Regional debt mart likely to get a boost with the arrival of a new Rating Agency, ICRA

Anis Al Jallaf-MD/CEO of EB and Chairman of Dubai International Financial Center seen with D.N. Ghosh(left), Chairman of rating agency ICRA, and Suresh Kumar-General Manager of Emirates Financial Services in Dubai

The domestic and regional commercial paper and corporate loans market is expected to get a boost with the arrival of rating agency ICRA, brought here by Dubai-based Emirates Bank Group.

ICRA was born in India in 1991. It claims to be the leading provider of credit ratings, investment information and advisory services - which it aims to extend here through a technical services agreement with recently formed Tricolour Initiatives FZ LLC (TIE) based in the Dubai Media City.

TIE is a wholly-owned subsidiary of Tricolour Investments Ltd, promoted and now owned 40 per cent by EBG. Tricolour recently declared a maiden dividend of 8 per cent after a year of operations.

ICRA's arrival comes against the backdrop of the recently announced Dubai International Financial Centre which has heightened activity in Dubai's financial sector.

"This region requires a rating agency," declared Anis Al Jallaf, managing director and chief executive of Emirates Bank. However, as chairman of DIFC, Al Jallaf declined to commit that there would be a requirement for rating if companies wanted to come to the debt market.

He, however, acknowledged that major international financial centres have such a requirement. ICRA chairman D.N. Ghosh, pointed out that rating agencies help foster the growth of the corporate debt market.

Al Jallaf added that until now banks or any other investors had to do due diligence on each corporate seeking a loan. The effort would be multiplied, if several banks were extending funds to the same corporate.

It would be easier, less time consuming and more cost effective if a corporate is rated by an independent rating agency. Banks would not need to look into the company, and the company would get funds faster. Also, if the rating is good, it allows corporates to get the benefit of better rates.

A regional rating agency is specialised in the region and costs less than an international agency. Therefore, it is of great use even for international investors who wish to place funds into this region, added Suresh Kumar, general manager of Emirates Financial Services on behalf of Tricolour.

Al Jallaf pointed out that majors like Standard and Poor's and Moody's are not very keen on small to medium enterprises that characterise this region. Incidentally, Moody's holds a majority shareholding in ICRA.

"We would love to have more rating companies as it deepens the market," added Al Jallaf. The rating operations are expected to start by the third quarter.

Reported on: Emirates Bank Group
Reported on: 13.03.2002

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