Rating Agencies Seek Amc-Like Structure For Plantation Firms

Credit rating agencies have suggested to the Securities Exchange Board of India (Sebi) that plantation companies should be structured on the lines of asset management companies.

While this suggestion has not found favour with some plantation companies, an official with a rating agency said that such a structure would facilitate in rating the schemes floated by the company.

Among the models being studied include practices in Australia and New Zealand where collective investment schemes are in vogue.

In India, according to market estimates, over 200 plantation companies are registered with the regulator and the amount mobilised by them is in the region of Rs 10,000 crore.

In order to help investors differentiate between the different schemes, Sebi decided to make it mandatory for collective investment schemes to be rated by the rating agencies. The agencies are awaiting detailed guidelines from the regulator.

They also point out that subsequent to Sebis decision, some of the companies have approached them for a rating.

Rating agency officials point out that there could be four different types of schemes that could be floated by a plantation firm structured on the lines of an asset management company.

The four schemes can be classified according to whether the schemes are risk sharing or non-risk sharing.

Alternatively the schemes could be according to whether the schemes assure a financial return at the end of the period. The suggestion is that the schemes should be in the nature of a close ended scheme rather than a open ended one.

At a recent the meeting with Sebi officials, it was also decided that there would be a separate rating scale for collective investment schemes.

The proposed scale is a five point scale where the first three grades would be investment grade while the last two grades would be speculative and default respectively.