India Ratings defends rating process for IL&FS group entities after audit flags misconduct
India Ratings refuted the Grant Thornton report, saying that it is based on partial and selective source material from IL&FS and demonstrates a limited understanding of the credit rating process
India Ratings said that its ratings for IL&FS group companies followed a robust and transparent analysis of relevant information including the company's audited financial statements. The statement came in the backdrop of an interim forensic audit report by Grant Thornton which alleged that rating agencies continued to give top ratings to IL&FS group entities despite being aware of the weak financials of the group.
The Grant Thornton audit report on the role of credit rating agencies engaged by the erstwhile IL&FS management flagged several cases amounting to potential favours and gifts given to senior officials of the agencies and even their family members to get favourable ratings. 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 during the period covered in the report.
India Ratings refuted the report, saying that it was produced without the involvement of the credit rating agencies. "The report has no legal standing whatsoever. The report largely ignores the fact that the government has charged the former management of IL&FS with engaging in widespread fraud and producing "falsified, spruced up" financial statements, which all credit rating agencies rely on to produce accurate ratings," an India Ratings spokesperson told PTI.
India Ratings said the Grant Thornton report is based on partial and selective source material from IL&FS and demonstrates a limited understanding of the credit rating process. The credit rating agency also said that the ratings are the collective work product of the agency and no individual, or group of individuals, is solely responsible for a rating, PTI reported.
India Ratings, a 100 per cent owned subsidiary of Fitch Ratings, further stated that its investigation into the role of a senior director at its parent firm's Singapore office found him in violation of the company's code of conduct. "The employee is no longer employed at Finch," PTI quoted the India Ratings spokesperson as saying.
(With PTI input)