From Aaa To Aaa+

The Credit Rating Services of India (Crisil) scrip was recommended in The Smart Investor on April 4, 1995 at Rs 115, and subsequently on September 16, 1996 at Rs 235. In the last one week, the price has moved up from Rs 245 to Rs 273.

The rise seemed strange as the 1996-97 results are unlikely to be exceptional. Subodh Shah, executive director, Crisil said, In the second half, a dull primary market saw a lower number of issues. Prospective debt issuers expected a lowering of interest rates and postponed their plans. (See table: Rating statistics).

The reason for the rise became clear on May 9, when Crisil announced that Standard & Poor would acquire a 9.6 per cent equity stake, hitherto held by the ADB.

 

The market is likely to upgrade its preference for the stock. Given S&P's standing word-wide, it enhances the stock valuation considerably. We retain a buy on Crisil.

The company is preparing itself for an interesting future, where the rating market is likely to change to one driven more by market dynamics than by regulation. That is, against the current scenario where rating is mandatory for corporates, the future will see the market demanding a rating. Crisil expects the secondary debt market to grow substantially, enhancing the importance of ratings, which will play a role in determining yields.

The recent trend of financing projects through structured obligations, ratings of which Crisil has done similar in the past could be a major income source. The commercial paper market is also expected to revive which means additional business for Crisil.

The strategic alliance which the two companies had has now been transformed into a financial stake. Both the agencies propose to work closely in the traditional business of ratings and also a range of services to support the growing Indian equty market including index and research products.Crisil's strength lies in the value of its brand and this is enhanced by the addition of S & P to the list of shareholders.