Indian rating agency to offer services in Sri Lanka; says prospects bright

India’s rating major ICRA Limited (ICRA) is poised to offer credit rating services in Sri Lanka following the grant of rating licence to ICRA Lanka Limited (ICRA Lanka), a wholly-owned subsidiary of ICRA, by the Securities and Exchange Commission of Sri Lanka.

The Lankan venture was incorporated early this year and will be offering its services in the local market, putting into use parent ICRA’s accumulated experience in the areas of credit rating, grading and investment information.

Speaking on the occasion ICRA Vice Chairman and Group CEO P.K. Choudhury said: “Sri Lanka, for us, holds a lot of promise at this juncture. With the decades-long war now over, the country appears poised to move up on a higher growth trajectory. From our perspective, the time is just right for ICRA to enter the country and contribute towards the development of the nation’s capital markets and also participate in that growth.”

Managing Director and CEO Naresh Takkar said the macro environment in Sri Lanka had improved considerably during the last two years and he was optimistic that growth rates would move up significantly now. He underscored the fact that the Lankan economy had reported growth rates of around 6% even during difficult periods and pointed to last year’s 8% to justify his optimism.

Takkar added that given the need, potential and willingness to develop Sri Lanka’s capital markets for faster growth, the prospects for the ratings business there are bright.

According to the Colombo-based Director of ICRA Lanka W. Don Barnabas, optimism abounds in Sri Lanka on the country being able to achieve steep growth rates in the years ahead. He feels this growth will be driven, inter alia, by the development of the capital markets.

“But,” he adds, “although we have a relatively developed, though small, equity market, the debt market is still in its infancy. There is great scope to develop this market, and that augurs well for the ratings business in Sri Lanka.”

Commenting on the current status of the ratings business in that country, Barnabas said there is large scope to add to the width and depth of the ratings market in Sri Lanka.

In Sri Lanka, while the Government debt market made some significant strides in the recent past, the total size of the Government debt and corporate bond markets remains very small in relation to GDP, as compared with most other Asian nations. But it is well recognised and accepted by policymakers in Sri Lanka that an expanded bond market would improve the efficiency of the domestic capital market by lowering spreads, extending maturities, and raising the return on long-term investments.

Further, it would also contribute positively to mobilising long-term investments, a requirement for high and sustainable economic growth rates. In this context, it is significant that Sri Lanka is one of the first countries in the region to have deregulated its markets and built up infrastructure to facilitate efficiency in the financial markets.

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment information and credit rating agency. Today, ICRA and its subsidiaries, along with their subsidiaries, together form the ICRA Group of Companies. ICRA is a public limited company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange.