Fitch Assigns Ratings to Indian Municipalities

Mumbai: Fitch Ratings has today assigned 13 national long-term issuer (general obligation) ratings to urban local bodies across India. The ratings were commissioned by the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), under the ministry of urban development, government of India in FY06, to encourage reforms and fast-track the planned development of identified cities.

The focus of the ratings is on efficiency in urban infrastructure and service delivery mechanisms, community participation and accountability of urban local bodies / parastatal agencies to the citizens of 63 cities.  This mission envisages a capex of around Rs1,205 billion up to FY2012, with only a part of this funded by urban local bodies; the remainder will come in the form of reform-linked grants from the federal and state governments.

Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA (ind)' for National ratings in India. Specific letter grades are not therefore internationally comparable.

Announcements and detailed credit analysis reports on each of the above ratings will be made available shortly on the agency's website, www.fitchratings.com. In the following months, Fitch expects to assign ratings to a few more urban local bodies  from out of the 21 entities that it was asked to rate.

 Its ratings for the 13 urban local bodies are:

"Fitch is happy to be participating in this important ministry of urban development initiative, which, in its view, will promote institution building at the municipal level,"says William Streeter, Fitch's managing director and head of global infrastructure and project finance, Asia Pacific. "The ratings exercise allows individual urban local bodies  to understand their relative strengths and weaknesses as they initiate their ambitious city development plans. By providing investors, bankers and other market participants with independent credit opinions, Fitch believes that it could potentially lead to the creation of a municipal bond market in India,"

Amit Tandon, managing director and CEO, Fitch Ratings India said that such a comprehensive nation-wide ratings exercise will create significant long-term benefits for the urban local bodies  and help them in equipping themselves better to access higher levels of financing required to transform the civic infrastructure in various Indian cities that are well below global benchmarks and crying for urgent attention.

Tandon added that the ratings process was boosted by the use of Fitch's well accepted global methodologies, appropriately adapted to the unique Indian context.
Fitch Ratings is one of the three large global credit rating agencies. Fitch rates 6000 financial institutions, including some 3,200 banks and 2,400 insurance companies, more than 1,700 corporates and 100 sovereigns as well as public finance, sub-sovereigns and structured finance transactions.