Don’t drag ratings agencies to court, SEBI tells firms

Securities & Exchange Board of India chairman U K Sinha on Wednesday asked companies raising capital from the public to avoid litigation against credit rating agencies, and instead adhere to regulations and be more transparent in their functioning.

''My message to corporates is they should be willing to follow the rules if they are raising money from the public or any institution, rather than be upset if something has been changed,'' Sinha said on the sidelines of the India Securitisation Summit.

At a meeting between officials of credit rating agencies and officials on Tuesday, the agencies expressed concern over some companies taking them to court, and urged the market regulator to assert its position as the only statutory authority to address and decide on ratings-related issues.

While SEBI asked the agencies to ensure their rating methodology was not questionable, the agencies expressed concern on litigation. They also pointed out that some companies didn't share complete information with them.

The issue has arisen as Kolkata-based Srei Infrastructure Finance as well as Videocon Industries have recently moved the Calcutta High Court after India Ratings & Research, formerly Fitch Ratings India, cut their rating. The court ordered a stay on the ratings firm from publishing the companies' credit rating or its opinion on the debt instruments issued by these companies.

Sinha said that companies should not take credit rating agencies to court, since these entities are regulated by SEBI. He also urged that companies should let the due process of assessment prevail. "My message to corporates is that if they are raising money, they should be willing to follow the rules of the game," the Sebi chief said.