Moody's okays 3-year lock-in of ICRA stake

Global rating agency Moody's Corporation has agreed to a three-year lock-in of its 20 per cent stake in ICRA Ltd to facilitate the latter's initial public offer (IPO).

Moody's, which holds a little over 28 per cent in ICRA through its indirect subsidiary Moody's India, has also agreed not to sell its remaining 8 per cent stake for at least one year.

The decision comes after the Securities and Exchange Board of India (Sebi) pointed out a "technical violation" by ICRA in the latter's draft red herring prospectus filed before Sebi.

ICRA had said it was a "professionally managed company" and that it did not have "any promoters or promoter group".

This is in violation of Sebi guidelines for credit rating agencies, according to which, any person or group holding more than 10 per cent in a credit rating agency is considered a "promoter".

Sebi sources said it insisted on a lock-in by Moody's so that retail investors would be assured of a long-term commitment by a big group like Moody's in ICRA. When contacted, P K Chaudhury, vice-chairman, ICRA Ltd, refused to confirm or deny the matter.

It is, however, not known whether Moody's India has agreed to term itself as the "promoter" of ICRA Ltd.

ICRA, when it filed for a renewal of its registration with Sebi on August 12, 2005, had described the State Bank of India (SBI), IFCI Ltd and Moody's India as its promoters, since each of them held more than 10 per cent in its share capital.

ICRA's IPO is an offer for sale by existing shareholders IFCI (21.13 per cent), specified undertaking of UTI (8.69 per cent) and SBI (11.59 per cent).

Through the IPO, both IFCI and the specified undertaking of UTI (SUUTI) will divest their entire stakes, while SBI will bring down its stake from 11.59 per cent to 9.99 per cent. The draft red herring prospectus by ICRA, which was filed on August 9, is awaiting final observations from Sebi.

The three-month deadline for clearing the IPO prospectus expired on November 9. It is not clear whether Sebi will ask ICRA to refile the prospectus.