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In India, the first credit rating agency, Credit Rating and Information Services of India Limited (“CRISIL”), was set up in 1987.
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A second rating agency, ICRA Limited (then known as, Investment Information and Credit Rating Agency of India Limited) (“ICRA”) was established in 1991.
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Third agency, CARE, was established in 1993.
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Duff and Phelps Credit Rating India (P) Limited which started its operations in 1996 was renamed Fitch Ratings India Private Limited (Fitch) in 2001 and renamed again to India Ratings and Research Private Limited in 2012.
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Brickworks Ratings India Private Limited (Brickworks) began its rating business in 2008.
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SME Rating Agency of India Limited (SMERA) also began its rating business in 2008.
If you see those who started early enjoying the >95% of the market share. Fitch exists from 1998 but still minuscule in terms of market share.
Similar story in U.S -
- In 1909 when John Moody started to rate US railroad bonds, and subsequently utility and industrial bonds.
- Poor’s Publishing Company issued its first ratings in 1916.
- Standard Statistics Company issued its first ratings in 1922.
- The Fitch Publishing Company issued its first ratings in 1924.
- In 1941, Poor’s Publishing and Standard Statistics merged to become Standard & Poor’s Corp.
Moody, S&P and Fitch started early than anybody else they are the top three.
Now questions is why is it so ? Did they never screwed up like CARE today ? Did CARE never screwed in last 24 years ? Is it the first time their reputation in on fire ? Is it all over as prof saying for CARE ?
I have a feeling these things happen over and over again, rating agencies have unbelieve kind of moat that they survive. That’s what history suggests, for example rating agencies in U.S have completed 100 years with no impact on market share among three. Think about it why is so ? So many people lost money in AAA rated mortgage debt in U.S. but none of the rating agencies lost their shirts and pants as Prof. predicting for CARE ( has to be seen) although sounds logical.
I think Prof got a very strong point and this is the reason there is a panic selling in CARE ( but today’s lower circuit was on very low liquidity .3% of total float),
I feel there a good case to be contrarian here. A very few times consensus is wrong but when they are wrong & you are right you make lots of money.
There are very good reasons why moat is very strong for top 3 and it’s hard to displace them. Here one more example of new rating agency didn’t succeed.
