Care Ratings today announced the launch of a new credit rating framework for infrastructure projects that would facilitate greater participation from long-term investors.
"Care Ratings, in consultation with the Ministry of Finance and other stakeholders, has developed a new credit rating framework for infrastructure projects to facilitate greater participation of long-term investors by enabling better risk-based pricing," the rating agency said in a statement.
The new ratings will be assigned on a scale from EL 1 to EL 7, with EL 1 having the lowest expected loss and EL 7 the highest.
"The new ratings will be a comment on the expected loss (EL) of a debt instrument after factoring in the probability of default and recovery prospects. The new credit rating addresses the concerns of the existing approach and focuses on recovery of dues by investors or lenders over the lifecycle of an infrastructure project.
"What would give comfort to long-term investors is that these ratings can be assessed for their differentiating and predictive abilities," it said.
The new rating scale can be used to assess projects across sub-sectors in infrastructure throughout their life cycle, it said.
Initially, ratings will be assigned only to completed and operational infrastructure projects. Conventional ratings scales will continue to be used for capital provisioning, while the new scale will be an additional input for debt market investors, the agency said.
"This rating system will go a long way in enhancing participation of investors and lenders, which in turn will provide a fillip to the development in the corporate bond market in these instruments.
"We are confident this will add a new dimension of buoyancy to a market that has hitherto been enveloped with some scepticism when it comes to infra projects," Care Ratings Managing Director and Chief Executive Officer Rajesh Mokashi said.
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