Rating Process
The BWR Credit Rating Process is illustrated in the following flowchart. The Rating Process is broadly divided into three main phases: (1) Pre-Rating, (2) Rating, and (3) Post-Rating Phases.
BWR Credit Rating Process
The credit rating process with BWR begins when an issuer or their representative reaches out to BWR's Business Development Team. This team identifies potential clients and ensures transparent communication regarding the fee structure, which is finalized before the commencement of the rating process.
BWR charges an initial rating fee at the onset of the rating process and an annual surveillance fee for the duration of the rating’s validity. The fee is determined by factors such as the principal amount of the securities or facilities being rated and the complexity of the assignment. In specific cases, such as for volume issuers or corporate groups, alternative fee structures may be offered. Comprehensive details on these arrangements are provided in BWR’s Policy on Compensation Arrangements (link).
The Business Development Team operates independently to determine rating fees, with no involvement from BWR’s analytical team. Once the issuer agrees to the terms in the rating contract or agreement, they provide the required initial information and the necessary rating fees to initiate the process.
Mandate Allocation
BWR handles mandates through a structured and transparent process designed to ensure accuracy and reliability in credit rating assignments. Mandates are categorized into two types: issuer ratings and issue ratings.
- Issuer ratings assess an entity's fundamental creditworthiness, reflecting its overall ability to meet financial obligations without being tied to specific financial instruments.
- Issue ratings, on the other hand, evaluate the entity’s capacity to service debt linked to a specific instrument, such as Non-convertible Debentures (NCDs). These ratings consider factors like collateral, guarantees, or insurance to provide investors with additional assurance.
Upon receiving a mandate, BWR gathers financial and non-financial information from the client, adhering to its Policy on Indicative Information Required for Credit Ratings(policy link). This information is then uploaded into BWR’s proprietary B-CRISP software for further processing.
Mandates are allocated to an analytical team consisting of an analyst, a co-analyst, and a Sector Head providing expert guidance. The allocation process ensures alignment between the complexity of the case, the client category, sector specialization, and the competencies of the assigned team, guaranteeing thorough and precise evaluation.
Analytical Process
The rating process begins with collecting comprehensive information about the client and their financial instruments from the client and other reliable sources. This data is then analyzed, validated, and interpreted, followed by the use of financial projection models to assess future expected performance. To ensure accuracy and objectivity, a peer review is conducted as part of the evaluation.
BWR has developed industry-specific financial projection models to facilitate a detailed and independent assessment of an issuer’s future financial performance. These models enhance the precision of rating evaluations by incorporating cash-flow-based metrics into forecasting, providing deeper insights into the issuer's financial outlook.
Management Interaction and Site Visits for In-Depth Analysis
Investor interests are protected through transparent communication with issuers, facilitated by management discussions and site visits, particularly for new manufacturing projects. These interactions provide valuable insights into the issuer's operations, strategies, and business environment. Additionally, engagements with bankers further strengthen the financial analysis. Conducted either on-site or via telephone, these interactions enable the analytical team to evaluate industry dynamics, competitive positioning, operational efficiency, management expertise, financing strategies, and financial performance. For more details, refer to BWR’s Policy on Management Interaction and Site Visits (https://www.brickworkratings.com/download/PolicyForManagementInteractionAndSiteVisits.pdf).
BWR ratings integrate financial projections and management outlook to evaluate key assumptions, strategies, and contingency plans. Using advanced models, the process assesses creditworthiness by analyzing financial health, management practices, industry trends, and macroeconomic conditions. This blend of quantitative and qualitative analysis is compiled into a comprehensive rating note, forming the foundation for the final rating decision.
Rating Committee Procedures and Assignment of Ratings
BWR analysts follow a structured rating process, guided by established criteria, to evaluate entities and prepare a comprehensive ‘Rating Note.’ This document, summarizing the analysis, is presented to a Rating Committee for review and decision-making. The committee comprises experts from diverse fields, including banking, capital markets, risk management, and public finance, ensuring a wide range of perspectives.
Rating Committees uphold objectivity and rigor by relying on collective deliberation rather than individual judgment. They finalize rating actions—such as assignments, upgrades, downgrades, outlook revisions, and withdrawals—through majority votes after thorough discussions on the analyst's findings. The committees, consisting of both internal and external members without business responsibilities, maintain independence. Potential conflicts of interest are proactively managed through strict recusal protocols.
Rating Disclosure and Appeals Process
Once the Rating Committee approves the rating, BWR shares the rating rationale (press release) with the issuer. This document outlines the key analytical factors influencing the rating decision, ensuring the issuer understands the basis for the assigned rating.
Accepted ratings are promptly published on the BWR website. If the issuer does not accept the rating within one month, it is disclosed as a non-accepted rating, adhering to recent SEBI guidelines.
Issuers who disagree with a rating decision, including outcomes from periodic reviews, can appeal by submitting new, material information addressing the constraints identified in the rating rationale. The Appeal Committee evaluates this information and issues a final decision. For more details, refer to BWR’s Policy on Review/Appeal of Ratings by Rated Entities (Policy-on-Review-Appeal-of-Ratings-by-Rated-Entities-Aug2024.pdf).
The rating rationale/press release serves as the sole public document for initial, reaffirmed, and upgraded ratings in both new and surveillance cases. Published in compliance with SEBI Circular guidelines, it provides concise details about the issuer, issue terms, and key rating factors. The press release is disseminated, and relevant stock exchanges or debenture trustees are notified within two working days of the issuer's acceptance of the rating.
Timeframe
BWR typically takes around four weeks (20 working days) to assign a bank loan or debt instrument rating. The overall timeline may vary depending on factors such as the availability of information with BWR, access to public information, the cooperation of the borrower/issuer in providing the necessary details, and the time allocated for management discussions. However, BWR aims to deliver rating decisions within shorter timeframes to accommodate urgent requirements.
Surveillance
Once a rating is made public, BWR continuously monitors it throughout the validity of the facility or financial instrument, or until the rating is withdrawn. Annual reviews are mandatory for Bonds/NCDs and BLRs, with additional reviews conducted as necessary, based on early warning signals or significant events. Issuers are required to fulfill obligations such as paying fees, providing necessary information, and submitting a monthly 'No Default Statement' to confirm timely payments.
The analytical team maintains regular communication with issuers to ensure the prompt exchange of financial and other relevant information. BWR also engages with the issuer's management at least annually, focusing on developments since the last interaction and the outlook for the coming year.
The review process follows the same steps as the initial rating assessment. Analysts and Sector Heads present their recommendations to the relevant Rating Committees, where cases are deliberated and decisions are made. Procedural steps, including issuing rating letters and publishing rating rationales, adhere to the same protocols as the initial rating process, with the exception that client acceptance is not required for review cases.
Non-Cooperation by the Issuer
In cases of non-cooperation by the issuer—such as failure to provide required information for the rating, non-payment of surveillance fees, or non-submission of the regulator-prescribed No Default Statement (NDS)—BWR will, in accordance with regulations, continue to review the rated security or loans on a best-effort basis. This process relies on the best available information, adheres to established rating procedures and policies, and accounts for the risk of inadequate information.
Non-cooperation instances are clearly highlighted in the press release published on BWR's website. In such cases, the rating symbol will be accompanied by the notation "Issuer did not cooperate; based on best available information," in line with recent SEBI guidelines. For more details, please refer to BWR’s policy on Issuer Non-Cooperation here.
Withdrawal of Ratings
BWR continuously monitors rated facilities and instruments throughout their lifecycle. For facilities with scheduled repayment dates, such as term loans or bonds, ratings are typically withdrawn upon maturity, redemption, or prepayment. In these cases, ratings are withdrawn based on independent written confirmation, such as a No Due Certificate (NDC) from banks, lenders, debenture trustees, auditors, or other reliable sources verifying full repayment.
Issuers may also request a rating withdrawal while the facilities or instruments remain active. Such requests must meet the conditions outlined in BWR’s withdrawal policy, which includes submitting a formal written request along with a No Objection Certificate (NOC) from the lenders or debenture trustees. These requests and confirmations must be provided on official letterhead or sent from official email IDs, duly signed and sealed by authorized representatives. Rating withdrawals are communicated via a press release and notification to the issuer or bank. Ratings may also be withdrawn if the issuer or borrower ceases to exist legally.
For further details, please refer to BWR’s Withdrawal Policy here.
Once the rating is published on the BWR website, the assigned analyst is responsible for the continuous monitoring of the rated entity. This involves reviewing publicly available information, tracking ratings from other credit rating agencies, and maintaining communication with the client when necessary. For listed companies, the analyst is expected to monitor quarterly financial results closely to identify any significant developments. If material events—positive or negative—arise, the analyst must promptly initiate a rating review, following the established processes and timelines.
Retention of Records
BWR ensures the effective management of rating-related records and documents, both in physical and electronic formats, in compliance with SEBI guidelines. These records include all communications, reports, and data related to the rating process. BWR has established clear guidelines for the retention, preservation, and eventual destruction of these documents, ensuring full regulatory compliance and operational transparency.
For further details, please refer to BWR’s Policy on Retention of Rating Records and Archival Policy here.
Confidentiality
A significant amount of information shared by the issuer is highly sensitive and provided exclusively for the purpose of determining the rating. This information is handled with the utmost confidentiality by the ratings team and is not disclosed to other divisions or group companies within BWR. BWR ensures that confidential details about rated entities are not shared, except when required by market regulators or law enforcement authorities.
In line with recent SEBI guidelines, BWR began disclosing unaccepted ratings on its website from 2016.
All employees at BWR are required to sign confidentiality agreements to safeguard sensitive information. Issuer-specific confidential information obtained during the rating process is not shared with any parties outside of the necessary regulatory or legal framework, unless mandated by law.
For more information, please refer to BWR’s Confidentiality Policy here.