Credit rating firms eye brisk business in Q4

Credit rating agencies are expected to do brisk business in the fourth quarter, with more and more small and medium (SME) companies queuing up for ratings, according to DR Dogra, managing director and chief executive officer, Care Ratings.

“We expect Q4 to be much better. With interest rates expected to rise, companies may borrow more in the present quarter,” said Dogra on sidelines of an interactive session on Globalised World Economy and India’s Options organised by Care here.

Care expects about 30-35 per cent increase in revenues this financial year. With more and more small and medium (SME) companies queuing up for ratings, this financial year the company expected to rate about 1,000 firms, with about 500 in the SME space, said Dogra. The company had rated about 769 companies, with nearly 200 being SMEs last fiscal.

“Even if our topline grows by 40 per cent, still our revenues should grow by 30-35 per cent this year,” said Dogra.

With the implementation of Base II norms, even SMEs are required to have a credit rating done by an independent agency. As a result, the credit rating industry has seen a healthy rise in volumes.

According to Dogra, the industry has been growing at an average rate of 25-30 per cent annually. “The big companies have already got their ratings done; now, the small and medium enterprises will be going for ratings. This will put some pressure on rating agencies as the due diligence required for smaller companies is higher than that required for large corporates,” said Dogra.

Though the volume of transactions would be higher, the fee income generated from such ratings would be low due to the small ticket size and networth of companies, he said.