India Ratings defends process after IL&FS row, says Fitch executive dumped

Finding itself at the centre of the IL&FS controversy, India Ratings on Saturday said its investigation into the role of a senior director at parent firm Fitch's Singapore office found him in violation of the company's code of conduct and he is no longer an employee.

The rating agency also defended its rating process, saying its ratings for IL&FS group entities followed a robust and transparent analysis of relevant information including the company's audited financial statements and sought to shift the blame to falsification and sprucing up of the financials by the former top management of the group.

It rejected the observations made in a special audit by Grant Thornton of the ratings given by five credit rating agencies, including India Ratings, to some IL&FS entities, in which it has been alleged that the agencies continued to give top ratings despite being aware about weak financials of the group.

The audit has also flagged attempts by the erstwhile top management of IL&FS to influence the ratings including by extending favours and gifts, and also by pressure tactics like threats to move to another agency.

Replying to it, a spokesperson at India Ratings and Research said in a statement, "This report was produced without a request for our participation or involvement. We were unaware of its existence until shortly before it found its way into the public domain."

It said the ratings were based on robust and transparent analysis of relevant information, including IL&FS' audited financial statements, in line with our publicly available rating methodology.

The ratings are also the collective work product of the agency and no individual, or group of individuals, is solely responsible for a rating, the spokesperson said.

It further said the Grant Thornton report is based on partial and selective source material from IL&FS and demonstrates a limited understanding of the credit rating process.

"The report has no legal standing whatsoever. The report largely ignores the fact that the government has charged the former management of IL&FS with engaging in widespread fraud and producing falsified, spruced up financial statements, which all credit rating agencies rely on to produce accurate ratings," it added.

The spokesperson further said Fitch conducted an investigation into the matter recently reported in the news relating to a senior director of the Fitch Singapore office and found that the employee engaged in activity in violation of Fitch's Code of Conduct.

"The employee is no longer employed at Fitch," the statement said.

The Grant Thornton report, as well as a probe by the Serious Frauds Investigation Office (SFIO), have said that the senior director's wife was helped by the then top officials of IL&FS in purchasing a luxury villa at a hefty discount.

The report has also flagged numerous instances of gifts and other favours extended by the former top brass of IL&FS to senior executives of various rating agencies and their family members.