The story of India's pioneer rating agency Crisil underplays the issues it faced
in its development
Biographical books on companies are invariably written to either eulogise the institution or chronicle events to create a compilation. Doing What is Right: The CRISIL Story does more of the first and less of the second.
The authors, Hemanth Gorur and Sumit Chowdhury, have tried to make an otherwise steady story exciting, but have fallen short with some omissions that could have strengthened the narrative. Even with endorsements from the likes of Chanda Kochhar, Ishaat Hussain, Rakesh Jhunjhunwala and Madhusudan Kela, the authors have not exactly been able to make the story engaging for a reader who is not familiar with the financial world. Names of employees who have been part of this adventure may not mean much to the layman. Besides, the authors tend to iconise two leaders, Pradeep Shah and Ravimohan. This puts the rest in the shadow, which cannot be the case for a well-established successful organisation that has some of the best minds in the industry.
The concept of Crisil goes back to the eighties, when the idea originated in the mind of N Vaghul of ICICI Limited. Mr Shah took it forward and, despite the uncertain nature of the concept of rating, created a market for it with admirable success. When it started, the industry was monopolistic for about four years. The authors, however, do not look at the early mover advantage that Crisil had in a sticky business where clients typically tend to remain with one agency. Moreover, though the role played by regulation in furthering the rating business was critical, it has been missed out here — both the Securities and Exchange Board of India and the Reserve Bank of India have played their part by making rating mandatory at different points of time. But Crisil has always been willing to experiment and innovate, despite its share of setbacks — it did not quite get it right in terms of its acquisition of EconoMatters, its transfer-pricing venture and healthcare ratings.
It is interesting to read about Crisil’s culture of free-flowing ideas in the rating committee meetings, which is imperative in any rating agency if independence of thought is to be maintained. Juniors and seniors mingle on a similar platform when it comes to ratings discussions, which has been a hallmark of the organisation. However, the story would have been enhanced if the authors had debated why Crisil opted for a rating committee that had only internal experts, unlike an external committee that it had earlier. While there is merit in having an internal committee, the idea of conflict of opinion does come up for debate often.
Rating agencies actually have no stake in their ratings; what works is the “credibility factor”, which is a necessity in this business since the worth of a rating is the acceptance by the investor, which is the lender. The ratings have to perforce be good. Since their role is “making markets function better”, the product – that is, ratings – has to be unbiased if market acceptance is to be obtained. Therefore, Crisil has always stood for selling credibility.
Curiously, as the authors point out, Crisil has now grown to be more of a research and analytics firm that does ratings rather than a rating agency that does analytics; more than half the business comes from the former. The Irevna-Pipal acquisitions have been largely successful, as was INFAC earlier, which has helped bring about the transformation in the company’s profile. The company has definitely been more aggressive in the market in terms of branding, and its own mutual funds awards are popular. The Crisil brand has been leveraged with governments to expand business. But here, the authors have downplayed the role of the Standard & Poor’s brand, which has certainly added “mascara” to the company’s public face.
The authors do discuss the innovativeness of Crisil, which was manifested in the inroads made into the small and medium enterprises business. This, along with diversification and their IPO, is the high point of the company’s business growth.
The authors could have included some discussion on how Crisil worked with growing competition, which is expected in all business lines, where more players mean declining market share — which, in turn, leads to changing strategies such as new products or diversification. Crisil’s diversification, as projected here, appears to be more a case of foresight and opportunity than a reaction to the loss of market share.
By swinging across time points, the authors have not succeeded in coherently chronicling developments. Also, their attempts to bring in conversations look out of place because they are infrequent and, evidently, cannot be from memory. By focusing on conversations involving the icons, the context looks a bit contrived. A plain prose description would have made the narrative flow better. In fact, the last chapter comes as quite an anticlimax. Here the authors recount the release of a research report on the power sector. Though the report contains an excellent prognosis, it should not have merited a separate chapter that dramatises a setting that, however true, does not gel with the flow of the story.
The Crisil story is certainly impressive, given that it was the pioneer of the business in India. However, the narrative could have done more justice if it included more discussion.
DOING WHAT IS RIGHT: THE CRISIL STORY
Hemanth Gorur and Sumit Chowdhury
Westland Limited; 135 pages
Biographical books on companies are invariably written to either eulogise the institution or chronicle events to create a compilation. Doing What is Right: The CRISIL Story does more of the first and less of the second.
The authors, Hemanth Gorur and Sumit Chowdhury, have tried to make an otherwise steady story exciting, but have fallen short with some omissions that could have strengthened the narrative. Even with endorsements from the likes of Chanda Kochhar, Ishaat Hussain, Rakesh Jhunjhunwala and Madhusudan Kela, the authors have not exactly been able to make the story engaging for a reader who is not familiar with the financial world. Names of employees who have been part of this adventure may not mean much to the layman. Besides, the authors tend to iconise two leaders, Pradeep Shah and Ravimohan. This puts the rest in the shadow, which cannot be the case for a well-established successful organisation that has some of the best minds in the industry.
The concept of Crisil goes back to the eighties, when the idea originated in the mind of N Vaghul of ICICI Limited. Mr Shah took it forward and, despite the uncertain nature of the concept of rating, created a market for it with admirable success. When it started, the industry was monopolistic for about four years. The authors, however, do not look at the early mover advantage that Crisil had in a sticky business where clients typically tend to remain with one agency. Moreover, though the role played by regulation in furthering the rating business was critical, it has been missed out here — both the Securities and Exchange Board of India and the Reserve Bank of India have played their part by making rating mandatory at different points of time. But Crisil has always been willing to experiment and innovate, despite its share of setbacks — it did not quite get it right in terms of its acquisition of EconoMatters, its transfer-pricing venture and healthcare ratings.
It is interesting to read about Crisil’s culture of free-flowing ideas in the rating committee meetings, which is imperative in any rating agency if independence of thought is to be maintained. Juniors and seniors mingle on a similar platform when it comes to ratings discussions, which has been a hallmark of the organisation. However, the story would have been enhanced if the authors had debated why Crisil opted for a rating committee that had only internal experts, unlike an external committee that it had earlier. While there is merit in having an internal committee, the idea of conflict of opinion does come up for debate often.
Rating agencies actually have no stake in their ratings; what works is the “credibility factor”, which is a necessity in this business since the worth of a rating is the acceptance by the investor, which is the lender. The ratings have to perforce be good. Since their role is “making markets function better”, the product – that is, ratings – has to be unbiased if market acceptance is to be obtained. Therefore, Crisil has always stood for selling credibility.
Curiously, as the authors point out, Crisil has now grown to be more of a research and analytics firm that does ratings rather than a rating agency that does analytics; more than half the business comes from the former. The Irevna-Pipal acquisitions have been largely successful, as was INFAC earlier, which has helped bring about the transformation in the company’s profile. The company has definitely been more aggressive in the market in terms of branding, and its own mutual funds awards are popular. The Crisil brand has been leveraged with governments to expand business. But here, the authors have downplayed the role of the Standard & Poor’s brand, which has certainly added “mascara” to the company’s public face.
The authors do discuss the innovativeness of Crisil, which was manifested in the inroads made into the small and medium enterprises business. This, along with diversification and their IPO, is the high point of the company’s business growth.
The authors could have included some discussion on how Crisil worked with growing competition, which is expected in all business lines, where more players mean declining market share — which, in turn, leads to changing strategies such as new products or diversification. Crisil’s diversification, as projected here, appears to be more a case of foresight and opportunity than a reaction to the loss of market share.
By swinging across time points, the authors have not succeeded in coherently chronicling developments. Also, their attempts to bring in conversations look out of place because they are infrequent and, evidently, cannot be from memory. By focusing on conversations involving the icons, the context looks a bit contrived. A plain prose description would have made the narrative flow better. In fact, the last chapter comes as quite an anticlimax. Here the authors recount the release of a research report on the power sector. Though the report contains an excellent prognosis, it should not have merited a separate chapter that dramatises a setting that, however true, does not gel with the flow of the story.
The Crisil story is certainly impressive, given that it was the pioneer of the business in India. However, the narrative could have done more justice if it included more discussion.
DOING WHAT IS RIGHT: THE CRISIL STORY
Hemanth Gorur and Sumit Chowdhury
Westland Limited; 135 pages
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