Moody'S Takes 11% In Icra

Global credit rating agency Moody's Investors Services has picked up an 11 per cent equity stake in Icra Ltd, the Delhi-based rating agency. A memorandum of understanding was signed by the two companies yesterday.

Following the equity tie-up, Moody's will be the second largest shareholder in Icra along with State Bank of India, which also holds a 11 per cent stake.

Icra's promoter, Industrial Finance Corporation of India, continues to be the single largest shareholder with a 30 per cent stake.

The equity tieup will help Icra get access to Moody's global research database, Icra managing director P K Choudhury said. "Icra will also benefit from the guidance and access to the latest rating methodology," he added.

 

Speaking at a press conference in Mumbai yesterday, Moody's president John Rutherfurd said: "This is a rare occasion where Moody's has agreed to a minority stake in a venture in a developing market." South Korea is the only other country where Moody's has agreed to a minority stake, Rutherfurd said.

Moody's will pick up 10 lakh equity shares in Icra for Rs 60 each, at a premium of Rs 50 per share. As a result, Icra's equity base will increase from Rs 7.80 crore to Rs 8.80 crore. It has an authorised capital of Rs 10 crore.

Icra has been in a technical tieup with Moody's subsidiary, Financial Proformas Inc (FPI), since 1996 for credit education, risk management software, credit research and consulting services.

After Moody's picking up a direct stake, Icra will be able to source all its inputs directly from the former.

According to MoU, besides the equity tie-up, Moody's will also provide Icra with technical support. Moreover, it will assist ICRA by advising on general ratings business and rating product strategy. "This will lead to improvement in product quality and ultimately investor confidence," Choudhury said.

"Moody's would be guiding and training us towards developing a better rating methodology," Choudhury said. "The tie-up will facilitate those issuers who would like to opt for domestic and international rating," he added.

According to Moody's `there is potential for growth in the financial sector and there will be opportunity for the sale of products and services in the area of credit analysis, credit education, research and consultancy services." Moody's said developing a well functioning and a mature rating system relates to establishing investor demand for ratings and investor confidence in rating system.