Country's first credit rating agency soon

HIMALAYAN NEWS SERVICE

KATHMANDU: Nepal’s first credit rating agency — Icra Nepal — will be able to start operations before the month is over as the regulator is in the final stage of granting it a licence.

“We have finished examining the infrastructure and set up of Icra Nepal and will be submitting the report by next week,” said director of Securities Board of Nepal (Sebon) — the capital market regulator of Nepal — Niraj Giri.

The regulator gives a final approval after inspecting the infrastructure and only then can the rating agency start operations. “If everything is found to be satisfactory then the licence can be granted in the next few weeks,” he added.

The agency had applied for the final licence about three months back after completing its set up. Icra Nepal was granted Letter of Intent to undertake the process to start a credit rating agency here in Nepal by Sebon in August 2011.

India’s Icra will have 55 per cent stake in the rating agency while the remaining stake is held by Credit Information Bureau, Himalayan Infrastructure Fund, and a few Nepali banks. The Credit Rating Agency Regulation 2068 states that a Nepali credit rating agency needs to have a minimum of 25 per cent stake of a foreign credit rating agency.

“We will start operations within a fortnight of getting the licence,” said managing director and CEO of Icra Nepal Dipal Kafle.

Credit rating agencies rate the credit worthiness and financial soundness of an entity — individual, company or country — based on their financial indicators. The credit ratings are supposed to be a simple yet effective indicator aiding the ordinary investors to understand the risks involved in investment process.

The agency analyses a company based on the comparison of a certain financial ratios with chosen benchmarks, and an analysis of corporate governance along with focusing on the legal, political and economic environment.

In the initial phase, Icra Nepal plans to focus on rating firms issuing shares, bonds and preference shares, as per the regulator’s directives but we will also rate mutual funds and other such investment instruments once they come into existence, said Kafle.

According to Credit Rating Agency Regulation 2068, companies planning to issue ordinary shares, bonds, debentures, and preference shares exceeding Rs 30 million in value have to be rated by a rating agency. The rating agencies also have to continue rating a company for the next two consecutive years once it has rated the concerned company.