Rating company ICRANSE -2.29 % said it has hired an independent investigative agency to probe charges of meddling in the rating of the failed Infrastructure Leasing & Financial Services Ltd, without naming it. 

The Securities & Exchange Board of India (Sebi) has initiated a judicial inquiry in to the charges that ICRA top management had allegedly influenced the rating, following a whistle blower complaint. 

“The company is in the process of addressing certain matters (i) related to credit rating assigned to one of its customers and its subsidiaries, regarding which adjudication proceedings have been initiated by Sebi and (ii) related to an anonymous representation that was forwarded to the company by Sebi,” ICRA, a unit of Moody’s Investor Services, said in regulatory filing. 

An anonymous complaint was forwarded by market regulator to the ICRA management. Icra is under Sebi scanner for alleged interference to ensure good rating for IL&FS whose credit instruments were rated triple A till the time it began defaulting last year. 

Rating companies have been at the receiving end for the past several months after IL&FS began defaulting on various debt instruments with outstanding total loans of nearly 90,000 crore.

The company which lent to build infrastructure was given the highest credit rating even as its finances were beginning to see stress. 

The board of directors has appointed external experts to assist with or look into the charges, which are currently ongoing. Sources said that consulting firm KPMG may be investigating the matter. The rating company had failed to detect the asset liability mismatch. IL&FS and its group companies borrowed short-term money to fund long-term projects. This spiralled into credit squeeze with mutual funds and banks not extending liquidity support to the NBFCs. 

Many pension funds including that of State Bank of India, Infosys and Bharat Heavy Electricals are staring at losses because of investments in securities sold by IL&FS group companies. 

“Based on the work done till date, the company has made provision on a prudent basis with regards to the adjudication proceedings, while, apropos the representation, no findings have yet been identified,” said Icra. 

Sebi has initiated probe against all three rating agencies that failed to spot stress before IL&FS started to default in August. 

Read more at:
//economictimes.indiatimes.com/articleshow/69260949.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst