Mumbai: Rating agency CARE on Monday claimed that the interim report by Grant Thornton's on IL&FS Group "misses" some rudimentary elements of the process of credit rating.
Separately, another credit rating firm ICRA has said the report "ignores" the alleged fraud perpetrated by former IL&FS management.
Grant Thornton in its recently conducted forensic audit of the cash-strapped IL&FS evaluated the role of credit rating agencies in rating various debt instruments and facilitating excessive borrowings from money markets across group companies that eventually led to defaults.
"The report by Grant Thornton on IL&FS group relating to the linking of ratings assigned by CARE Ratings to various entities in the IL&FS group should be read with caution as it misses some rudimentary elements of the process of credit rating," CARE Ratings said in a statement.
CARE, ICRA, India Ratings and Brickwork were the main rating agencies for IL&FS Transportation Networks (ITNL), IL&FS Financial Services (IFIN) and IL&FS for the last 10 years for which the forensic audit was carried out.
From 2016, Brickwork was also introduced for IFIN and ITNL. It replaced Crisil for ITNL.
Crisil maintained that it has never rated IL&FS, IL&FS Financial Services, or any debt issued by these companies.
"We strongly urge to refrain from drawing conclusions about the role of ICRA on the basis of unverified information contained in an interim report commissioned by the IL&FS Board, which largely ignores the alleged fraud perpetrated by former IL&FS management," said ICRA in a statement issued Monday.
Notably, the audit report found numerous cases of favours and gifts such as tickets for a Real Madrid football match and hefty discounts on a luxurious villa to a Fitbit watch and shirts extended by the erstwhile top management of IL&FS to senior officials of rating agencies and their family members.
Stating that it is 'fully compliant' with all the extant Sebi guidelines, CARE Ratings said the Grant Thornton report should have understood the details of the rating mechanism before putting out such a report which presents it in an unfavourable light.
Grant Thornton had never approached it for any clarification in this regard, CARE said.
ICRA said the reports authors chose not to seek the input of the rating agencies but rather rely on assumptions and limited procedures performed pertaining to more than 100 individuals and spanning over a decade.
"The report, which has no legal or official significance, demonstrates a severe lack of understanding of the credit rating process," ICRA said.
It said credit ratings are based on information gathered from the public domain as well as confidential information provided by the rated entity.
If intentionally incorrect or incomplete information is provided by a rated entity, as cited in the draft report, then the rated entity is deliberately misleading the credit rating agency, ICRA said.
"To selectively read into this correspondence and arrive at observations would, therefore, be highly prone to inaccuracies and misinterpretation," ICRA added.
Updated Date: Jul 23, 2019 14:15:42 IST