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Wednesday, Aug 09, 2006

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Markets - Interview
Money & Banking - Credit Rating
Industry & Economy - SSI
Main thrust on rating: CARE

Nilanjan Dey

Kolkata , Aug. 8

Credit Analysis & Research Ltd (CARE)expects considerable business to come its way, thanks to continued activity in the debt market. "Ratings will continue to be our main thrust, while advisory and information services will grow at its own pace," Mr K. Sivaprakasam, MD, told Business Line. He also predicted a fairly stable upgrades/downgrades scenario in the coming months. Excerpts.

What are the main trends in credit ratings at the moment?

We expect various categories of issuers to remain active in the days ahead.

Wide ranges of companies are in a position to raise debt. This should translate into good scope for rating agencies like us. The corporate sector is generally doing well, adding critically to their toplines and bottomlines.

Many of them have lined up large projects. As for existing ratings, we do not expect a marked change in terms of sharp downgrades or upgrades.

How does CARE view equity gradings?

Gradings of IPOs is a service aimed at those who seek professional opinion on the issuers' fundamentals.

Investors, who are expected to read lengthy offer documents complete with disclosures and management perceptions of risks, will be able to get an independent observation.

Mind you, this will not be a reflection of price trends that will later be evident on the stock exchange.

And investor needs to realise this before they invest on the basis of the gradings assigned.

FDs are said to be coming back. Will rating history be repeated?

No, I don't see the financial services sector giving us too many FD rating mandates. NBFCs, for instance, are not expected to go back to their deposit-raising days.

Banks, however, will remain involved in terms of sustaining their deposit programmes. Banks, which have been looking at various innovative ways of shoring up their resources, are anyway throwing up a sizeable number of rating mandates.

The RBI's stance of interest rates, which is right now a topic of discussion, will be keenly watched.

Is CARE interested in tie-ups with other rating agencies ?

So far, we are the only rating agency that is completely owned by Indian promoters.

We have a strong set of shareholders, including IDBI and Canara Bank, and cannot take a view on this issue without their consent.

The same holds true if you ask us about the possibility of our going public or about changing our ownership structure.

What will drive revenue growth in the future?

Ratings will continue to be our core business; it will also prepare the foundations for incremental revenue growth.

CARE's other operations including advisory services, will be determined by the sort of mandates we secure from clients.

There is a need to avoid issues stemming from conflict of interest. The ratings market itself is expected to offer us diverse opportunities. We are keen to tap the SME segment, which is seen as a major growth area.

A few smaller but emerging areas - such as rating of claims-paying ability of insurance companies - are also set to assume greater importance.

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