CARE's global JV to be christened ARC Ratings

Will take over the businesses of Portugal-based rating agency

ARC Ratings, an international rating agency to be formed as a joint venture between five international rating agencies, including CARE Ratings, would take over the businesses of Portugal-based rating agency Companhia Portuguesa de Rating (CPR). The five partners — CARE, CPR and one rating agency each from Brazil, Malaysia and South Africa, would each hold 20 per cent stake in ARC Ratings.

As CPR already has a European Securities Markets Authority (ESMA) licence, ARC would follow ESMA regulations. “Operations would commence as soon as the participants receive ESMA’s nod for change in the shareholding pattern of CPR. As of now, shareholding agreements are being drawn up and matters regarding revenue, location of the headquarters, bonus issues for existing shareholders, among others, are being decided,” said a source privy to the development. The headquarters, sources said, would be in Europe, though not necessarily in Portugal.

CARE Ratings is planning to rope in foreign investors. It plans to comply with Reserve Bank of India (RBI) guidelines that would allow it to raise money through foreign direct investment (FDI). It can do so without prior government or RBI approval, once it complies with RBI guidelines. According to RBI norms, certain categories of non-banking finance companies, such as rating agencies seeking foreign funds through the FDI channel, can do so through the automatic route, without the approval of the government or the central bank. However, such companies should have at least $0.5 million of foreign capital, to be brought upfront to be eligible for FDI.

Credit Analysis and Research (CARE) is a registered NBFC, regulated by RBI.

To be compliant with FDI norms, CARE plans to issue about 40,000 shares, worth $0.5 million, to foreign investors. According to sources close to the development, the credit rating agency would issue these shares six months after its initial public offering, which was launched on December 26, 2012.

At its current market price of about Rs 720 a share, the number of shares comes to about 38,000. “According to Sebi regulations, the price fixed for share sale is the average of the last six months’ price movement. To decide on a price, the company is waiting for that period to be over,” said the source.

CARE had sought an extension of the deadline to meet the minimum capitalisation requirement, and it has now been decided the deadline would be September 30.

The company did not respond to a query from Business Standard.

A NEW ARC

• International agency to be called ARC Ratings
• To be co-owned, along with CARE, by agencies from Brazil, Malaysia, South Africa and Portugal
• ARC will take over the businesses of Companhia Portuguesa de Rating (CPR) – a rating agency in Portugal
• CPR is also a stakeholder in ARC and will own 20 per cent stake