S&P offer may put spoke in Crisil's overseas ambitions

Standard & Poor's (S&P) open offer to acquire majority control in Crisil could put the brakes on the Indian rating agency's overseas expansion plans.

Crisil proposes to further expand its operations overseas, having already taken minority stake in a Caribbean rating firm. With S&P having a global footprint, it is likely that future expansion plans could take a hit.

"The two companies need to sit down and work out how best they can grow together," said industry sources close to the development.

S&P's currently holds 9.45 per cent in Crisil, and this is its lowest foreign holding among rating agencies in the country today. Moody's holds 30 per cent in ICRA, while Fitch Ratings is a wholly owned subsidiary of UK-headquartered global rating agency.

The open offer has not surprised any body as globally S&P holds majority stakes in each of its ventures except for India where it has been holding a minority stake for nine years. It started its affiliations with Crisil in 1996, which then fructified into a "small" stake of 6 lakh shares in 1997.

Despite proposing to take majority stake up to 65 per cent, S&P has no plans to change the name of the Indian entity, which it feels has a strong brand name in India.

At the same time, the pricing of the open offer takes into account the strong management team and talented manpower. As such, it is unlikely to make any structural change at Crisil, but could induct additional board members.

S&P wants to integrate Crisil's operations with itself, which could result in an end to the independent growth ambitions of the Indian rating agency. S&P president Kathleen A Corbet said "a majority position will enable Standard & Poor's to integrate Crisil more fully into our operations for the benefit of the Indian and international marketplace."

When contacted, Ravimohan, managing director Crisil said: "it is too premature to get into these issues now. We have a fair amount of talent, prospects and ability."

S&P however, in its press release pinpointed out 'international marketplace' indicating that it may not favour competition within the group as it has operations in 21 countries.

Crisil, meanwhile, had plans to harness the capabilities it had built for opportunities abroad. It had acquired 9 per cent strategic equity stake in the Caribbean Information and Credit Rating Agency for $ 300,000 in March 2004.

The Caribbean rating agency is the first regional rating agency in the world serving 19 countries. Crisil also provided technical assistance to the agency to establish and stabilise its operations.

Further, a relook at the independent existence of Crisil's London-based subsidiary EconoMatters Limited, is also likely. The gas consulting and information company was Crisil's first overseas acquisition in December 2003.

Crisil also has strategic alliance with US-based National Economic Research Associates (NERA) for global expertise in regulations and regulatory reforms. This is a unit of Mercer Consulting Group and a subsidiary of Marsh and Mclennan Companies Inc.