PORTFOLIO MANAGEMENT

ACKNOWLEDGEMENT

I owe a great many thanks to a great many people who helped and supported me during the writing of this book.

My deepest thanks to Lecturer, [PROF. KUNAL SONI] the Guide of the
project for guiding and correcting various documents of mine with attention and care. He has taken pain to go through the project and make necessary correction as and when needed.

I express my thanks to the Principal of, [MR.TIWARI], for extending his support.

My deep sense of gratitude to [MR. KUNAL SONI] course-coordinator [MAHARSHI DAYANAND COLLEGE] for support and guidance.

I would also thank my Institution and my faculty members without whom this project would have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.

INDEX

Sr. No	Topic	Page No.
1.	WHAT IS CREDIT RATING AGENCY?	06
2.	OVERVIEW	07
3.	VISION, MISSION AND VALUES	08
4.	WHY CARE RATINGS ?	10
5.	CARE RESEARCH	13
6.	MEDIA RESEARCH	16
7.	BOARD OF DIRECTORS	20
8.	SHAREHOLDERS	23
9.	RATING COMMITTEE	24
10.	RATING PROCESS	25
11.	RATING CRITERIA	27

WHAT IS CREDIT RATING AGENCY?

A Credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves. In some cases, the servicers of the underlying debt are also given ratings.

In most cases, the issuers of securities are companies, special purpose entities, state and local governments, non-profit organizations, or national governments issuing debt-like securities (i.e., bonds) that can be traded on a secondary market. A credit rating for an issuer takes into consideration the issuer's credit worthiness (i.e., its ability to pay back a loan), and affects the interest rate applied to the particular security being issued.

The value of such security ratings has been widely questioned after the 2007-09 financial crisis. In 2003 the U.S. Securities and Exchange Commission submitted a report to Congress detailing plans to launch an investigation into the anti-competitive practices of credit rating agencies and issues including conflicts of interest.^[1]More recently, ratings downgrades during the European sovereign debt crisis of 2010-11 have drawn criticism from the EU and individual countries.

A company that issues credit scores for individual credit-worthiness is generally called a credit bureau (US) or consumer credit reporting agency (UK).

OVERVIEW

Credit Analysis & Research Ltd. (CARE Ratings) is a full service rating company that offers a wide range of rating and grading services across sectors. CARE has an unparallel depth of expertise. CARE Ratings methodologies are in line with the best international practices. CARE Ratings has completed over 8488 rating assignments having aggregate value of about Rs.26609 billion (as at Sep 2010), since its inception in April 1993. CARE is recognised by Securities and Exchange Board of India (Sebi), Government of India (GoI) and Reserve Bank of India (RBI) etc.
CARE was promoted by major Banks/FIs (financial institutions) in India. The three largest shareholders of CARE are IDBI Bank, Canara Bank and State Bank of India. CARE, is set-up with two divisions:

VISION, MISSION & VALUES

OUR VISION:
To be a respected company that provides best-in its field -quality & value services.
OUR MISSION:
To offer a range of high quality services to investors, issuers of debt, equity and other instruments and other participants in the capital market. To build a pre-eminent position for ourselves in India in securities analysis, information and related services and to be an international credit rating agency. To earn customer satisfaction and investor confidence through fairness and professional excellence. To be deeply committed to our customers, our employees and the community in which we serve. To apply the most advanced techniques of securities analysis and information and communications technology for ensuring efficiency and high quality. To provide state-of-the-art services of securities rating, information and related services of international standard.
OUR VALUES:
Integrity & Transparency : A commitment to be ethical, sincere and open in our dealings. Pursuit of excellence: A commitment to strive relentlessly to constantly improve ourselves. Fairness: Treat clients, employees and other stakeholders fairly. Independence: We pride our independence, are unbiased and fearless in expressing our opinion Thoroughness: We like to do rigorous analysis and research on every assignment that we take.

WHY CARE RATINGS?

Regulatory Recognition:

CARE Ratings are recognized by Government of India and regulatory agencies in India. CARE is registered with the Securities and Exchange Board of India. CARE Ratings are also recognized by RBI, NABARD, NHB and NSIC. RBI has also recognized CARE Ratings as an eligible external credit rating agency for the purpose of Basel II implementation in India 

Independent:

CARE is an independent rating agency promoted by major banks and financial institutions in India. The three largest shareholders of CARE are IDBI Bank, Canara Bank and State Bank of India. CARE is a board managed company with eminent professionals on the board. The entire Board comprises of Independent Directors. CARE is the only rating agency in India which operates with an independent rating committee comprising of senior and reputed professionals. 

Professional:

CARE Ratings endeavor has been to provide investors and risk managers with independent, authentic and insightful credit opinions based on detailed in-depth research, which encompasses detailed analysis of risks that affect credit quality of an issuer. CARE's analyst strength consists of large number of well qualified and multi-faceted professionals from diverse backgrounds such as; financial analysts, economists, sector specialists, chartered accountants, chartered financial analysts and financial risk managers. CARE is a founder member of the Association of Credit Rating Agencies in Asia (ACRAA) and is actively in dialogue with Asian and International rating agencies. This provides access to international know-how on ratings. CARE has a well established rating process and detailed rating methodologies covering various sectors. CARE also follows a well defined Code of Conduct for its Directors, Rating Committee Members and Analysts for professional conduct and for avoidance of conflict of interests.

Experienced:

 CARE has over a decade of experience in rating various types of instruments. CARE assigned its first rating in November 1993 and upto March 31, 2010, CARE had completed 7654 rating assignments for an aggregate value of about Rs23121 bn. With a large number of qualified and experienced multi-faceted analyst and presence in all major metros of India, CARE has a unique understanding of the local business, cultural and value systems and factors which affect the Indian economy. 

Wide Sectoral Coverage:

CARE is a full service rating company offering a wide range of rating and grading services which includes rating debt instruments/enterprise ratings of Corporate, Banks, Financial Institutions (FIs), Public Sector Undertakings (PSUs), State Government bodies, Municipal Corporations, Non-banking Finance Companies (NBFCs), SMEs, Micro finance institutions, Structured finance Securitization transactions. In addition, CARE Ratings undertakes Corporate Governance ratings, Mutual Fund Credit quality ratings, IPO grading, Claims Paying Ability rating of Insurance Companies, Grading of Construction Entities and Issuer ratings. 

Market Acceptance:

CARE has a significant rating coverage of the Indian Banks and Financial Institutions, who are also amongst the major investors in the Indian bond markets. This, acknowledges the confidence of Indian Institutional Investors in CARE Ratings. CARE ratings are also used by a wide range of investors including Mutual Funds, Insurance companies, Provident funds, Corporate and Retail investors. 

CARE RESEARCH

CARE Research & Information Services is an independent division of CARE. CARE Research services a variety of business research needs with credible, high quality research and analysis on various facets of the Indian Economy and Industries. It provides an insightful input on industry performances by assessing trends and predicting their impact on the future.

The research division has a two pronged objective of providing an in-house support to the ratings division as also high quality sectoral research to financial intermediaries, corporate, analysts, policy makers etc, as an aid to their decision making process. CARE Research draws its strengths from CARE’s decade long experience and in-depth understanding of the Indian economy/industries, use of rigorous analytical methods and its knowledge team. CARE Research has an in-house team of qualified, experienced analysts. CARE Research is committed to provide accurate, reliable research to its clients with consistent updates in timeframe.

The research division is growing steadfastly, capturing new avenues apart from providing contemporary research and information covering various industries and Indian financial markets. 

CARE Research has established a network of primary and secondary sources, which enable the team of analysts to form unbiased opinions on industry segments. CARE Research has also developed different methodologies for forecasting the future demand-supply situation in a particular industry. These forecasts are deliberated with industry experts and then the methodologies for the same get validated and finalized.

CARE Research offers both subscription-based reports as also customized reports on request by customers. The reports by CARE Research provide insightful data and analysis on various industry sectors and CARE’s outlook on the same. 

Customized Research:

The rising level of volatility in complex markets with lots of opportunities to tap necessitates thorough understanding and guidance provided by a well known research firm. To address such needs CARE Research offers need-based solutions by completely checking the facts, market scenario, past trends, etc to help you realize your futuristic goals and transform your businesses. Customized Research involves business analysis and position in the market, financial analysis, and future outlook etc. It helps the clients to make better credit / investment decisions 

Sector Research:

In depth analysis of business environment of industry, trends, future direction, coverage on sectors in India, including updates at regular intervals for a year forward. A dedicated team of sector specialists track various industries on daily basis.

The Research Report includes:

SWOT analysis of the industry along with three year forward analysis and free updates one year forward. The industry research report incorporates demand/supply situation, price variations, cost estimation, analysis on new and existing policies, business trends, etc. 


Our Research Methodology:

• We are independent research company
• We stress on facts
• Trend Analysis
• Extent of competition
• Global competition
• Key Players
• Cyclist/ Seasonality
• Economic Scenario
• Latest Developments
• Future Perspective
• We trace five year track record for each industry
• We meet the top people of that industry for inputs.
• Information from primary and secondary sources is used
• Government Rules & Policies adhering to that business are studied
• Market survey, wherever necessary is conducted

Research Report services

CARE Research is known as a leading provider of value research. Investors, bankers, analyst, etc use CARE Research reports for in-depth understanding of present situation, issues etc to arrive at opinion. The reports contain high quality data, trends, opinions and outlook. The services are today subscribed to by a vast number of clients.

The updates provide quarterly /half-yearly review of issues/environment, updated information about the significant changes that occurred during the period along with review of outlook.

MEDIA CENTER

Welcome to CARE Media Area, designed exclusively for members of the Press. Please call the media desk or email to us, our communication team will get in touch with you soon.

CARE assigns ‘CARE AA+’ rating to NCDs of The Indian Hotels Co Ltd. CARE assigns ‘CARE BB+’ rating to the Bank Facilities of Frontier Lifeline Pvt Ltd.  CARE assigns ‘CARE BB+’ rating assigned to Bank Facilities of Radcliffe Education Pvt Ltd.  CARE assigns ‘CARE BB+(Is)’ rating to Issuer rating to Radcliffe Schools Education Pvt Ltd.  CARE assigns a ‘CARE BBB-’ rating to the Long-term Bank Facilities of Pallazzio Hotels and Leisure Ltd.  CARE assigns ‘CARE A’ rating to the proposed NCD issue of Everonn Education Ltd.  CARE assigns ‘CARE BB+’ rating to the Bank Facilities of S. R. Ferro Alloys  CARE revises ratings assigned to the Bank Facilities of Empee Distilleries Ltd.  CARE revises the ratings assigned to the Bank Facilities of Khaitan Chemicals & Fertilizers Ltd.  CARE reaffirms the rating assigned to Senior Bonds of ICICI Home Finance Ltd.  CARE reaffirms rating assigned to the Bank Facilities of Karaikal Port Pvt Ltd.  CARE reaffirms ‘CARE A1+’ rating assigned to the ongoing CD programme of United Bank of India  CARE reaffirms rating assigned to the STD/CP programmes of National Engineering Industries Ltd.  Care Places The Ratings Of Cox & Kings Ltd On Credit Watch CARE assigns CARE BBB- and CARE A3 rating to the Bank Facilities of Kriti Nutrients Ltd  CARE assigns ‘CARE BB-’ rating to the Bank Facilities of Anjani Enterprise  CARE assigns ‘CARE BBB-’ rating to the Bank Facilities of Amit Intertrade Pvt. Ltd.  CARE assigns ‘CARE BBB-’ to the long/medium bank facilities of Infinity BNKe Infocity Pvt. Ltd.  CARE assigns ‘CARE AA- (SO)’ rating to the proposed NCD issue of The Mysore Paper Mills Ltd  CARE assigns ‘CARE BBB’ rating to Bank Facilities of Indiasign Private Ltd  CARE assigns ‘CARE BBB’ and ‘CARE A3+’ ratings to the Bank Facilities of Madhav Alloys Pvt. Ltd.  CARE reaffirms the ratings assigned to various debt instruments of Intas Pharmaceuticals Ltd  CARE assigns ‘CARE IPO Grade 4’ to the proposed IPO of Intas Pharmaceuticals Ltd.  CARE reaffirms the ratings assigned to the Bank Facilities of Intas Pharmaceuticals  CARE revises the rating assigned to Bank Facilities of Indian Technomac Co Ltd  CARE reaffirms rating assigned to STD programme of IL&FS Financial Services Ltd.  CARE reaffirms the rating assigned to CP programme of Elder Pharmaceuticals Ltd  Care Revises the Ratings Assigned To the Bank Facilities Of Western India Metal Processors Ltd.  CARE assigns ‘CARE BBB-’ and ‘CARE A3’ ratings to the Bank Facilities of Kiran Global Chems Ltd.  CARE assigns ‘CARE B’ and ‘CARE A4’ ratings to the bank facilities of Bhanwardeep Copper Strips Pvt. Ltd.  CARE assigns ‘CARE BB’ rating to the Bank Facilities of Corner Point Infrastructure Pvt. Ltd.  CARE assigns ‘CARE B’ rating to the Bank Facilities of Ainaj Industries  CARE assigns ‘CARE BBB-’ and ‘CARE A3’ ratings to the Bank Facilities of Bharat Parenterals Ltd.  CARE assigns ‘CARE BB’ rating to the bank facilities of Kanade Aqua Farm Pvt. Ltd.  CARE assigns ‘CARE BB-’ rating to the Bank Facilities of ZamZam Exports Limited  CARE assigns ‘CARE BB’ rating to the Bank Facilities of Sunglare Vitrified Private Limited  CARE reaffirms the rating assigned to CD programme of Syndicate Bank  CARE reaffirms the ratings for the Bank Facilities of TCPL Packaging Ltd.  CARE suspends the ratings assigned to bank facilities of Narmada Bio Chem Pvt. Ltd.  CARE suspends the ratings assigned to bank facilities of Deegee Cotsyn Pvt Ltd  CARE reaffirms the ratings assigned to the Bank Facilities of I G Petrochemicals Ltd . CARE reaffirms the long-term rating and assigns ‘CARE A4’ rating to the short-term bank facilities of Kottex Industries Pvt. Ltd.  CARE reaffirms the rating assigned to Lower Tier II bonds of Punjab And Sind Bank  CARE reaffirms the rating assigned to the Commercial Paper of Future Value Retail Ltd.  CARE reaffirms the rating assigned to the Commercial Paper of Pantaloon Retail (India) Ltd.  CARE reaffirms the rating assigned to the Market Borrowing Programme Rural Electrification Corporation Ltd.  CARE reaffirms ‘CARE BB+’ and ‘CARE A4’ ratings to the Bank Facilities of Jasubhai Jewellers Pvt Ltd.  CARE Assigns “CAE AA-’ Ratings to Public Issue of Secured NCD of India Infoline Investment Services Ltd.  CARE assigns ‘CARE AA-’ rating to the proposed Perpetual Debt issue of Dewan Housing Finance Corporation Ltd.  CARE reaffirms the rating assigned to NCD issue of Dewan Housing Finance Corporation Ltd.

BOARD OF DIRECTORS

Board of Directors(BoDs)This apex decision making body provides direction, strategic inputs and insight for futuristic goals of the company. The BoDs comprises highly qualified professionals with proven competence and vast experience in industry, capital markets and government.   

Shri O.V. Bundellu

Shri O.V. Bundellu is Chairman of the Company. Shri Bundellu is the former Deputy Managing Director of IDBI Bank Ltd. He has served on the Board of several companies. Shri Bundellu has about 4 decades experience in development banking and commercial banking. He is having a Masters degree in Science and also obtained Masters’ degree in Financial Management from Mumbai University

Dr. N.K. Sengupta

Dr. N.K. Sengupta a retired I.A.S. Officer, has held various positions including Revenue Secretary and Member Secretary of Planning Commission, Govt. of India, Controller of Capital Issues, etc. He also served as Director General of International Management Institute, Delhi. Dr. Sengupta also serves on the Board of a number of companies.

Shri Venkatraman Srinivasan

Shri Venkatraman Srinivasan is a practicing Chartered Accountant and is a partner in V. Sankar Aiyar & Co, Chartered Accountants. He handles the audit of a number of reputed companies. He serves on the Board of a number of companies.

Ms. Bharti Prasad

Ms. Bharti Prasad has held various positions including Deputy Comptroller & Auditor General of India & Chairperson Government Accounting Standard Advisory Board and Joint Secretary (Personnel), Ministry of Finance. She is also member on ‘Advisory Group on Evaluation and Audit (AGEA), International Civil Aviation Organisation (ICAO), Montreal, Canada and ‘Internarnational Public Sector Accounting Standard (IPSAS) Board of International Federation of Accountants (IFAC), New York, USA.

Shri D. R. Dogra

Shri D.R.Dogra is the Managing Director and Chief Executive Officer of the Company. Shri Dogra, prior to joining the Board of CARE, was Executive Director of the Company. Shri Dogra joined CARE in 1993 and has been a part of the top management team of CARE. Shri Dogra holds a post graduate degree from FMS, Delhi and is an Associate of the Indian Institute of Bankers.

Shri Rajesh Mokashi

Shri Rajesh Mokashi is the Deputy Managing Director of the Company. Shri Mokashi, prior to joining the Board of CARE, was Executive Director of the Company. Shri Mokashi joined CARE in 1993 and has been a part of the top management team of CARE. Shri Mokashi holds a bachelors degree in Mechanical Engineering from VJTI, Mumbai University and MMS from Narsi Monjee Institute of Management Studies. He has also Passed Level III of the CFA Program, CFA Institute,USA

SHAREHOLDERS

CARE was promoted in April 1993 by major Banks/FIs (financial institutions) in India. The three largest shareholders of CARE are IDBI Bank, Canara Bank and State Bank of India. The other share holders include Federal Bank, IL&FS, ING Vyasa Bank etc.

RATING COMMITTEE

CARE is committed to the establishment of the highest standards of professional quality and integrity. One of the guiding factors in achieving this objective is the independence in rating decisions. In line with this, CARE has independent Rating Committee comprising reputed professionals who decide each rating. They are assisted in the evaluation by a team of professional analysts with varied experience in industry, banking and FIs.

CARE’s Rating Committee Members1 include:

Mr. Y. H. Malegam (Chairman)      Former Managing Partner - S. B. Billimoria & Co. Member of the Board of Directors of a number of companies and organisations including the Reserve Bank of India Mr.P.P.Pattanayak     Former Managing Director of State Bank of Mysore. Former Dy. Managing Director & Chief Credit Officer of State Bank of India. Mr. V. Leeladhar      Former Dy. Governor, Reserve Bank of India. Mr. V.K. Chopra      Former Wholetime Member of Securities & Exchange Board of India and Chairman and Managing Director of Corporation Bank.

RATING PROCESS

The rating process takes about three to four weeks, depending on the complexity of the assignment and the flow of information from the client. Rating decisions are made by the Rating Committee.

FREQUENCY OF RATING ACTIONS The rating assigned is communicated to the client along with a detailed rationale. The ratings accepted by the clients are published and then monitored on a continuous basis over the life of the instrument. CARE has a comprehensive in-house data base which facilitates surveillance of the various industries and companies operating in these industries. Each rating is reviewed formally at least once a year, when analysts meet the issuer's management. A review can also be triggered by a major development in the company or in the industry, which may have a significant bearing on the credit-worthiness of the company. As a part of the review exercise, actual financial performance is analysed in the light of the estimates made earlier and deviations are examined. CARE puts the rating under Credit Watch, when any event or deviation from the expected trend has occurred or is expected and additional information is necessary to take rating action. The rating may be retained, upgraded or downgraded based on the changed prospects for the issuer. A rating change is at the absolute discretion of CARE, without concurrence of the client.

RATING CRITERIA / METHODOLOGY

CARE undertakes rating exercise based on information provided by the company In-house database 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 and their adequacy to meet debt obligations in adverse conditions. The analysis attempts to determine the long-term fundamentals and the probabilities of change in these fundamentals, which could affect the credit-worthiness of the borrower. 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 vary with the type of issuer. Rating determination is a matter of experienced and holistic judgement, based on the relevant quantitative and qualitative factors affecting the credit quality of the issuer.

Definition of Default CARE defines default as any missed payment on its rated instrument. As an exception, however, cases of missed payments attributable to technical reasons e.g. procedural delays caused by government machinery etc. which are likely to be rectified within a short time, are not placed in the default grade immediately. If, however, such delays are not rectified within a short time, ratings are placed in the default grade.

WHAT RATINGS DO NOT MEASURE It is important to emphasise the limitations of credit ratings. They are not recommendations to invest. They do not take into account many aspects which influence an investment 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. Although these are often related to the credit risk, the rating essentially is an opinion on the relative quality of the credit risk.

BIBLOGRAPHY

Ø www.careratings.com

Ø www.google.com

Ø Wikipedia, the free encyclopedia