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CARE undertakes a rating exercise based on information provided by the company, in-house databases and data from other sources that CARE considers reliable. CARE does not undertake unsolicited ratings. The primary focus of the rating exercise is to assess future cash generation capability of the company and its adequacy to meet debt obligations, even in adverse conditions. The analysis attempts to determine the long-term fundamentals and the probabilities of change in these fundamentals. The analytical framework of CARE's rating methodology is divided into two interdependent segments. The first deals with the operational characteristics and the second with the financial characteristics. Besides quantitative factors, qualitative aspects like assessment of management capabilities play a very important role in arriving at the rating for an instrument. The relative importance of qualitative and quantitative components of the analysis varies with the type of issuer. Rating determination is a matter of experienced and holistic judgment, based on the relevant quantitative and qualitative factors affecting the credit quality of the issuer. CARE has developed various general and sector specific Rating Methodologies which are available on our website. CARE reviews the Rating Criteria/Methodologies at least once in two financial years.

Definition of Default

CARE’s ratings are an opinion on the relative ability and willingness of an issuer to repay debt in a timely manner. CARE considers one day one rupee missed payment as default, whenever CARE is aware of such delay occurring in respect of any of CARE-rated debt instrument/facility. This definition is uniformly applied both for capital market instruments and bank facilities. Needless to say that while assigning rating to various types of bank facilities like Bill Discounting, Letter of Credit, Bank Guarantees, etc, CARE takes into account nuances of such facilities while determining missed payment which is consistently applied across all the issuers. For further details on treatment of default on bank facilities and other debt instruments, please click here

What Ratings Do Not Measure

It is important to emphasize the limitations of credit ratings. They are not recommendations to renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. They do not take into account many aspects which influence an investment or lending decision. They do not, for example, evaluate the reasonableness of the issue price, possibilities for capital gains or take into account the liquidity in the secondary market. Ratings also do not take into account the risk of prepayment by issuer. Ratings neither take into account investors' risk appetite nor the suitability of a particular instrument to a particular class of investors.

Rating Outlook

CARE's rating outlook is an opinion on the likely direction of movement of the rating in the medium term. A rating outlook shall be assigned to all credit rating assignments undertaken by CARE. For further details, please click here

CARE Ratings follows a transparent pricing mechanism for undertaking rating of various products. The fee structure is usually linked to the debt amount to be rated subject to a minimum fee.

The general nature of compensation arrangements that CARE Ratings has with rated entities is as under:

1. Before crystallising any rating agreement, the applicable fees are finalised with the entity to be rated.
2. The credit rating fees generally have two components: Initial Rating Fee (IRF) and Annual Surveillance Fee (ASF). The IRF is charged at the time of assignment of initial rating and the ASF is charged annually during the time that the rating remains outstanding.
3. While the fees are generally correlated to the debt to be rated, it also depends upon the industry type, debt facility break-up and complexity of the assignment.
4. Only the business development team is involved in the finalisation of the fees for the rating assignments and these officials are not part of the rating operations / rating committees.
5. Rating analysts are not part of the mandate origination and fee discussions. Thus, the fees charged for the rating assignments is not disclosed to the rating analysts.
6. The amount of rating fees is not a determinant of rating analysis or rating outcome by CARE Ratings in any manner whatsoever.
7. CARE Ratings reserves the right to charge the rating fees within the general nature of compensation arrangements with rated clients.
8. Fee schedules are available to issuers on request.
9. In certain cases, CARE Ratings may be appointed and compensated for the rating assignments by the investors or parties other than the issuer for the same.

GST is generally charged over and above the fees quoted for the rating assignment. Out-of-pocket expenses, if any, are generally charged to the client on actual basis. CARE Ratings will not be obliged to disclose details of such expenses.

Notes :

• Rating fees are computed separately on each instrument issued.
• Issuers are liable to pay rating fees, regardless of whether they accept CARE's rating or not. Full rating fee is to be paid upfront.
• CARE Ratings may consider alternative price structure for large volume borrowers, group structures and such other entities. CARE Ratings also reserves the right to have an alternative fee structure for bulk deals, PSU tenders, etc.
• CARE reserves the right to make changes in the fee structure at any time.
• CARE does not charge any fee to its clients or to the investors for disseminating / publishing ratings and Press Releases on its website www.careratings.com.

For fee structure of Rating products please contact CARE Head Office and Regional Offices.