Whenever someone approaches us for a loan, we invariably assess their creditworthiness, keeping in mind whether they will be capable of repaying the borrowed amount within the agreed-upon timeframe.
Similarly, businesses can also be in a situation where they need external funding. In such instances, the entities extending the funds carefully examine the business’s capacity to meet its repayment commitments. This is precisely where credit rating agency’s ratings play a crucial role.
These agencies evaluate the probability of a company or government defaulting on the funds it has procured.
Now let’s understand credit rating, a credit rating is an evaluation of an entity’s ability to meet its financial obligations, particularly in terms of repaying borrowed funds. This assessment is expressed through a rating scale, typically consisting of a combination of letters and symbols, with each representing a particular credit risk level.
For example, the highest credit rating might be indicated by AAA, suggesting a very low risk of default, while lower ratings such as B or C might indicate a higher risk.
There are three listed players in India they are Crisil, ICRA, and Care rating.
CRISIL Limited is a globally diversified analytical company that offers ratings, research, risk, and policy advisory services. CRISIL is India’s leading rating agency and the foremost provider of high-end research to major banks and prominent corporations.
In the June quarter, the company’s revenue grew by 15%, increasing from Rs 669 crore to Rs 771 crore. The company achieved an operating profit of Rs 204 crore, accompanied by an operating profit margin of 26%. The net profit of the company stood at Rs 151 crore in Q1 FY24, compared to Rs 122 crore in the same quarter of the previous year.
The current market capitalisation of the company is Rs 27890 crore. The company’s shares closed at Rs 3815 each on the BSE and have delivered a 17% return in the last year.
ICRA Limited is a prominent financial and investment institution, commercial bank, and financial services company, that intends to create an independent and professional investment information and credit rating agency. The company is engaged in activities such as rating, management consulting, outsourcing, and information services.
In the June quarter, the company’s revenue grew by 11%, increasing from Rs 93 crore to Rs 103 crore. The company achieved an operating profit of Rs 35 crore, accompanied by an operating profit margin of 34%. The net profit of the company stood at Rs 41 crore in Q1 FY24, compared to Rs 22 crore in the same quarter of the previous year.
The current market capitalisation of the company is Rs 5772 crore. The company’s shares closed at Rs 5981 each on the BSE and has delivered a 56% return in the last year.
Care Ratings Limited is a prominent credit rating agency in India. The company offers diverse credit ratings that aid corporates in securing capital for their various needs and assists investors in making informed investment decisions based on credit risk and their own risk-return expectations.
In the June quarter, the company’s revenue grew by 22%, increasing from Rs 55 crore to Rs 66 crore. The company achieved an operating profit of Rs 18 crore, accompanied by an operating profit margin of 27%. The net profit of the company stood at Rs 26 crore in Q1 FY24, compared to Rs 21 crore in the same quarter of the previous year.
The current market capitalization of the company is Rs 2260 crore. The company’s shares closed at Rs 760 each on the BSE and has delivered a 57% return in the last year.
