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    BUILDING A MODEL THAT MIMICS

    THE CREDIT RATING BY CRISIL

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    Introduction.

    Rating of the companies from the Crisil Site.

    Took the latest financial ratios of thecompanies from Capitaline Plus.

    The data set consist of 260 companies.

    Referred paper by Shabari nayak, Altman.

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    Crisil Rating Methodology

    CRISIL AAA

    (Highest Safety)

    Instruments with this rating are considered to have the highest degree of safety regarding timely servicing

    of financial obligations. Such instruments carry lowest credit risk.

    CRISIL AA

    (High Safety)

    Instruments with this rating are considered to have high degree of safety regarding timely servicing of

    financial obligations. Such instruments carry very low credit risk.

    CRISIL A

    (Adequate Safety)

    Instruments with this rating are considered to have adequate degree of safety regarding timely servicing

    of financial obligations. Such instruments carry low credit risk.

    CRISIL BBB

    (Moderate Safety)

    Instruments with this rating are considered to have moderate degree of safety regarding timely servicing

    of financial obligations. Such instruments carry moderate credit risk.

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    Crisil rating methodology

    CRISIL BB(Moderate Risk)

    Instruments with this rating are considered to have moderate risk of defaultregarding timely servicing of financial obligations.

    CRISIL B

    (High Risk) Instruments with this rating are considered to have high risk of default regarding

    timely servicing of financial obligations.

    CRISIL C(Very High Risk)

    Instruments with this rating are considered to have very high risk of defaultregarding timely servicing of financial obligations.

    CRISIL DDefault

    Instruments with this rating are in default or are expected to be in default soon.

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    PARAMETERS

    P/E

    P/B

    D/E

    Current ratio

    Interest coverage ratio

    PBIDTM Return on capital

    Return on networth

    Sales to asset

    Return on equity

    Return on asset

    CFO to Debt

    Equity to liability

    Total debt to Total asset

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    CORRELATION MATRIX

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    LINEAR PROBABILITY MODEL

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    Logistic Function

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    Logistic Regression

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    Multinomial logit equation

    Rating2i = 1 + 2 de+ 3cr + 4roce +

    5ronw + ui

    Rating3i = 1 + 2 de+ 3cr + 4roce + 5ronw

    + vi

    Rating4i = 1 + 2 de+ 3cr + 4roce + 5ronw

    + zi

    Ref=1

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    Ref=1

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    Data Summary

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    Odds Ratio

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    Ref=2

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    Odds Ratio

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    Ref=3

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    Odds Ratio

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    Ref=4

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    Odds Ratio

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    Binary Logit

    Ratingi = 1 + 2de+ 3icr + 4roce + 5eq2l+

    6td2ta+ 7pbidtm+ui

    Ref=0

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    BINARY LOGIT

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    Data summary

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    EVALUATION

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    Thank You.


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