Contact Your Financial Adviser Money Making MC
13
November 2018
 |
credit ratings (The Total Investment & Insurance Solutions)
Market
regulator Securities and Exchange Board of India (SEBI) has asked credit
ratings agencies (CRAs) to include a specific section on liquidity in their
reports to highlight the company financials.
In its
guidelines, SEBI said, "The press release shall include a specific section
on 'liquidity', which shall highlight parameters like liquid investments or
cash balances, access to unutilised credit lines, liquidity coverage ratio, and
adequacy of cash flows for servicing maturing debt obligation. CRAs shall also
disclose any linkage to external support for meeting near term maturing
obligations."
To help
investors understand underlying rating drivers better and make more informed
investment decisions, CRAs are asked to make specific disclosures in the
section on analytical approach. This includes, infusion of fund from parent
group or government for servicing debt and providing rationale in case
subsidiaries or group companies are consolidated for rating action.
For
reviewing rating criteria, SEBI has asked ratings agencies, to assess
inter-linkages of holding company and subsidiaries, holding company’s
liquidity, financial flexibility and support to the subsidiaries.
"While
carrying out 'monitoring of repayment schedules', CRAs shall analyse the
deterioration in the liquidity conditions of the issuer and also take into
account any asset-liability mismatch. While reviewing 'material events', CRAs
may treat sharp deviations in bond spreads of debt instruments vis-à-vis
relevant benchmark yield as a material event," SEBI said.
The
market regulator has also asked credit rating agencies to publish information
about historical average rating transition rates across various rating
categories, so that investors can understand the historical performance of the
ratings assigned by the CRAs.
"Accordingly,"
SEBI said, "CRAs shall publish their average one-year rating transition
rate over a five-year period, on their respective websites, which shall be
calculated as the weighted average of transitions for each rating category,
across all static pools in the five-year period."
CRAs are also required to furnish data on
sharp rating actions in investment grade rating category to stock exchanges and
depositories on half-yearly basis, within 15 days from the end of half year on
31st March and 30th September.The Total
Investment & Insurance Solutions
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