Crisil pitches for avoiding sharp rating actions

In the wake of troubles surrounding Amtek Auto, domestic rating agency Crisil has said it did not have a rating on the troubled auto parts maker and stressed on the need to avoid sharp rating actions.
"Amtek is not something that we had a rating on," its chief analytical officer Pawan Agrawal told reporters, acknowledging that the Amtek fiasco has raised many questions on quality of rating agencies' calls.
Taking cognizance of the episode, which witnessed some of its rivals either suspending their rating or cutting it sharply, Crisil undertook a performance review of its portfolio of better rated companies, he said.

"What we've tried to outline now is to provide some performance-related statistics related to Crisil ratings in 'A' category and above, where we've looked at the stability in terms of rating actions as well as the intensity of ratings actions," he said, expressing satisfaction at the results.
Its senior director Somasekhar Vemuri said out of the 1,005 firms which had a rating of A- and above, only 55 witnessed rating actions, either upgrade or a downgrade. About 30 upgrades and 25 downgrades in the space.
Within this, the intensity of the change was not strong and there was only one case, where there was an action by two notches, he said.

Last month, Care Ratings suspended its investment grade 'AA-' rating assigned to Amtek on August 7, while Brickwork Ratings lowered its rating to 'C' from 'A+'.

"Such sharp rating changes...Catch the market by surprise, leave investors in the lurch and really constrain the ability of fund managers and lenders to handle their exposures," Vemuri said, stressing on the need to avoid such sharp actions.
He added that investors and market participants should "differentiate" between rating agencies.
Amtek Auto defaulted on a payment of Rs 800 crore on a bond earlier this month.
"This event has not changed anything for us because our ratings continue to be under constant monitoring all the while and therefore if there are any changes that are happening on account of industry or specific factors, we factor that in into our ratings," Agrawal said.

A sharp rating swing is possible only in the lower rated companies, he added.