In Focus: Highly Rated

ICRA, (Idirect Code: ICRLIM) which is among the top credit rating agencies, came out with its initial public offer in March. Though the company is primarily engaged in the business of credit rating, it has also moved into grading of products like corporate governance, project finance ratings, issuer ratings, mutual fund ratings and grading of maritime research institutes, healthcare institutions and real estate developers and projects. The company is also into consulting services, information technology-based services, information services and outsourcing services. The company’s IPO issue was made to facilitate the shareholders, wanting to exit the company, completely or partially.

Two financial institutions IFCI and Specified Undertaking of the UTI (SUUTI), which were holding 21.13 per cent and 7.95 per cent, respectively, had offered their shares for sale to move out of ICRA. Additionally, the State Bank of India, which had 11.59 per cent holding in the company, had put 20,000 shares on the bloc. Post issue, State Bank of India’s stake in the company was to come down to 9.99 per cent. State Bank of India had to dilute its equity in the company to comply with the regulatory requirements and enable it to rate the country’s largest bank’s debt issues in future.

The company was also to make a preferential allotment of 2,88,900 equity shares to Moody’s India and 9,06,000 equity shares to ESOS Welfare Trust at the offer price. ICRA’s issue did not get the company any funds as the proceeds are being used to pay off the outgoing shareholders. The share price of ICRA had run up substantially soon after its listing. The ratings industry in India is maturing as the Reserve Bank has made ratings mandatory for issuance of debt instruments. Another boost for the ratings agencies have come from the big financial institutions and corporates, who don’t invest beyond a particular limit in unrated instruments. The company may also stand to gain from the compulsory equity IPO rating of the companies.