What Is Moody’s and Why Its Rating For India Matters?

What is Moody's

There are various corporations in the market that determine the creditworthiness and the analytics of the companies or the governments and the securities they issue. One such among all is Moody’s Corporation.

what is moody's

What Is Moody’s & Who Owns It? 

Moody’s which is known as Moody’s Corporation is a globally recognized financial services company. The corporation is based in New York, and was established in 1909 by John Moody to produce manuals of statistics related to stocks and bonds and bond ratings.

The corporation is best known for providing its various financial services. Although the corporation operates itself as a diversified entity, it has two major subsidiaries, i.e. Moody’s Investors Services and Moody’s Analytics. 

Who owns Moody's?

It provides its credit ratings services, research reports about various companies and governments about securities, debit, bonds through its subsidiary Moody’s Investors Services, and also provides analytics, research, tools, economic analysis, risk managements through its other subsidiary, i.e. Moody’s Analytics. 

Moody’s corporation plays a pivotal role as it provides the insights and crucial information about the credit ability of various entities, that might include, companies, governments, countries, etc. 

Moody investor services

There are other businesses too that are operated by Moody’s Corporation that provides its services beyond financial services. 

The information provided by the corporation is highly used by investors, market analysts, lenders, and other participants in the financial market to assess and evaluate the risks and opportunities associated with the categories and transactions in which they wish to invest. 

Moody’s Corporations Establishment Years 

Year Country Name 
1985 Japan 
1986United Kingdom 
1988France 
1991Germany 
1994Hong Kong 
1998India 
2001China 
Moody’s Corporation Establishment Years of Different Countries

Note: The main focus in this discussion will be on the establishment of Moody Corporation along with its major financial subsidiaries, i.e. Moody’s Investors Services & Moody’s Analytics in India. 

Let’s now discover what moody ratings actually mean! 

What do Moody’s Ratings Mean? 

Moody’s ratings have evolved and changed with time according to the growing demand of the global financial capital market. However, the initial ratings were given by the founder John Moody itself. 

Its rating criteria comprises Global long-term rating scale and Global short-term rating scale. 

Global Long-Term Rating Scale  

Ratings Meaning 
Aaa Entities or the government or the country having Aaa ratings
by Moody’s are considered to be of highest quality and are
subjected to the lowest level of risk credit. 
Aa Those rated Aa ratings are of high quality and are subjected to
face low credit risk. 
The entities that are rated A are to be upper-medium grade and
face low credit risk.
Baa Baa rating means that the entities are rated medium-grade and
face moderate credit risk and can also possess certain
speculative characteristics.
Ba Ba ratings means that they are subjected to be risky and are
known to face substantial credit risk.
The entities having B rating are considered speculative and are
known to face high credit risk.
Caa That have Caa are considered to be at risk of poor standing and are
subjected to have very high credit risk.
Ca Ca ratings means that, they are highly at risk and are likely to be at or in,
or near at default with some expectations of recovery of principal and
interest
The C rating indicates that the entities or the government are lowest rated
and are typically to be at default, with little hope for recovery of principal
or interest.
Moody’s Long-Term Rating Scale

Global Short-Term Rating Scale  

Ratings Meaning 
P-1 Prime-1 ratings state a higher ability to repay short-term
financial obligations.
P-2 Whereas, Prime-2 ratings showcase a strong ability to
repay short-term obligations. 
P-3 Third tier, i.e. Prime-3 ratings show an acceptable capability to
repay short-term financial obligations or the securities. 
NP The Entities or Issuers (or supporting financial institutions)
that are rated Not Prime do not fall within any of the Prime
rating categories. 
Moody’s Short-Term Rating Scale

Working of Moody’s Credit Ratings

The corporation conducts in-depth research and evaluations of the financial numbers, its economic stability, management practices, and the industry trends of the entity/country being rated. 

Moody's corporation working

The analysts within the Moody’s corporation analyze various quantitative and as well as qualitative aspects and parameters to form a clear understanding of the entity’s credit risk and financial performance.

Based on all the evaluation factors like market position of the entity, financial securities ratio, debt, cash flow, etc. and getting sufficient knowledge and understanding of an organization/entity/country, etc. 

Apart from it Moody also uses a comparison factor, i.e. it compares the particular entity being rated to other names in the same industry, so that it provides a brief overview of credit risks to the investors to form an understanding before investing. 

Moody’s then assigns particular credit ratings by using their rating scales that determines the likelihood of the chances of failure or default to meet financial requirements and securities.

The rating scale consists of both forms i.e. it has letter grades as well as the numerical modifiers. 

Moody’s Ratings For India

Just like any other country, India too has been rated by Moody’s. Moody’s ratings on bonds, loans, securities and other financial instruments. It is also a major issuer of credit ratings to investors in India.

Its ratings provide risk evaluation ability to the investors to evaluate the creditworthiness of issuers.

Moody's India

The latest 2023 rating rated by Moody’s for India is Baa3 rating, and along with that it has maintained a  ‘stable’ outlook on the Indian economy. 

According to the ratings agency, the rating and stable look takes into account a decrease of civil society and political objections, which are associated with rising domestic political risks. 

According to the global long term rating scale the foreign-currency issuers or entities ratings and the local-currency rating remains at Baa3, while on the other hand the short-term local-currency rating is rated at P-3. 

Moody's ratings

The number mark that has been retained by Moody’s investor services for 2023 for India’s growth GDP is 6-.7%, citing the country’s remarkable flexibility and durability on strong domestic demand, while along with that it has also predicted the ratings for the following years i.e. 6.1% in 2024 and 6.3% in 2025.

Why Moody’s Rating for India Matters?

Moody’s ratings are important and highly valuable in India as it provides credit ratings of various entities and issuers to investors in India. Its ratings provide investors with a risk assessment of the creditworthiness of entities/organization/issuers, etc.

Moody’s corporation analyzes various aspects both quantitative and qualitative, to present a clear understanding of the particular entity’s credit risk to the investor. 

Impact of Moody's ratings

These ratings provide an overview of India’s financial market stability and the perks as well as down side associated with it to the international investors and in the financial market.

Currently, India stands at Baa3 ratings which means that the financial landscape in India is being rated as medium-grade and will face moderate credit risk and along with that there may be certain speculative characteristics.

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Summing Up

Moody’s Corporation is a large entity that is prominent in determining the credit ratings for various companies, organizations, countries, etc.

Moody’s ratings in India serve as the rating board for international investors and financial markets to get an overview of India’s creditworthiness. 

Moody's company

Currently, Moody’s is one of the leading credit rating agencies whose ratings are of utmost importance and are valuable in the regulation of financial markets. Credit ratings consist of various factors like financial performance, economic stability, industry trends, and so on. 

These ratings are highly valuable and have a strong impact on matters a lot in the financial landscape!

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Published By: Aashita Singh
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