Rating Products
Companies or borrowers avail various types of loan facilities from banks to fulfill their fund requirements. These loans can be either Funded, where the bank disburses actual cash, or Non-funded, where cash disbursement occurs only upon devolvement of these credits. Bank loans are used for short-term fund needs (such as working capital loans, overdrafts, revolving cash credit, import credit, export credit, etc.) and long-term loans for project funding. Non-funded loans typically take the form of guarantees or documentary credits.
CARE Ratings Nepal Limited's (CRNL) Bank Loan Rating (BLR) is a facility-specific assessment of credit risk. The primary focus of this rating is to evaluate the future cash generation capability and its adequacy to meet debt obligations according to the repayment terms. The analysis aims to determine the fundamentals of the business and the industry, as well as the probabilities of changes in these fundamentals that could impact the borrower's creditworthiness. Once assigned, the rating undergoes annual surveillance to ensure its continued relevance.
The primary focus of the rating exercise is to assess future cash generation capability and the adequacy to meet debt obligations in adverse conditions. The analysis therefore attempts to determine the fundamentals and the probabilities of change in these fundamentals, which could affect the creditworthiness of the issuer. Debt rating can be done for Bonds, Debentures, Commercial Papers, Certificate of Deposits, Subordinated Debt, Fixed Deposits, Bank loan ratings and other such debt obligations..
An Issuer Rating is an assessment of the credit risk specific to an issuer. Unlike long-term instrument ratings, Issuer Ratings are not tied to any particular instrument issued by the entity but rather to the overall creditworthiness of the issuer itself.
Issuer Ratings consider the expected performance of the entity over an intermediate time horizon, typically around three years. They reflect the issuer's capability to service its financial obligations. These ratings are valuable to lenders and investors as they provide insight into the credit quality of the issuer, helping them make informed decisions about lending or investing in the entity.
CRNL has a comprehensive methodology for Claims Paying Ability (CPA) / Financial Strength Rating (FSR) for insurance companies. The rating process involves the analysis of qualitative factors such as an insurer's business fundamentals, competitive position, management, ownership structure, insurance regulations, underwriting, and investment strategies. Quantitative factors include the analysis of the company's risks underwritten, asset quality, profitability, liquidity, solvency, and asset-liability management methods.
CRNL's IPO grading is a service aimed at facilitating the assessment of equity issues offered to the public. It provides an independent and professional opinion on the fundamentals of the issuer. The grade assigned to any individual issue (IPO, FPO, Rights Issue, Bonus Share) represents a relative assessment of the 'fundamentals' of that issuer. CRNL's IPO grading involves an in-depth assessment of various quantitative and qualitative parameters of the issuer. Quantitative parameters include the growth prospects of the industry, the financial strength, and operating performance of the issuer. Qualitative parameters primarily include management capability, promoters' evaluation, accounting policies, and corporate governance practices.
SME Ratings indicate the relative level of creditworthiness of an SME entity, adjudged in relation to other SMEs. It is an issuer specific rating reflecting overall general creditworthiness. It is a onetime assessment of credit risk. The rating exercise would take into account the industry dynamics, operational performance, financial risk characteristics, management capability and the future prospects of the entity for arriving at the overall risk profile of the SME unit.
