FEATURES

SMERA’s Credit Rating is an opinion on the relative ability and willingness of an issuer to make timely payments of financial obligations on the rated instrument over its life. The rating is for a specific instrument. It is an opinion on the probability of default on the rated instrument in future. Thus, the rating is forward looking. Higher the rating, lower is the probability of default.

SMERA offerings

SMERA rates a wide range of debt and debt-like instruments issued by entities such as:

Manufacturing companies
Service companies
Banks
Non-banking financial companies (NBFCs)
Infrastructure companies
Microfinance companies
Insurance companies
Mutual funds
Central and State Governments
Urban local bodies
Special purpose vehicles

Debt instruments rated by SMERA include:

Long term instruments
Long term instruments are those that have an original maturity of more than one year, such as:

• Debt Instruments (Debentures/Bonds/Preference shares)
• Cash credit limit, Working capital term loans
• Long term loans
• Fixed deposits
• Structured debt

Short term instruments
Short term instruments are those that have an original maturity of one year or less, such as:

• Commercial papers/Certificates of deposits
• Letters of credit/Bank guarantees/Packing credits/Bill purchase limits
• Non-convertible debentures
• Inter corporate deposits
• Fixed deposits
• Loans
• Structured debt

What SMERA ratings do not measure
SMERA’s rating is not a recommendation to buy/sell/hold the rated instrument, an indicator of the general performance, a predictor of the price of the issuers' bonds or equity shares, a statutory or non-statutory audit of the issuer, a commentary on the issuer’s promoters, directors, officers, associates, affiliates, or group companies

Rating Scale

SMERA may apply '+' (plus) or '-' (minus) signs to its ratings assigned to indicate their relative standing within the category. SMERA may differentiate a debt instrument rating by a prefix to the rating assigned.

For Structured Obligations, SMREA assigns suffix '(SO)' to the rating symbol. The rating suffixed by the letters (SO), indicates presence of a credit enhancement which has been factored into the rating.

Rating Process

SMERA has formulated a detailed and well-defined process for ratings to ensure objectivity, comprehensiveness, professionalism, standardization, independence and analytical rigor. Typically, the process takes about 3-4 weeks after all the information is received. Timeframe is also a function of the complexity of a given rating exercise and in exceptional circumstances faster turnaround could be considered.

The stages in the rating process and few of its highlights are given below:

• Every rating is assigned based on a rating request by the issuer. SMERA does not undertake unsolicited ratings.
  
• The rating criteria are clearly and transparently spelt out and consistently applied.
• All ratings are assigned based on written information provided by the issuer, information obtained from sources SMERA considers reliable and very importantly interviews with the management of the issuer. It helps SMERA factor in non public information. The discussions cover critical issues identified and the future plans and strategies.  
• All ratings are assigned by a committee consisting of experienced professionals and not by a single individual.  
• The rating assigned is communicated to the issuer along with the rating rationale.