Credit Rating Readiness Checklist for Indian Companies

A first credit rating tends to stick. Agencies usually move ratings in steps as evidence builds up, so the grade from the first exercise can shape your borrowing cost and your bankers' view for a long time. Most of what drives that grade is fixed by your numbers, but a meaningful part depends on preparation: complete information, consistent data and a management team that can explain the business.

This checklist covers what to prepare before you sign a rating mandate, grouped the way analysts will look at it. Start early, because the gaps it reveals usually take longer to close than the rating itself.

Why readiness decides the first rating

Rating committees are cautious when information is thin. If the analyst cannot verify a number, the committee tends to take the less favourable reading, and a missing document can become a stated weakness in the published rationale. Preparation does not change your fundamentals, but it removes avoidable doubt.

Readiness also saves time and money. A complete pack shortens the process, avoids repeated information requests, and lets management spend the meeting on strategy instead of hunting for data.

Financial documents

Start with the numbers the analyst will build the model from. Everything should reconcile: audited accounts to provisional figures, and provisional figures to GST returns and bank stock statements.

If the auditor has qualified the accounts or reported adverse matters under CARO, prepare a clear explanation and show what has been fixed.

• Audited financial statements for recent years, usually at least three, with the auditor's report and notes
• Provisional results for the current year, and monthly MIS if available
• A debt schedule: lender, facility, sanctioned limit, outstanding, rate, repayment schedule and security
• Ageing of debtors and creditors, and inventory details at recent dates
• Contingent liabilities, including guarantees given, tax disputes and pending litigation
• Capex plan with its funding: internal accruals, new debt or fresh equity

Banking profile and account conduct

Analysts speak to your lenders, and banker feedback carries real weight. Before the mandate, check your own record for overdrawals beyond drawing power, delayed instalments or interest, devolved letters of credit or invoked guarantees in the recent past.

Pull the company's commercial credit report and your promoters' individual reports, and get errors corrected through the bureau and the lender before the agency sees them. Keep sanction letters, the latest renewal note and recent stock statements ready, and give the agency the right banker contacts.

Agencies treat even a one-day delay on rated debt as a default, and a cash credit that stays overdrawn for more than 30 days can be treated the same way. If conduct has slipped, fix it and let a run of clean months build up before you apply.

Projections and the business story

Agencies rate the future, so projections carry weight. Prepare projections for the next few years with a written basis for every major assumption: volumes, prices, margins, working capital days, capex and funding. They should tie to the last audited balance sheet and to any CMA data already filed with your bank.

Alongside the numbers, prepare the business story: products, customers and their share of revenue, suppliers, order book, capacity and utilisation, competitive position and industry outlook. Customer concentration is common in SMEs; explain the length of the relationships, contract terms and the plan to diversify.

Group structure, related parties and governance

Draw the group chart: every company, LLP and firm the promoters control, with ownership, what each does and how money moves between them. Agencies look closely at corporate guarantees given for group entities, inter-corporate loans and advances, and promoter share pledges, because these can pull cash out of the rated company.

List related-party transactions with the business reason for each, and confirm they were approved and disclosed as the law requires. Board composition, audit quality, internal controls and timely statutory filings all feed the management and governance assessment.

Preparing for the management meeting

The management meeting is where the analyst tests whether the story and the numbers belong to the same company. The managing director, the finance head and, for manufacturers, the operations head should attend. Agree beforehand on the key messages and on who answers what.

Expect questions on growth drivers, margin sustainability, the working capital cycle, capex funding, dependence on key customers, group support, succession and how the business did in its worst recent year. Answer consistently with the documents already submitted; a number that changes during the meeting costs more credibility than a weak number explained honestly.

If a site visit is planned, make sure the plant or warehouse reflects what you have described: capacity, stock levels and activity.

After the rating: surveillance readiness

A rating is not a one-time event. The agency collects a monthly no default statement from the company, reviews the rating at least once a year, and expects prompt information about material events such as delays, large new borrowings or changes in ownership.

Give one person ownership of the relationship, calendar these obligations, and keep the information pack updated so the annual review is quick. Non-cooperation leads to an issuer not cooperating tag, which every lender can see and which is far harder to explain than any weak ratio.

Frequently asked questions

What documents are needed for a credit rating?

Typically recent audited accounts, current-year provisional figures, a debt schedule with sanction letters, projections with assumptions, business and customer information, the group structure, related-party details and contingent liabilities. Each agency sends its own information list after the mandate.

Can we prepare for a rating before appointing an agency?

Yes. A readiness review compares your numbers with the agency's published criteria and with rated peers, identifies weaknesses and prepares the information pack. It is a practical way to decide whether to apply now or fix issues first.

Does the agency talk to our bankers?

Yes. Banker feedback on account conduct, limit utilisation and any irregularity is a standard part of the process, so check your own account history before signing the mandate.

How early should we start preparing?

Ideally a few months ahead, and longer if account conduct, audit delays or group guarantees need fixing. Documents take weeks to assemble; the behaviour agencies look for, such as clean banking and timely audits, takes longer to show.

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• Credit rating readiness review