1.

RATING METHODOLOGY CRISIL

CRISIL s methodology for providing credit quality ratings to bond funds encompasses of both qualitative and quantitative analyses.
1. Two broad types of analyses are done: (a) industry and business analysis, and (b) financial analysis. 2. The key factors considered in industry and business analysis are: (a) growth rate and relationship with the economy (b) industry risks characteristics, (c) structure of industry and nature of competition, (d) competitive position of the issuer, and (e) managerial capability of the issuer. 3. The important factors considered in financial analysis are: (a) earning power, (b) business and financial risks, (c) asset protection, (d) cash flow adequacy, (e) financial flexibility and (f) quality of accounting. 4. Subjective judgment seems play an important role in the assessment of the issue/issuer on various factors 5. While each factor is normally scored separately, no mechanical formula is used for combining the scores on different factors to arrive at the ratings conclusion. In the ultimate analysis all variables are viewed as interdependent

CARE
CARE undertakes rating exercise based on information provided by the company In-house database and data from other sources that CARE considers reliable. CARE does not undertake unsolicited ratings. The primary focus of the rating exercise is to assess future cash generation capability and their adequacy to meet debt obligations in adverse conditions. The analysis attempts to determine the long-term fundamentals and the probabilities of change in these fundamentals, which could affect the credit-worthiness of the borrower. The analytical framework of CARE's rating methodology is divided into two interdependent segments. The first deals with the operational characteristics and the second with the financial characteristics. Besides quantitative factors, qualitative aspects like assessment of management capabilities play a very important role in arriving at the rating for an instrument. The relative importance of qualitative and quantitative components of the analysis vary with the type of issuer

ICRA
ICRA considers all relevant factors that have a bearing on the future cash generation of the issuer. These factors include: industry characteristics, competitive position of the issuer, operational efficiency, management quality, commitment to new projects and other associate companies, and funding policies of the issuer. A detailed analysis of the past financial statements is made to assess performance under "real world" business dynamics. Estimates of future earnings under various sensitivity scenarios are drawn up and evaluated against the claims and obligations that require servicing over the tenure of the instrument being Rated. Primarily, it is the relative comfort level on the issuers' cash flows to service obligations that determines the Rating.

2. RATING PROCESS CRISIL CARE ICRA

3. RATING OUTCOME PRESENTATION CRISIL

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AAA (Triple A) Highest Safety Instruments rated 'AAA' are judged to offer the highest degree of safety, with regard to timely payment of financial obligations. Any adverse changes in circumstances are most unlikely to affect the instrument. AA (Double A) High Safety payments on the

CARE ICRA Credit Rating of Debt instruments ICRAs Long-Term Rating Scale
A. Long /Medium -term instruments (NCD/FD/CD/SO/CPS/RPS/L) Symbols Rating Definition CARE AAA: Instruments with this rating are considered to be of the best credit quality, offering highest safety for timely servicing of debt obligations. Such instruments carry minimal credit risk. CARE AA: Instruments with this rating are considered to offer high safety for timely servicing of debt obligations. Such instruments carry very low credit risk. CARE A: Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk. CARE BBB: Instruments with this rating are considered to offer moderate safety for timely servicing of debt obligations. Such instruments carry moderatecredit risk. Long-Term rating Scale: All Bonds, NCDs, and other debt instruments (excluding Public Deposits) with original maturity exceeding one year. LAAA The highest-credit-quality rating assigned by ICRA. The rated instrument carries the lowest credit risk LAA The high-credit-quality rating assigned by ICRA. The rated instrument carries low credit risk. LA The adequate-credit-quality rating assigned by ICRA. The rated instrument carries average credit risk. LBBB The moderate-credit-quality rating assigned by ICRA. The rated instrument carries higher than average credit risk. LBB The inadequate-credit-quality rating assigned by ICRA. The rated instrument carries high credit risk. LB The risk-prone-credit-quality rating assigned by ICRA. . The rated instrument carries very high credit risk. LC The poor-credit-quality rating assigned by ICRA. The rated instrument has limited prospects of recovery.

Instruments rated 'AA' are judged to offer a high degree of safety, with regard to timely payment of financial obligations. They differ only marginally in safety from 'AAA' issues.

A Adequate Safety

Instruments rated 'A' are judged to offer an adequate degree of safety, with regard to timely payment of financial obligations. However, circumstances changes in can adversely

affect such issues more than those in the higher rating categories. BBB (Triple B) Moderate Safety Instruments rated 'BBB' are judged to offer moderate safety, with regard to timely payment of financial obligations for the present; however, changing

circumstances are more likely to lead to a weakened capacity to pay interest and repay principal than for instruments in higher rating categories. BB Instruments rated 'BB' are judged

(Double B) to carry inadequate safety, with Inadequate regard to timely payment of Safety financial obligations; they are less likely to default in the immediate future than instruments in lower rating categories, but an adverse change in circumstances could lead to inadequate capacity to make payment obligations. B High Risk on financial

CARE BB: Instruments with this rating are considered to offer inadequate safety for timely servicing of debt obligations. Such instruments carry high credit risk.

LD The lowest-credit-quality rating assigned by ICRA. The rated instrument has very low prospects of recovery.

Instruments rated 'B' are judged to have high likelihood of default; while currently financial obligations are met, adverse business or economic conditions would lead to lack of ability or willingness to pay interest or principal.

Instruments rated 'C' are judged

Substantial to have factors present that make Risk them vulnerable to default; timely payment of financial obligations is possible only if favourable circumstances continue. .

ICRAs Medium-Term Rating Scale (only for Public Deposits) CARE B: MAAA The highest-credit-quality rating Instruments with this rating are considered assigned by ICRA. The rated deposits to offer low safety for timely programme carries the lowest credit risk servicing of debt obligations and carry MAA The high-credit-quality rating very high credit risk. Such assigned by ICRA. The rated deposits Instruments are susceptible to default. programme carries low credit risk. MA The adequate-credit-quality rating CARE C: Instruments with this rating are considered assigned by ICRA. The rated deposits programme carries average credit risk. to be having very high MB The inadequate-credit-quality rating likelihood of default in the payment of assigned by ICRA. The rated deposits interest and principal. programme carries high credit risk. MC The risk-prone-credit-quality rating CARE D: assigned by ICRA. The rated deposits Instruments with this rating are of the lowest category. They are either indefault programme carries very high credit risk. MD The lowest-credit-quality rating or are likely to be in default soon. assigned by ICRA. The rated instrument has very low prospects of recovery NCD Non Convertible Debenture FD Fixed Deposit CD Certificate of Deposit SO Structured Obligations CPS Convertible Preference Shares RPS Redeemable Preference Shares