17-09-2012, 02:48 PM
MARKETING OF BANK LOAN RATING FOR FITCH RATINGS IN CONSTRUCTION AND INFRASTRUCTURE SECTOR IN HYDERABAD
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ABSTRACT
The SIP started with two weeks of training in which we were enlightened about the working of credit rating agencies. Once the Mock interviews and Mock Meetings were successfully completed then I met a lot of Issuers and Bankers. To issuers the purpose was to explain about Fitch ratings, Advantages of getting the rating done from Fitch rating, followed by sending of Offer letter, followed by Agreement signing, Collection of Information and handing over the case to Analyst Team. Main aim of meeting the bankers was to get the list of unrated companies which we could target. I also used to get the feedback form filled from them on the basis of which I have done the content analysis. Then all the other credit rating agencies were visited by me, based on which I analyzed the differences in their working. I also got to work on a Credit analysis project where my role was just of data mining of financial information of various companies. For the Business Development of the company I got in touch with around 80 corporate accounts through tele-calling. I visited around 30 companies/ issuers, sent profiles to 25 companies and visited around 35 Banks. Then analysis of Construction and Infrastructure sector is also done by me.
PURPOSE OF THE PROJECT:
My project on Business Development is being undertaken to increase the visibility of Fitch Ratings in Hyderabad by targeting mid and large-corporate clients and to create awareness among the bankers of Fitch, its research and credit ratings. The industries assigned to me are Construction and Infrastructure.
The requirement of Bank Loan Ratings and how corporate and bankers perceive Fitch as an External Rating Agency is being studied through the feedback which we are collecting from them. Also, the difference between a rating done by a Financial Analyst and that done by a Credit Rating Agency will be studied to bring out the importance of CRAs in the financial markets.
OBJECTIVES OF THE PROJECT:
The objective of my Business Development project is to increase the visibility of Fitch Ratings in Hyderabad using various marketing techniques, especially in the Bank Loan Ratings segment. The Bank Loan Rating segment has become very competitive in India with the entry of many external rating agencies. Hence the big players have a large share in the mid and large corporate sector and trying to poach the clients of other Credit Rating Agencies is not an easy task. However, this is what I am attempting to design various marketing strategies that can be used to target the large corporate who are not currently clients of Fitch Ratings.
LITERATURE REVIEW:
Credit Ratings-Meaning
Credit Rating is based on the history of borrowing and repayment as well as the availability of assets and extent of liabilities. It provides individual and institutional investors with information that assists them in determining whether issuers of debt and fixed-income securities will be able to meet their obligations with respect to those securities. Credit rating is a mechanism whereby an independent third party makes an assessment, based on different sources of information on the credit quality of the assessed.
Credit Rating Agency:
A Credit Rating Agency (CRA) is a company that assigns ratings for issuers of certain types of debt obligations. They issue opinions on the creditworthiness of a particular issuer or financial instrument. They are crucial to the functioning of financial markets.
International Rating Agencies
Fitch Ratings: John Knowles Fitch founded the Fitch Publishing Company in 1913. Fitch then published financial statistics for use in the investment industry. In 1924, Fitch introduced the AAA through D ratings which has become the basis for ratings throughout the industry. Through a series of acquisitions and mergers, Fitch began to develop operating subsidiaries specializing in enterprise risk management and Fitch India came to being as one such subsidiary.
Criticisms against Credit Rating Agencies:
Credit rating agencies (CRAs) play a key role in financial markets by helping to reduce the informative asymmetry between lenders and investors, on one side, and issuers on the other side, about the creditworthiness of companies or countries. CRAs' role has expanded with financial globalization and has received an additional boost from Basel II which incorporates the ratings of CRAs into the rules for setting weights for credit risk. Ratings tend to be sticky, lagging markets, and overreact when they do change. This overreaction may have aggravated financial crises in the recent past, contributing to financial instability and cross-country contagion.
The recent bankruptcies of Enron, WorldCom, and Parmalat have prompted legislative scrutiny of the agencies. Criticism has been especially directed towards the high degree of concentration of the industry. Promotion of competition may require policy action at national and international level to encourage the establishment of new agencies and to channel business generated by new regulatory requirements in their direction.
Accuracy and performance of ratings:
CRAs’ failure to predict the Mexican and Asian financial crises was due, among other things, to the fact that contingent liability and international liquidity considerations had not been taken into account by CRAs.
In making their ratings, CRAs analyze public and non-public financial and accounting data as well as information about economic and political factors that may affect the ability and willingness of a government or firms to meet their obligations in a timely manner. However, CRAs lack transparency and do not provide clear information about their methodologies.