CRISIL Ratings, in consultation with the Ministry of Finance and other stakeholders, has developed a new credit rating framework for infrastructure sector based on the expected loss (EL) methodology. EL ratings provide additional credit information to investors (especially long term investors) of infrastructure debt to take informed calls. Given that the Government of India has plans to significantly increase infrastructure investments over the next 5 years, we believe EL Ratings can help the investors in deciding their investment policies and decisions, with more confidence.
EL rating indicates the expected loss an investor may incur over the life of a debt instrument. By construct, conventional credit rating methodology (based on the probability of default, or PD, approach) focuses only on the likelihood of default and does not take into account post-default recovery prospects of infrastructure projects. EL rating seeks to fill this gap.
It also focusses on recovery of dues to investors and lenders over the life of an infrastructure project, by taking into account the presence of embedded safeguards. Thus, EL rating of infrastructure projects can help issuers raise long-term capital at competitive cost and, at the same time, help investors manage their ALM without taking undue risk.
Recently, the Insurance Regulatory and Development Authority of India also facilitated use of EL rating to classify certain infrastructure investments as approved investments, a much desired initiative given the huge requirement of funds for infrastructure in India.
In this context, CRISIL Ratings invites you to a virtual discussion forum titled 'EL ratings, the big differentiator in infrastructure financing' where our experts will cover following aspects:
What is EL rating?
How is EL rating different from PD rating?
What are the benefits of Infra EL rating to investors and issuers?
This will be followed by a Q&A session.
We hope the discussion will help you get an in-depth understanding of the new rating.
