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How Credit Rating Agencies Determine Ratings
A credit rating is the output of a structured process that combines quantitative financial analysis with qualitative business and management judgement.
The Building Blocks
Rating agencies build their assessment from four broad risk categories: business risk (industry structure, competitive position, revenue visibility), financial risk (leverage, coverage, profitability, cash flow), management and governance quality, and liquidity. Each category is assessed against sector-specific criteria published by the agency.
From Analysis to Opinion
Analysts translate this multi-factor analysis into a rating symbol by comparing the company against its published criteria and against how similarly positioned peers have historically been rated. The final rating reflects a rating committee's collective judgement, not a mechanical formula applied by a single analyst.
Because a rating is ultimately an opinion on future debt-servicing capability, agencies also build projections and run scenario analysis, rather than relying solely on historical financial performance.
Talk to FinMen Advisors — for help preparing for a rating exercise, write to marketing@finmen.in or call +91 77387 14680.
Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.
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10 Things Companies Should Never Do During a Rating Exercise
Certain behaviours consistently undermine credibility with rating analysts and are worth actively avoiding.
The List
• Do not submit inconsistent figures across different documents without reconciling them first
• Do not withhold information about known risks, since this typically surfaces anyway and damages credibility once discovered
• Do not send conflicting messages through different management representatives
• Do not treat the management meeting as a one-way sales presentation rather than an interactive discussion
• Do not attempt to negotiate or pressure the agency toward a specific rating outcome — this is outside the process and generally counterproductive
• Do not delay responses to follow-up queries, since this stalls the timeline and can read as evasiveness
• Do not present overly optimistic projections without a credible, well-supported basis for the assumptions
• Do not overlook the surveillance obligations that continue after the rating is assigned
• Do not assume a good current-year performance alone guarantees a favourable outcome, since agencies assess trends and sustainability, not a single year in isolation
• Do not skip internal preparation on the assumption that strong financials will speak entirely for themselves
Talk to FinMen Advisors — for help preparing for a rating exercise, write to marketing@finmen.in or call +91 77387 14680.
Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.
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10 Things Companies Should Do Before a Rating Exercise
A short, practical pre-rating checklist that materially improves how smoothly the process runs.
The Checklist
• Reconcile all financial statements, debt schedules, and CMA data before submission, so figures are internally consistent
• Prepare a concise business overview presentation covering strategy, competitive position, and outlook
• Identify and prepare all management representatives likely to be involved in discussions
• Compile a complete, organised documentation pack in advance rather than assembling it reactively
• Review known weaknesses honestly and prepare a credible narrative addressing each one
• Benchmark key financial ratios against rated peers to understand where the company stands
• Clarify contingent liabilities, guarantees, and related-party transactions internally before they are raised
• Align messaging across finance, operations, and promoters on any sensitive recent developments
• Confirm near-term liquidity position and headroom under existing covenants
• Build in a realistic timeline buffer, especially if the rating is needed for a specific funding deadline
Talk to FinMen Advisors — for help preparing for a rating exercise, write to marketing@finmen.in or call +91 77387 14680.
Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.
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Credit Rating Process: Common Mistakes Companies Make
Most process-related setbacks are avoidable and stem from a handful of recurring, well-understood mistakes.
Documentation and Timing Mistakes
• Submitting incomplete or inconsistent documentation, requiring multiple follow-up rounds
• Waiting until close to a funding deadline to initiate the rating process
• Failing to reconcile figures across different documents — for instance, debt figures that do not match between the CMA data and sanction letters
Communication Mistakes
• Downplaying or omitting known risk factors, which then surface during the agency's own diligence and undermine credibility
• Sending different messages through different functional leaders in separate conversations
• Over-rehearsed, scripted answers that read as evasive rather than substantive
Strategic Mistakes
• Treating the rating exercise as a one-time compliance task rather than an ongoing relationship requiring continuous engagement
• Not preparing a clear narrative for significant one-off events, such as a large asset sale or a related-party transaction
• Underestimating how much weight agencies place on liquidity and near-term debt servicing capacity relative to headline profitability
Talk to FinMen Advisors — for help preparing for a rating exercise, write to marketing@finmen.in or call +91 77387 14680.
Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.
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How Credit Rating Advisors Support the Rating Process
External advisors help companies prepare a stronger, more complete case for the agency to assess — they do not, and cannot, determine the rating outcome.
Where Advisors Add the Most Value
• Organising documentation into the structure and format agencies expect
• Helping management anticipate and prepare for likely analyst questions
• Benchmarking the company's financial metrics against rated peers ahead of time
• Identifying likely rating sensitivities early enough to address them proactively
• Coordinating between finance, operations, and promoters to ensure a consistent narrative
Where Advisory Support Ends
Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies based on their own independent methodologies. Advisory support is typically most useful in the preparation phase before the analyst engagement; the substantive management discussion with the agency is generally conducted directly by company management, not by the advisor on the company's behalf.
A reputable advisor is explicit about this boundary — the value they add is in preparation and presentation quality, not in influencing or guaranteeing any particular rating outcome.
When Advisory Support Is Most Useful
Advisory support tends to matter most for first-time rating exercises, for companies preparing for a rating upgrade review, and for businesses navigating a rating exercise shortly after a significant event such as an acquisition, a large capex programme, or a change in ownership.
Talk to FinMen Advisors — for help preparing for a rating exercise, write to marketing@finmen.in or call +91 77387 14680.
Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.
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What Is the Role of Promoters During a Credit Rating?
Promoters are assessed on strategic vision, financial commitment, and track record — dimensions that financial statements alone cannot capture.
Demonstrating Commitment and Support
For closely held businesses in particular, promoter willingness and financial capacity to support the company in a downturn is a recognised input into Indian rating methodologies, and promoters are typically expected to speak directly to this in management discussions.
Setting Strategic Direction
Promoters are usually best placed to articulate the company's longer-term strategy, rationale for major investment decisions, and approach to diversification or group structuring — topics that sit above the day-to-day operating detail typically covered by the CFO or operating heads.
Track Record as a Credibility Anchor
A promoter's history of financial discipline — across this company and any group entities — functions as an important credibility anchor in the governance assessment, since it offers agencies a longer track record than any single year's financial statements can provide.
Talk to FinMen Advisors — for help preparing for a rating exercise, write to marketing@finmen.in or call +91 77387 14680.
Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.
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What Is the Role of a CFO During a Credit Rating?
The CFO typically functions as the primary financial interface between the company and the rating agency throughout the assignment.
Owning the Financial Narrative
The CFO usually leads on compiling financial documentation, explaining variances and trends, walking analysts through the working capital cycle and liquidity position, and defending the assumptions behind financial projections.
Coordinating the Information Flow
Because the CFO typically has visibility across treasury, accounting, and financial planning, this role often becomes the internal coordination point for pulling together documentation from other departments and ensuring the agency's information requests are answered completely and on time.
Building Analyst Confidence
A CFO who engages with precision — explaining covenant headroom, debt maturity profiles, and funding plans in specific rather than general terms — meaningfully strengthens the agency's confidence in the reliability of the company's financial reporting and planning, which is a distinct qualitative input into the overall assessment.
Talk to FinMen Advisors — for help preparing for a rating exercise, write to marketing@finmen.in or call +91 77387 14680.
Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.
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What Is the Role of Management in the Rating Process?
Management is the primary source of both data and narrative context, and its engagement quality is itself an input into the qualitative assessment.
Providing Accurate, Timely Information
Management teams — spanning finance, operations, and business development — are responsible for compiling and validating the documentation the agency requires, and for ensuring it accurately reflects the current state of the business.
Articulating Strategy and Risk Awareness
Beyond data, management is expected to articulate the company's strategic direction, its understanding of the risks specific to its industry and business model, and credible plans for managing those risks — an area where day-to-day operating leaders often add more insight than financial statements alone can convey.
Consistency Across Functions
Rating agencies pay close attention to whether different functional leaders — finance, operations, sales — tell a consistent story. Significant inconsistencies between what different management representatives say can raise questions about internal alignment and information quality.
Talk to FinMen Advisors — for help preparing for a rating exercise, write to marketing@finmen.in or call +91 77387 14680.
Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.
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