Skip to main content

Infra projects' credit system expected soon

By
Six registered agencies are said to be working collectively to come up with a new ratings system for such projects
In a global first, India is set to come out with a new ratings system for infrastructure projects in the coming months, to boost domestic funding and foreign investment in the infra space. Such a move will help prospective investors put money in a project based simply on the merits of the undertaking.
India is also likely to ask the BRICS Bank to adopt the same ratings system, as the multilateral development lender plans to set up a new credit ratings system for infrastructure projects.
Six registered credit agencies, including Crisil, CARE Ratings and India Ratings are said to be working collectively to come up with a new ratings system for such projects, Business Standard has learnt. In his 2016-17 Budget speech, Finance Minister Arun Jaitley had said that “a new credit rating system for infrastructure projects which gives emphasis to various in-built credit enhancement structures" would be developed, instead of relying on a “standard perception of risk which often results in mispriced loans”.
“The credit ratings agencies are at an advanced stage of releasing the new ratings system,” Economic Affairs secretary Shaktikanta Das told Business Standard. “BRICS Bank wants to set up new credit ratings system for infra projects. Since India is coming up with its own ratings for infra projects, we feel they should adopt ours. No country has it anyway,” said another government official aware of the developments.
The move will help revive infra projects in the country. The new ratings system will look at variable risk factors in public-private partnership projects to assess their viability. The new ratings will differentiate between credit rating of contractor versus the project. "Generally, infra projects - be it ports or airport - are given corporate ratings for the contractor. We have a legacy of relationship banking instead of project financing. The new ratings agency attempts to change that,” said the official cited above. Construction projects attract low corporate ratings due to their high gestation period. “These are not necessarily high-risk projects. For instance, road projects have a monopoly purchaser in the government, with under-rated debt, no obsolescence, and 20 years of assured traffic. Only construction takes longer.  Actually, this is a low-risk project and should get ‘AAA’ rating,” added the official. The government has asked ratings agencies to distinguish between corporate ratings and infra ratings by adopting 1,2,3 or x,y,z instead of the usual AAA or BBB.
Business Standard New Delhi,18th May 2016

Comments

Post a Comment

Popular posts from this blog

Govt’s gamble on GST cuts: What do the bond and currency markets signal?

By
  It’s not just humans who suffer from cognitive biases; markets do too. Interestingly, different financial markets exhibit distinct biases, each interpreting events through its own prism of prejudice. Take the recent announcements on GST reforms: equity markets have chosen to view them through the lens of growth, while bond and currency markets are focusing on potential macroeconomic risks—fiscal pressures and current account challenges. So, which lens captures the true pulse?Equity markets may be right in expecting GST reforms to revive consumption, which has remained lacklustre for a while. But the key question remains—will this revival come at the cost of broader macro stability?It is well known that consumption stocks have rallied since the GST rationalisation announcement. But what about bond markets? What signals are they sending since this rejig was announced from the ramparts of the Red Fort?The signs aren't encouraging. Bond prices have slumped and yields have surged sinc...
Post a Comment
Read more

Luxury carmakers urge clarity on GST rates to boost festive season sales

By
  A clear picture regarding new GST rates at the earliest will help the overall auto industry, including the luxury car segment, to regain momentum in the ongoing quarter, which generally sees enhanced sales on account of the festive season.The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation.In an interaction with PTI, BMW Group India President and CEO Hardeep Singh Brar said the recent speculation about the change in GST rates has caused uncertainty in the minds of consumers.Consumer interest and demand is strong, but they (prospective buyers) have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level, he noted."Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar stated.He also hoped that the sustainable p...
Post a Comment
Read more

Sebi proposes tighter norms for green bond third-party reviewers

By
  Sebi on Friday said it has proposed to tighten the norms to appoint independent third-party reviewers or certifiers for green debt securities to align them with requirements for other ESG-linked bonds.In a draft circular, Sebi said that the current norms for green bonds, introduced in February 2023, lack detailed requirements around reviewer independence, conflict of interest mitigation, and disclosure standards that are now in place for other ESG-linked securities under a June 2025 circular.The regulator's latest proposal seeks public comments on a revised framework that would bring parity by incorporating comprehensive criteria for third-party certifiers of green bonds on non-convertible securities.Under the proposed norms, issuers of green debt securities will need to appoint reviewers who are independent of their management, directors, and key managerial personnel. These reviewers will be remunerated in a way that prevents any conflicts of interest and possess relevant expert...
Post a Comment
Read more