CareEdge Group

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CareEdge Group (formerly known as CARE Ratings) is an Indian analytical company that provides services in credit ratings, research, risk management solutions, and advisory services. It is headquartered in Mumbai, Maharashtra.

History[edit]

CareEdge Group was established in 1993 as Credit Analysis and Research Limited (CARE). It commenced operations as India's second-largest credit rating agency, providing ratings for companies across diverse sectors. Over the years, CareEdge expanded its service offerings into areas like corporate governance ratings, value creation studies, SME ratings, mutual fund ratings, and infrastructure project assessments.

Key milestones include:

  • 1997: Launched India's first loan rating product
  • 2001: Founding member of Association of Credit Rating Agencies in Asia (ACRAA)
  • 2007: Executed agreements with banks to provide Basel II ratings
  • 2011: Acquired 75% stake in risk advisory firm Kalypto Risk Solutions (now CARE Analytics)
  • 2024: Unveiled sovereign rating methodology.[1]

CareEdge has international subsidiaries in Mauritius (CARE Ratings Africa), South Africa, and Nepal to offer ratings and advisory services in those regions.

Credit Ratings[edit]

CareEdge provides credit ratings and grading services across sectors like manufacturing, infrastructure, financial services, structured finance and more. It rates various debt instruments, bank facilities, IPOs and has developed methodologies for areas like urban local bodies, ESCOs, REITs/InvITs.

In March 2024, CareEdge Ratings upgraded Punjab National Bank to Care AA+ (Stable), citing improving asset quality[2]

Research and Advisory[edit]

Through subsidiaries like CARE Analytics and CARE Advisory, CareEdge offers services in areas like risk management, IFRS implementation, financial restructuring, business intelligence and training.

Sovereign Ratings[edit]

In 2024, CareEdge unveiled its sovereign rating methodology to assess the creditworthiness of sovereign debt issuers globally. It plans to provide sovereign ratings after receiving necessary approvals.[3] In 2024 the African Peer Review Mechanism and Care Ratings (Africa) signed a Memorandum of Understanding to collaborate in developing credit rating standards for Africa.[4]

Involvement in the IL&FS Crisis[edit]

CareEdge Group was one of the credit rating agencies responsible for rating Infrastructure Leasing & Financial Services and its subsidiaries: CareEdge, along with ICRA Limited and other rating agencies, continued to assign high ratings to IL&FS group entities despite being aware of their deteriorating financial condition. This resulted in a delay in downgrading IL&FS's debt instruments until after defaults had already begun.[5]

The agency's role in the crisis has been subject to significant scrutiny: An audit conducted by Grant Thornton revealed that IL&FS management had indeed interfered with the rating process, influencing CareEdge and other agencies to maintain favorable ratings. This interference included providing incomplete or incorrect information to avoid downgrades.

As a result, the Securities and Exchange Board of India (SEBI) imposed penalties on CareEdge and ICRA for lapses in their rating process related to IL&FS.[6]

The IL&FS crisis exposed significant flaws in the credit rating process and the oversight of financial institutions in India. As one of the rating agencies involved, CareEdge Group faced criticism and regulatory action for its role in the crisis. The incident has led to calls for greater transparency and accountability in the credit rating industry to prevent similar occurrences in the future. Like other major rating agencies, CareEdge has faced criticism for potential conflicts of interest in its issuer-pays business model. There have been concerns about the quality and timeliness of some of its ratings during periods of stress.

An independent enquiry into the leadership of Rajesh Mokashi who was the CEO of CareEdge during the time of the crisis revealed that there was no wrongdoing on his part.[7]

Subsequent to the crisis, the company hired an outside CEO, Ajay Mahanjan to take over leadership of the business. In 2022, Mehul Pandya was internally promoted to become CEO of the group.[8][9]

Other key executives include Rajani Sinha (Chief Economist) and Kiran Kavala (Head - Sovereign Ratings), Dinesh Sharma and Revati Kasture. CareEdge is recognized and regulated by the Securities and Exchange Board of India (SEBI) as one of the leading credit rating agencies in India. It aims to enhance its global footprint and provide diverse analytical services to investors and issuers.

References[edit]

  1. ^ "CareEdge Ratings to assess credit profile of sovereign debt issuers". The Hindu Business Line. 30 Jan 2024. Retrieved 17 June 2024.
  2. ^ Kumar, Shivendra (30 March 2024). "ARE Ratings upgrades PNB Housing Finance's various instruments". The Economic Times. Retrieved 17 June 2024.
  3. ^ "CareEdge Ratings to assess credit profile of sovereign debt issuers". The Hindu Business Line.
  4. ^ "The APRM and CARE Ratings (Africa) Signed a Memorandum of Understanding for Credit Rating Collaboration". African Peer Review Mechanism. Retrieved 17 June 2024.
  5. ^ Roy, Abhirum (21 July 2019). "Rating agencies knew of stress at IL&FS, but gave good ratings: audit". Reuters. Retrieved 17 June 2024.
  6. ^ Upadhyay, Jayshree (26 Dec 2019). "Sebi penalizes rating agencies over lapses in IL&FS". Mint. Retrieved 17 June 2024.
  7. ^ "Care Edge Ratings: Inquiry into potential misconduct by former top executives not established". Business Line. 12 April 2022. Retrieved 17 June 2024.
  8. ^ "Ajay Mahajan exits CARE Ratings". The Hindu Business Line. 27 April 2022. Retrieved 17 June 2024.
  9. ^ "Best Advice: 'Don't shy away from challenges,' says Mehul Pandya, MD and CEO of CareEdge". Indian Business Today. 17 October 2023. Retrieved 17 June 2024.
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