Credit Rating Agencies

  • What is the role of your agency and what are the various services you offer?

Credit Analysis & Research Ltd. (CARE) is a premier Indian rating agency providing full range of rating as well as grading services. It includes debt instrument ratings, bank loan ratings, issuer ratings, SSI MSE rating, SME rating. Securitization ratings etc. It also provides grading services like IPO grading, equi grade, shipyard grading, maritime training course grading etc.

Also CARE has a research division which provides Industry research, customized research, CARE industry risk matrix and MLD valuation etc.

  • What are the different types of clients you cater to? 

CARE caters to a whole range of clients which includes Industrial companies, Banks, Non-banking financial companies (NBFCs), Infrastructure entities, Microfinance institutions, Insurance companies, Mutual funds, State government entities, Urban local bodies, services organisations etc.

  • Who are your major clients?

CARE’s clientele includes large banks like State Bank of India, ICICI Bank, Punjab National Bank, HDFC Bank, Axis Bank etc. It also includes large corporate entities like Reliance Industries Ltd., Grasim Industries Ltd., Tata Motors Ltd., Tata Steel Ltd., Aditya Birla Nuvo Ltd. etc.

  • What are the various factors considered by you while assigning credit ratings for issuers of debt obligations/instruments?

CARE has well laid down criteria for rating borrowings of companies from various industries. These criteria differ from industry to industry and are available in detail on www.careratings.com

  • How do you find the growth & investment in the current Indian textile industry?

While the growth of Indian Textile Industry has remained stable during last two years, incremental investments in new capacity by Indian Textile Industry have not been aggressive. The investment in pipeline is not uniform and it is distributed amongst some of the sectors of the industry. Whereas there is capacity addition happening in sectors like denim, continuous polymerization (CP) plants etc. some other sectors like spinning are witnessing modest investments.

Main reasons for overall slowdown in investment climate have been as follows:

  • Limited financial flexibility available with the textile companies, with leveraged balance sheets
  • High interest rates
  • Heightened Volatility in commodity prices like cotton, cotton yarn, crude oil
  • Increased power and fuel costs, with power shortages in some of the states
  • Uncertainty related to Technology Upgradation Fund Scheme continuation

After robust investment in FY11, spinning sector has witnessed slowdown in investment flow in the next two years. At the same time, denim sector has seen continued growth in investment, which is likely to result in oversupply situation in the segment. Polyester chain has witnessed investments in CP plants, with many players implementing the same.

Union Budget 2013-14 has laid special emphasis on textile sector by way of extension of TUFS in the 12th Plan with an investment target of Rs.1,51,000 crore. Extension of TUFS coupled with RBI’s action on the monetary policy front will encourage investment in the sector which has not seen much of capacity addition in the past two years. Further, other budget proposals like ‘Zero Excise Duty Route’ for Readymade Garment (RMG) Industry, setting up of RMG park within Integrated Textile Parks and financial assistance for Handloom sector will also encourage investments in the sector.

With moderation in cotton prices and sustained demand for cotton yarn from China on the back of China’s concentration on production of value added products, the prospect of cotton spinning units is expected to improve. Exports of cotton yarn are expected to touch an all time high during FY13 with 758 million kg of cotton already exported during the period April-December 2012, which is almost 20 percent higher as compared to corresponding period a year ago.  However, in case of Indian apparel sector wherein the US and EU account for more than 70 per cent of exports, the concerns over the economic health of these regions would put pressure on the Indian apparel exporters in the medium term.

As far as ratings of companies in textile industry are concerned, there has been deterioration in credit profile of small to mid size companies having leveraged balance sheet and having limited presence in the textile value chain. However, credit profile of large, integrated players having presence across the textile value chain has remained largely stable.