login
Untitled Document
Credit Ratings
The suffix ‘(ind)’ refers to National Ratings assigned by Fitch India. Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA (ind)’ for National ratings in India. Specific letter grades are not therefore internationally comparable.
 
Long Term Credit Ratings
 
   
Investment Grade
 
AAA(ind)
AAA' national ratings denote the highest rating assigned in its national rating scale. This rating is assigned to the "best" credit risk relative to all other issuers or issues in the country.
AA(ind)
'AA' national ratings denote a very strong credit risk relative to other issuers or issues in the country. The credit risk inherent in these financial commitments differs only slightly from the country's highest rated issuers or issues.
A(ind)
'A' national ratings denote a strong credit risk relative to other issuers or issues in the country. However, changes in circumstances or economic conditions may affect the capacity for timely repayment of these financial commitments to a greater degree than for financial commitments denoted by a higher rated category.
BBB(ind)
'BBB' national ratings denote an adequate credit risk relative to other issuers or issues in the country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment of these financial commitments than for financial commitments denoted by a higher rated category.
   
Speculative Grade
 
BB(ind)
'BB' national ratings denote a fairly weak credit risk relative to other issuers or issues in the country. Within the context of the country, payment of these financial commitments is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.
B(ind)
'B' national ratings denote a significantly weak credit risk relative to other issuers or issues in the country. Financial commitments are currently being met but a limited margin of safety remains and capacity for continued timely payments is contingent upon a sustained, favorable business and economic environment.
C(ind)
This category of national ratings denote an extremely weak credit risk relative to other issuers or issues in the country. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments.
D(ind)
This category of national ratings are assigned to entities or financial commitments which are currently in default.
   
Within a band of rating symbols from ‘AA(ind)’ to ‘B(ind)’, the signs "+" or "-" may be appended to a rating to denote relative status within the rating category.
 
   
Short Term Credit Ratings
 
F1(ind)
Indicates the strongest capacity for timely payment of financial commitments relative to other issuers or issues in the country. Under the national rating scale, this rating is assigned to the "best" credit risk relative to all others in the country
F2(ind)
Indicates a satisfactory capacity for timely payment of financial commitments relative to other issuers or issues in the country. However, the margin of safety is not as great as in the case of the higher ratings
F3(ind)
Indicates an adequate capacity for timely payment of financial commitments relative to other issuers or issues in the country. However, such capacity is more susceptible to near-term adverse changes than for financial commitments in higher rated categories..
F4(ind)
Indicates a highly uncertain capacity for timely payment of financial commitments relative to other issuers or issues in the country. Capacity or meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
F5(ind)
Indicates actual or imminent payment default.
   
Only Short-Term ratings of ‘F1(ind)’ and ‘F2(ind)’ will carry the suffix “+”.
 
   
Rating Outlooks
 
A Rating Outlook indicates the direction a rating is likely to move over time. Outlooks may be positive, negative or stable. A positive or negative Rating Outlook does not imply a rating change is inevitable. Similarly, companies whose outlooks are ‘stable’ could be upgraded and downgraded before an outlook moves to positive or negative if circumstances warrant such an action. Occasionally, Fitch may be unable to identify the fundamental trend. In these cases, the Rating Outlook may be described as ‘evolving’.
 
   
Rating Watch
 
Ratings are placed on Rating Watch to notify investors that there is a reasonable probability of a rating change and the likely direction of such change. These are designated as "Positive", indicating a potential upgrade, "Negative" for a potential downgrade, or "Evolving" if ratings may be raised lowered or maintained.
 
   
Notes to Ratings
 
·          The suffix ‘(ind)’ refers to National Ratings assigned by Fitch India. Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA (ind)’ for National ratings in India. Specific letter grades are not therefore internationally comparable.
 
·          "Withdrawn": A rating is withdrawn when Fitch deems the amount of information available to be inadequate for rating purposes, or when an obligation matures, is called, or refinanced.
 
   
Term Deposit Credit Ratings
 
   
Investment Grade
 
tAAA(ind)
Indicates the strongest capacity for timely payment of financial commitments relative to other issuers or issues in the country.
tAA(ind)
Denote a strong credit risk relative to other issuers or issues in the country. The credit risk inherent in these financial commitments differs only slightly from the country's highest rated issuers or issues.
tA(ind)
Indicates an adequate capacity for timely payment of financial commitments relative to other issuers or issues in the country. However, such capacity is more susceptible to near-term adverse changes than for financial commitments in higher rated categories.
   
Speculative Grade
 
tB(ind)
Indicates an uncertain capacity for timely payment of financial commitments relative to other issuers or issues in the same country. Such capacity is highly susceptible to near-term adverse changes in financial and economic conditions
tC(ind)
Indicates a highly uncertain capacity for timely payment of financial commitments relative to other issuers or issues in the country. Capacity or meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment
tD(ind)
Indicates actual or imminent payment default.
Within a band of rating symbols from ‘tAA(ind) to ‘tB(ind)’, the signs "+" or "-" may be appended to a rating to denote relative status within the rating category.
 
   
Issuer Strength Financial Rating
 
The Insurer Financial Strength Rating (IFS Rating) provides an assessment of the financial strength of an insurance organization and its capacity to meet senior obligations to policyholders and contract holders on a timely basis.
 
   
AAA(ind)
Relative to other insurers in the same national market, insurers in this category have the highest capacity to meet policyholder obligations and provide policyholder benefits. Compared with other insurers in the same national market, these insurers have the lowest susceptibility to the effect of adverse business and economic factors.
AA(ind)
Relative to other insurers in the same national market, insurers in this category have a very high capacity to meet policyholder obligations and provide policyholder benefits. Compared with other insurers in the same national market, these insurers have a very low susceptibility to the effect of adverse business and economic factors.
A(ind)
Relative to other insurers in the same national market, insurers in this category have a high capacity to meet policyholder obligations and provide policyholder benefits. Compared with other insurers in the same national market, these insurers have a low susceptibility to the effect of adverse business and economic factors.
BBB(ind)
Relative to other insurers in the same national market, insurers in this category have an acceptable capacity to meet policyholder obligations and provide policyholder benefits. Compared with other insurers in the same national market, these insurers have some susceptibility to the effect of adverse business and economic factors.
BB(ind)
Relative to other insurers in the same national market, insurers in this category have a speculative capacity to meet policyholder obligations and provide policyholder benefits. Compared with other insurers in the same national market, these insurers have a moderate susceptibility to the effect of adverse business and economic factors.
B(ind)
Relative to other insurers in the same national market, insurers in this category have a vulnerable capacity to meet policyholder obligations and provide policyholder benefits. Compared with other insurers in the same national market, these insurers have significant susceptibility to the effect of adverse business and economic factors.
CCC(ind)/CC(ind)/C(ind)
Relative to other insurers in the same national market, insurers in this category have a highly vulnerable capacity to meet policyholder obligations and provide policyholder benefits. The insurer may be under the supervision of an insurance regulator and already may not be making all payments in a timely fashion.
   
"+" or "-" are used with a rating symbol to indicate the relative position of a credit within the rating category.  They are not used for the 'AAA' category.
 
   
The ISO Country Code is placed as a suffix in parentheses immediately following the rating to indicate the identity of the national market within which the rating applies.  For illustrative purposes '(ind)' has been used above.
 
   
Bond Fund/Volatility Ratings
 
V1+(ind)
Lowest Market Risk (Stable Value) Funds rated ‘V1+(ind)’ are considered to have the lowest market risk. The rating is assigned only to money market funds that should not experience loss of principal value to shareholders or participants even in severely adverse interest rate environments.
V1(ind)/V2(ind)
Low Market Risk Funds rated ‘V1(ind)’ and ‘V2(ind)’ are considered to have low market risk. Total returns exhibit relative stability, performing consistently across a broad range of interest rate scenarios. These funds offer low risk exposure to interest rates and changing market conditions.
V3(ind)/V4(ind)
Moderate Market Risk Funds rated ‘V3(ind)’ and ‘V4(ind)’ are considered to have moderate market risk. Total returns perform consistently over intermediate to long-term holding periods but will exhibit some variability over shorter periods due to greater exposure to interest rates and changing market conditions.
V5(ind)/V6(ind)/V7(ind)
Moderate to High Market Risk Funds rated ‘V5(ind)’, ‘V6(ind)’, and ‘V7(ind)’ are considered to have moderate to high market risk. Total returns experience significant variability across a broad range of interest rate scenarios. These funds typically exhibit significant exposure to interest rates and changing market conditions, as well as may face additional risks from mortgage prepayments, derivatives, leverage, illiquid markets, and/or foreign currencies.
V8(ind)/V9(ind)/V10(ind)
Speculative Market Risk Funds rated ‘V8(ind)’, ‘V9(ind)’, and ‘V10(ind)’ are considered to have speculative market risk. Total returns may experience extreme variability across a broad range of interest rate scenarios. These funds typically exhibit substantial exposure to interest rates and changing market conditions, as well as mortgage prepayments, derivatives, leverage, illiquid markets, and/or foreign currencies.
   
Definition of Bond Fund Credit Ratings
The rating scale for fund ratings would have the same rating symbols as the national long term rating scale. The suffix ‘(ind)’ refers to National Ratings assigned by Fitch India. National Bond Fund Credit Ratings provide a relative assessment of the combined credit quality of the fund’s portfolio solely within the Indian context. The national rating assigned to a bond fund links its credit quality to the weighted average default probability of the portfolio of bonds. Thus, the credit quality of the fund is similar to that of a bond rated at the same level on the national credit rating scale.

The bond fund rating scale is given below:

AAA (ind): The fund portfolio provides highest protection against losses from credit defaults.

AA (ind): The fund portfolio provides high protection against losses from credit defaults.

A (ind): The fund portfolio provides adequate protection against losses from credit defaults.

BBB (ind): The fund portfolio provides moderate protection against losses from credit defaults.

BB (ind): The fund portfolio provides inadequate protection against losses from credit defaults.

B (ind): The fund's portfolio carries high risk of losses from credit defaults.

C (ind): The fund's portfolio carries substantial risk of losses from credit defaults.

Within a band of rating symbols (from AA (ind) to B (ind)), Fitch may add the signs “+” (plus) or “-” (minus) to denote relative position within the rating category

Definition of Volatility Ratings
National volatility ratings are an opinion of the relative sensitivity of the total return, (including price) on a fund’s units to a broad array of assumed changes in interest rates, liquidity of the portfolio, spreads, and other market conditions. Volatility ratings are expressed on a scale of ‘V1+(ind)’ (least volatile) through ‘V10(ind)’ (most volatile). V1+(ind) is usually assigned to money market funds or similar investment pools which should not experience loss of principal value to participants even in severely adverse movements in market conditions. Volatility ratings, however, do not predict the magnitude or direction of these movements in such market conditions, and hence do not predict whether, or the extent to which, any particular fund will perform favourably or adversely in the future.

The bond fund volatility rating definitions are given below:

Lowest Market Risk (Stable Value)
Funds rated ‘V1+ (ind)’ are considered to have the lowest market risk. The rating is assigned only to money market funds that should not experience loss of principal value to shareholders or participants even in severely adverse interest rate environments.

Low Market Risk
Funds rated ‘V1 (ind)’ and ‘V2 (ind)’ are considered to have low market risk. Total returns exhibit relative stability, performing consistently across a broad range of interest rate scenarios. These funds offer low risk exposure to interest rates and changing market conditions.

Moderate Market Risk
Funds rated ‘V3 (ind)’ and ‘V4 (ind)’ are considered to have moderate market risk. Total returns perform consistently over intermediate to long-term holding periods but will exhibit some variability over shorter periods due to greater exposure to interest rates and changing market conditions.

Moderate to High Market Risk
Funds rated ‘V5 (ind)’, ‘V6 (ind)’, and ‘V7 (ind)’ are considered to have moderate to high market risk. Total returns experience significant variability across a broad range of interest rate scenarios. These funds typically exhibit significant exposure to interest rates and changing market conditions, as well as may face additional risks from mortgage prepayments, derivatives, leverage and illiquid markets.

Speculative Market Risk
Funds rated ‘V8 (ind)’, ‘V9 (ind)’, and ‘V10 (ind)’ are considered to have speculative market risk. Total returns may experience extreme variability across a broad range of interest rate scenarios. These funds typically exhibit substantial exposure to interest rates and changing market conditions, as well as mortgage prepayments, derivatives, leverage and illiquid markets.



IPO Grading Scale

The IPO grade scale as arrived at by SEBI is a 5 point scale with Grade 1 denoting poor fundamentals and Grade 5 indicating strong fundamentals. The grade assigned to any individual issue represents a relative assessment of the ?fundamentals? of that issue in relation to the universe of other listed equity securities in India.

 

Grading Category

Definitions

Fitch IPO Grade 5 (ind)

Strong fundementals

Fitch IPO Grade 4(ind)

Above average fundementals

Fitch IPO Grade 3 (ind)

Average fundementals

Fitch IPO Grade 2 (ind)

Below average fundementals

Fitch IPO Grade 1 (ind)

Poor fundementals



Structured Finance Loss Severity Ratings

Loss Severity (LS) Ratings provide an assessment of the relative loss severity of an individual tranche within a structured finance transaction, in the event that the tranche experiences a default.

LS Ratings will be assigned to structured finance tranches in the 'B' category and above. Structured finance tranches with a debt rating below that level will typically be assigned Recovery Ratings.


LS-1 The tranche has low risk of severe loss severity given default, as evidenced by a tranche loss multiple (TLM) in the range of 10.1x or greater. The TLM is calculated as the size of the tranche divided by the base case loss expectation for the collateral pool.
LS-2 The tranche has medium-to-low risk of severe loss severity given default, as evidenced by a TLM in the range of 4.1 to 10x. The TLM is calculated as the size of the tranche divided by the base case loss expectation for the collateral pool.
LS-3 The tranche has a medium risk of severe loss severity given default, as evidenced by a TLM in the range of 1.1 to 4x. The TLM is calculated as the size of the tranche divided by the base case loss expectation for the collateral pool.
LS-4 The tranche has a medium to high risk of severe loss severity given default, as evidenced by a TLM in the range of 0.51 to 1x. The TLM is calculated as the size of the tranche divided by the base case loss expectation for the collateral pool.
LS-5 The tranche has a high risk of severe loss severity given default, as evidenced by a TLM of less than 0.5x. The TLM is calculated as the size of the tranche divided by the base case loss expectation for the collateral pool.