprising for the researchers that those who are regular investors are also not aware of the term Equity grading. Ratings are taken into consideration at the time of IPOs by the investors most of the time while equity used to get second preference compared to Preference shares and Debt instruments.

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Bibliography:

Literature review of credit rating on IPO

http://people.usd.edu/~Hunter.An/papers/JCF_IPO.pdf <Accessed as on 17th October, 2011>

DEFINITION
http://www.investorwords.com/1209/credit_rating.html#ixzz1b2fjdNuO <Accessed as on 18th October, 2011>

Fitch rating
http://www.investopedia.com/articles/bonds/09/history-credit-ratingagencies.asp#ixzz1b2yDeUvf <Accessed as on 18th October, 2011>

CARE
http://www.egyankosh.ac.in/bitstream/123456789/25902/1/Unit13.pdf <Accessed as on 18th October, 2011>

Concept
http://freeworking.hubpages.com/hub/ALL-ABOUT-CREDIT-RATING <Accessed as on 21st October, 2011>

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CRISIL, ICRA
http://business.mapsofindia.com/finance-commission/institutions/credit-rating-agencies.html <Accessed as on 23rd October, 2011>

Miscellaneous
http://www.unibg.it/dati/bacheca/530/36104.pdf http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2009milan/492.pdf http://shodhganga.inflibnet.ac.in/bitstream/10603/274/9/09_chapter%203.pdf

<Accessed as on 25th October, 2011>

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QUESSTIONNAIRE
(1) Name: _____________________________________________________

(2) Sex:

Male

Female

(3) Are you aware of the term Credit Rating? YES / NO

(4) How many Credit rating agencies is known by you? One More than One None

(5) Do you take into consideration ratings assigned by rating agencies? YES / NO

(6) During IPO do you look after the ratings assigned by agencies? YES / NO
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(7) Are you aware about Equity grading? YES / NO

(8) While making investments in different instruments give your preference that you take into consideration of ratings assigned by agencies? (Give preference from 1 to 4, where 1= Highest and 4= Least Important) IPO Debentures Preference shares Equity shares

(9) How do you rate the system of credit rating? (Select any one from following)

Excellent Very Good Good Fair Poor

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