“We are here because of the nature of our business not the country of origin” An interview with Mr. Sajan Goyal; CEO of CARE Ratings Nepal

Mon, Sep 3, 2018 3:10 PM on Experts Speak, Interview, Stock Market,
“We are he...

Having built itself as one of the second largest credit rating agency in India, CARE Ratings has expanded its service even in Nepal. CARE Ratings Nepal registered its business in May, 2017 and got licensed from SEBON in November, 2017.  With an objective to create an eminent position in Nepalese rating business through qualitative and fair rating, CARE Ratings Nepal has been operating under the leadership of Mr. Sajan Goyal.

Mr. Goyal initiated his career in July, 2005 through Andhra Bank of India. In October, 2006, he then joined CARE Ratings India. With his 11 years of experience in India, Mr. Goyal is here to undertake the opportunities in Nepalese rating agency market.

On this note, the team from ShareSansar visited the corporate office of CARE Ratings Nepal in order to understand the ideology set by the agency for the benefit of investors and companies.   

Further paragraphs; in the words of Mr. Sajan Goyal:

From the viewpoint of a company, why should a company choose CARE rating for its rating?

First and foremost, CARE Ratings Nepal has been authorized by SEBON; the regulatory body of Nepal. The authorization from a regulatory body itself is the evidence that CARE Ratings is eligible for carrying out its services in Nepal. Secondly, CARE Ratings Nepal has a backup of CARE Ratings India. CARE Ratings India, being the second largest agency in India and has been into credit rating business from more than 25 years has an experience in all sorts of industries. So, as we undertake our business in Nepal, the similar advantages will be carried out even in the country. The ratings are assigned by highly experienced rating committee who includes professionals with qualifications of CAs, CFAs and management graduates from colleges like IIM Ahmedabad further enhances the credibility of the rating scores. So, all these reasons are accountable for a fair rating and hence, the companies can be carefree on our rating scores.

As an investor, why should I consider the rating of CARE, provided that many Nepalese investors don’t give importance to credit rating score?

When it comes to investment decision making, investors can make decision about those companies that are recognized and known by them. The past performance of the companies can be foundation on whether or not investment is to be made. But, what about the lesser known companies? Is there any way they can take the informed decision? No. This gap is thus, filled by CARE Ratings Nepal. The investors can take informed decision by understanding the risk of the company and evaluating the risk of the company with the investors’ risk appetite by going through the rating rationale. CARE Ratings further does not recommend buying, selling or holding of shares. So, the investors can rely on our ratings as it is fair.

What are the strategic plans that CARE ratings will imply in the upcoming days?

As a new rating agency in Nepal, we are trying best to increase the outreach as much as possible to the investors, regulators, borrowers, bankers, merchant bankers, industrialists and companies. Over the period of operation in Nepal, we came to know that the credit rating business is limited only in Kathmandu valley. Thus, we are planning to create credit rating awareness programs in other business towns such as Biratnagar, Birgunj, etc. Along with exploring new locations, we are also thinking of exploring new products. We will be launching SME ratings, NGO ratings, real estate ratings in future. We will also create awareness on corporate bond market in the upcoming days. However, our current concentration is on Borrower’s Credit rating.

What are the recent projects that CARE Ratings is involved in?

In the past, we have done credit ratings of commercial banks such as Sunrise Bank, NIC Asia and Nepal Bank Limited. As of now, although I cannot disclose the names due to privacy concerns, but we have undertaken assignments from microfinance companies, power sectors, iron & steel companies, cement companies, trading companies, construction companies and life insurance companies.

With ICRA already in establishment, what was the motive of introducing CARE Ratings in Nepal?

As the regulatory authority of the country demanded a stronger capital requirement in Nepal, we recognized an opportunity of our services and established rating agency in Nepal. Despite already having one credit rating agency in Nepal, there are lots of opportunities to be established as a strong credit rating agency in Nepal. Nepalese economy is expected to grow at 8% in the next fiscal year. Our business is directly linked with the growth of economy. This requires establishment of new businesses including private, public and private- public partnership. Government of Nepal has also recognized the significant role played by private companies in the development. New projects will be emphasized and thus, provides plenty of opportunities to credit rating agencies. Moreover, government has targeted hydro power sectors so, many mega projects can be seen in the pipeline. Similarly, banks participation with national and international banks to finance and establishment of infrastructural bank with a paid up capital of at least Rs 20 billion reflects that a lot of development activities will be taking place. SEBON further has played an instrumental role in modernizing and controlling the regulatory body. The introduction of Demat accounts, ASBA system, and transfer of bonus shares and dividends to individual accounts also signal the development of capital market in Nepal. Government has also encouraged private institutions to enter the secondary market. So, all these have been presented as opportunities to CARE Ratings Nepal.   

What challenges has CARE Ratings been facing provided that ICRA is in establishment throughout a long period of time?

ICRA Nepal is an established player whereas CARE Nepal is a new player. A credit ratings’ performance can be accessed on how the ratings have behaved over the past in the market. CARE Ratings Nepal aspires to establish its name, goodwill, credibility in the market over the period of time by expanding its outreach to the customers. Even though competition might be a challenge as a new player in the market, we will convert the challenge into opportunity to lead our way to become most valued credit rating agency of Nepal.

How is CARE and ICRA different from each other? Where does CARE India and ICRA India stand in competitive mapping?

If we consider value and credibility, both CARE Ratings Nepal and ICRA Nepal are at par with each other. The only difference between the performances of rating agency is on the basis of how services are delivered to the clients. There is no compromise in the rating part but CARE delivers its services in its own way while ICRA might do as per its desire.

When it comes to CARE India and ICRA India, among seven credit rating agencies in India, CARE India stands at second position while ICRA India at third position on the basis of revenue earned from credit rating business.

When CARE Ratings expanded its services to Nepal, it wasn’t perceived fair as both the rating agencies belonged to an Indian economy. How fair do you find this criticism? Do you think Nepal should bring rating agency from other foreign countries?

I am not known to such criticisms. However, when it comes to bringing in the rating agencies from foreign countries, I believe, it is not the regulator who chose both the rating agencies from the same country but it is the company who choose to expand its business in a certain territory. Apparently, in case of Nepal, both the rating agency companies belong to India. Both ICRA and CARE Ratings were given license on the basis of Credit Rating Regulations of Nepal and as per the nature of the business rather than the country of origin.

Do you think conducting credit rating of Nepal is necessary to attract foreign investors and FDI in the country?

If the credit rating of the country is in place then it really help to enhance the credibility image of the country which helps in attracting foreign investors and FDI in the country as per the risk appetite of the investor. Now that, Nepal is focused on foreign loans and FDI, the sovereign rating is must not only to attract the investments but also pricing of the loans.

How much of importance do Indian investors give to the credit agencies? Is the scenario different than Nepal?

Indian long term investors always take ideas from credit rating agencies and take an informed decision as per their risk taking capacity. It is not that nobody gives importance to credit rating in Nepal, it is rather their risk taking capacity and return from the market according to which they select their choice of investment.

How do you perceive Nepalese financial market?

Presently, the market has been hit with pessimism, however, the growth in stock market in the upcoming days cannot be ruled out. For instance, the Budget announcement for the company with Rs. 1 Billion paid up capital mandatory to be listed will give investors broader investible base, the recent provision of monetary policy has facilitated that the debentures/bonds issued by banks can be used in the calculation of CCD ratio. We can expect most of the banks will go for bonds and debentures in the upcoming days. So, I believe, a lot more is coming in the near future for the development of Nepal Financial Market.

What are the factors behind the growth of index in India and overall stock market of India?

The major factors that contribute the growth of index in India is that a strong fundamental growth is being undertaken in the economy. Besides, the interest rates of banks came down a lot after demonetization so, people are after stocks, mutual funds and equities. Even the corporate economy is growing.

Mr. Goyal, who is all set to expand his career in another territory says “It is a learning experience for me. Both Nepal and India are developing on its own pace. It’s just the size of the market that differs. In India, there is a higher level of awareness about the credit ratings and in Nepal, we are supposed to create it. Since I need to work from the grass root level, I will take this as a learning opportunity.”