The analytical method that ICRA follows for
rating short-term instruments such as Commercial
Paper is almost similar to the one it uses to assign
long-term credit ratings. The main distinction
between the two is that ICRA’s rating methodology
for Commercial Paper programmes focuses primarily on
evaluating the short-term liquidity position of the
issuer, which in turn is determined by the business
and financial risks that the issuer is exposed to.
Although ICRA ratings are specific to the
instruments rated, the short-term ratings in general
have a linkage with the assigned or implicit
long-term ratings of the issuers concerned.
Corporate Rating Methodology
The basic objective of credit rating is to
provide an opinion on the relative credit risk
associated with the instrument being rated. The
process, in a nutshell, involves estimating the
issuer’s capacity to generate cash from operations
and assessing the adequacy of this estimate the
issuer’s debt servicing obligations over the tenure
of the instrument. Aditionally, the rating process
also involves assessing the cash flow support that
may be available to supplement the operational cash
flows.
Issuer Rating Methodology
Business Risk
Industry Risk
Competitve Position
Management Quality
New Project Risk
Financial Risk
Financial Position
Profitability
Capital Structure
