The debt binge in India is biting and there are numbers to show how companies are slipping below the radar. Around 3,900 companies, the debt instruments of which are rated by Crisil, have stopped providing information or cooperating regarding the same with the rating agency.
SEBI last year had mandated credit rating agencies to provide information about companies that do not provide information about their financials or do not cooperate with them but not suspend rating of the instrument till it expires. Crisil says it has put together a framework to assess the risk of information adequacy when reviewing the risk of such non-cooperative issuers.
“Crisil’s portfolio had 3,890 such (non-cooperative) issuers as on March 31, 2018,” the rating agency said in its ratings round-up report for fiscal 2018.
Non-cooperation happens when a company refuses to share certain information that is key to the rating process. Before the SEBI diktat, rating agencies used non-cooperation as a ground for suspending the rating on some companies, which got it done from other agencies. To plug any loopholes, SEBI had said that if a company that has not cooperated with one rating agency, approaches another for a rating, the latter will have to include the instance of non-cooperation in its rating press release.
‘Sending wrong signals’
“It is worrisome if companies have stopped cooperating with credit rating agencies to get their debt instruments rated,” said Deven Choksey, Promoter, KR Choksey Investments Managers.
“This is sending the wrong signals,” he added.
Crisil is just one rating agency and there are many more such agencies that have a long list of those not cooperating with them, all of which makes for a scary scenario and opens up a Pandora’s Box, experts say. Crisil has outstanding ratings on 12,500 issuers.