Sebi chief ‘unhappy with rating agencies’

NEW DELHI: Capital market regulator Sebi on Monday said it is "not happy" with the current state of affairs at credit rating agencies and will soon float a discussion paper for a new set of norms for them.

This follows within days of the watchdog tightening the disclosure norms for the credit rating agencies (CRAS) amid concerns about delayed rating action regarding debt-ridden firms.

"We are bringing out a discussion paper within a month," Tyagi said in reply to a question on how would Sebi deal with the situation if the rating agencies fail to adhere to the new set of stricter norms.

Tyagi further said the regulator will look at the views from all stakeholders before taking a final call.

"We are not happy with the current state of affairs at the credit rating agencies," the Sebi chairman said in a strong message for the CRAS which have been facing a lot of flak lately, especially with regard to limited warning from their side about defaults by companies on bonds.

Last week, Sebi asked the CRAS to proactively monitor financial health, including share price movement, of companies to provide timely and accurate ratings on their debts.

The decision followed several instances of the CRAS not taking cognisance of delays in servicing debt obligations by the issuers they rate, even though the information has already been discounted by the market.

Besides, the Securities and Exchange Board of India (Sebi) has increased disclosure requirements for the CRAS and want them to monitor the exchange websites for disclosures made by the issuers.

Sebi asked the rating agencies to carry out a review of the ratings upon the "occurrence of or announcement/news of material events", including financial results, any significant decline in share/bond prices of the issuer or group companies if it is not in line with the overall market movement and any attachment or prohibitory orders against the company.

Besides, the rating agencies would have to seek a 'No Default Statement' from the issuer at the end of each month.

In the rating action, disclosure report by the CRAS would include key financial indicators and ratios for the issuer for the last and current financial year, in tabular form, as well as any other significant information relevant to the issuer and its sector, the regulator said.

Sebi has also asked the CRAS to make disclosures in case of considerable delay in providing information by the issuer.

"If the issuer does not share information sought by the CRA within seven days of seeking such information from the issuer, even after repeated reminders... the CRA shall take appropriate rating action depending upon the severity of information risk...," it said.

Rating agencies have to accept an appeal from the issuer with regard to review of rating within five working days.

"In case rating is not accepted by the issuer within a month of communication of rating by the CRA to the issuer, the same shall be disclosed as 'Non Accepted Rating' on the CRA'S website," Sebi said.

The CRAS have been advised to refrain from giving indicative ratings without having a written agreement in place.

"In case such indicative ratings are provided by the CRA, it shall be considered as aiding and abetting the issuer in suppression of material information by the CRA," Sebi said.

Separately, Sebi plans to soon come out with a detailed discussion paper on CRAS as it seeks to check the menace of rating shopping and pickand-choose approach in their actions.

Sebi has also asked Debenture Trustees to have adequate systems to ascertain the status of payment of interest or principal by issuer companies on due dates in a timely manner and efficiently share such information with the CRAS. MUMBAI: The trading in corporate debt securities at leading stock exchanges NSE and BSE has surged 66.5 per cent to a record Rs 4.34 lakh crore during the first quarter of the current fiscal, according to official data.

Trading worth Rs 2.61 lakh crore in corporate bonds was seen on the two bourses during April-june period of 201617, as per the data compiled by capital market regulator Sebi.

During the first quarter of 2017-18, the National Stock Exchange (NSE) represented the largest share of trading in corporate bonds at over 70 per cent. In the period under review, Bonds worth Rs 3.12 lakh crore were traded on the exchange.

The stock exchange had witnessed trades amounting to Rs 2.10 lakh crore in the first quarter of the last fiscal.

The remainder of the bonds worth Rs 1.22 lakh crore were traded on the BSE during the first quarter of the current fiscal -- more than double the amount recorded in the same period year-ago.

During the current fiscal, June recorded the highest value in terms of trading in corporate debt at Rs 1.69 lakh crore. Bond transactions worth Rs 96,948.64 crore took place in the same month during the previous fiscal.

In April this fiscal, Rs 1.39 lakh crore worth of trading was reported while in May it was nearly Rs 1.26 lakh.

Corporate bonds or debt securities issues are increasingly becoming a preferred route for companies to raise funds for various business purposes. like building a new plant or purchasing equipment.

When an entity buys a bond, one lends money to the firm that issued the security and in exchange, the company promises to return the money with interest on a specified maturity date.