Crisil Plans To Bill Commercial Use Of Index

Crisil, in association with Standard & Poors (S&P), plans to bolster revenue by levying charges for commercial use of its Crisil-500 index. At present, S&P charges the users of their S&P 500 index who price forwards and futures based on the index.

S&P has a huge user base globally comprising trading and broking houses, research firms apart from publication houses and wire services. As far as the index-based forwards and futures are concerned, S&P 500 is the worlds largest traded index.

Weightage given to S&P indices can be seen from the fact that trades amounting to more than $340 billion have been entered into per day during the previous six months. S&P has commenced charging from end users for use of its product. The charges levied are arrived at as a percentage agreed between the user and the rating company, said Crisil managing director R Ravimohan.

 

Crisil 500 has been well received at the domestic front both by the traders as well by publication industry. Crisil is also thinking of commencing prediction of its index movement in line with its strategic alliance partner S&P, said Ravimohan.

Crisil has not taken a board decision for charging from the users of our indices. However, seeing the good response for S&P indices and the revenue that is reaching S&P coffers, we are considering to commence charging for Crisil indices, he said.

S&P has been charging indices funds linked to the S&P 500. The charge is a percentage of the funds garnered. At present, there are nearly $650 billion worth of funds linked to the S&P index. Whenever a newspaper refers to the S&P index, they have to pay a fee to the rating agency.

The scope of income from the index is tremendous as Crisil already has a lot of derivative indices like the industry-specific funds.

However, the Crisil-500 has not yet become a benchmark in the industry, till date. Even today it is the Sensitive Index (Sensex) of the Bombay Stock Exchange that it looked upon.

However, once the options and futures market takes off, they will have to be linked to the Crisl-500. This is so because Crisil-500, which is broad-based, is a more stable index unlike the Sensex which is based on 30-scrips.

Standard & Poors master stroke

Our Banking Bureau MUMBAI

Acquiring a stake in Credit Rating Information Services of India Ltd (Crisil) was the best bet for Standard and Poors (S&P) to enter India according to sources in the financial sector. The option to enter India independently would not have been a feasible proposition for S&P basically because it would have to compete with Crisil. Crisil currently controls 70 per cent of the market share with 2500 ratings. Hence, it would have been difficult to gain a significant market share in India.

Secondly, Mcgraw Hill Company, which owns S&P and has a turnover of 3.6 billion dollars, will not be interested in investing substantially in India as the business is very low. The income from operations of Crisil in 1995-96 was around US $ 10 million. Hence, the best option for S&P was to acquire a stake in Crisil.