Sebi asks rating agencies to submit details of rating actions after lockdown

MUMBAI: The Securities Exchange Board of India (SEBI) has asked rating companies to provide details of rating actions and broader trends after the lockdown that brought businesses to a grinding halt.

The move is seen as an attempt to assess the overall economic situation, especially with the authorities seeking to revive sagging growth, three people with knowledge of the matter told ET.

“Since May, the capital market regulator has been in routine discussions with rating companies seeking sector specific details,” said one of the persons cited above.

To be sure, Sebi is not seeking individual company details unless any particular event warrants it.

The capital market regulator was keen to know about sectors badly hit by the pandemic. Hotels, tourism, manufacturing, real estate, and construction were among the worst hit initially. Rating companies have been updating Sebi about these sectors.

Some of these queries were also directed to check the compliance of credit rating agencies with various Sebi circulars issued during the pandemic. In August, the regulator issued a circular asking the rating agencies not to downgrade any debt in the event of a default if the financial stress in the company was purely on account of Covid-19.

“We have been asked to provide special dispensation in cases where the pandemic and lockdown played spoilsport,” said the top executive at a domestic rating agency. “Sebi is also checking our compliance in that respect.”

Sebi did not reply to ET’s query.

While in some cases Sebi sought suggestions from the rating agencies, the regulator too has guided them on the rating treatment related regulatory policies. For example, the central bank’s one-time recast plan required guidance as rating companies could not downgrade them for non-repayments.

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Recently, a couple of rating agencies reported an improvement of sentiment in sectors such as steel, engineering, metals and education, particularly digital platforms.

“The paradigm of queries has changed in the past few months with unlocking gaining strength,” said a senior executive working in a large rating company, which is an arm of an international entity.

Like other regulators, Sebi has been taking stock of the Covid-19 impact on Indian Inc. This data could help the government understand the scenario better and come out with specific policies, sources said.

“The pandemic and the resultant lockdown has reduced the scale of operations impacting sales, collections, liquidity and overall profitability of businesses, all of which have adversely impacted the financial profile of these entities,” CARE ratings said in a recent report.



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