Transparent framework — our complete 7-factor model, rating definitions, and criteria
PreRatings uses the standard AAA-to-D long-term scale consistent with SEBI-registered credit rating agencies
What each rating category means for long-term, short-term, and instrument-specific ratings
AAA — Highest degree of safety regarding timely servicing of financial obligations. Lowest credit risk.
AA — High degree of safety. Credit risk only marginally higher than AAA.
A — Adequate degree of safety. However, changes in circumstances can affect credit quality more than higher-rated categories.
BBB — Moderate degree of safety. Adverse changes more likely to weaken credit quality. Lowest investment-grade category.
BB — Speculative grade. Moderate risk of default. Adverse business or economic conditions will likely impair capacity to repay.
B — High risk of default. While currently meeting obligations, there is significant uncertainty about continued capacity to do so.
C — Very high risk of default. Currently vulnerable or dependent on favourable conditions to meet obligations.
D — Default. The obligor has defaulted on one or more financial obligations.
Short Term Scale: A1+ (highest), A1, A2, A3, A4, D.
Rating Modifiers: "+" (plus) and "−" (minus) suffixes indicate relative standing within the main rating category.
Outlook: Positive, Stable, or Negative — indicating the likely direction of the rating over the medium term.
The 7-factor AI engine — transparent, sector-calibrated, and continuously validated
Measures the company's top-line growth trajectory over a three-year period. Industry-adjusted: high-growth sectors (IT, pharma) have higher thresholds. Revenue decline over 3 years scores zero. Above 20% CAGR scores maximum points in most sectors.
The most heavily weighted factor for capital-intensive sectors. Measures financial leverage — total debt divided by shareholders' equity. Thresholds: Below 0.5x (excellent, AAA range), 0.5-1.0x (strong, AA range), 1.0-2.0x (moderate, A-BBB range), 2.0-3.0x (elevated, BB range), Above 3.0x (high leverage, B and below). Sector-specific: infrastructure companies with stable cash flows can sustain higher leverage than cyclical manufacturing.
Ability to service debt from operating profits. Thresholds: Above 8.0x (excellent), 5.0-8.0x (strong), 2.5-5.0x (adequate), 1.5-2.5x (moderate), 1.0-1.5x (weak), Below 1.0x (insufficient — company cannot cover interest from operations). Weighted higher for NBFCs and financial institutions.
Short-term liquidity — current assets divided by current liabilities. Thresholds: Above 2.0x (excellent), 1.5-2.0x (strong), 1.0-1.5x (adequate), Below 1.0x (liquidity stress). Weighted higher for trading and working-capital-intensive sectors.
Profitability after all costs, taxes, and interest. Industry-adjusted: FMCG and IT services typically have higher margins; commodities and trading have thinner margins. Sustained negative margins significantly depress the overall score.
Qualitative assessment of competitive standing: Market Leader, Strong Player, Moderate, or Weak / Challenged. Considers market share, brand strength, distribution network, customer diversification, barriers to entry, and pricing power within the industry.
Qualitative assessment of management track record, governance standards, succession planning, disclosure quality, related-party transaction management, and strategic execution capability. Scored from Excellent to Below Average.
Understanding the complexity of different rating types and what each assessment involves
| Rating Type | Complexity | Typical Data Needs | Turnaround |
|---|---|---|---|
| Long Term Corporate Rating | Standard | 7-factor form + audited financials | 2-4 hours |
| Short Term Rating | Standard | Current ratio + working capital cycle | 2-4 hours |
| NCD / Bond Rating | Standard | Corporate data + structured terms | 4-8 hours |
| Bank Loan Rating | Standard | 7-factor + facility structure | 4-8 hours |
| IPO Grading | Moderate | DRHP + projections + peer set | 12-24 hours |
| Project Finance | Moderate | DSCR, concession agreement, EPC contract | 12-24 hours |
| Structured Obligation | Moderate | Pool data, legal structure, trustee docs | 12-24 hours |
| NPA / Stressed Asset | Moderate | Resolution plan, liquidation value, IBC status | 12-24 hours |
| Municipal / ULB Rating | Moderate | Budget, revenue base, state support framework | 12-24 hours |
| ICE (Large Exposure) | Moderate | Full borrower assessment + industry analysis | 12-24 hours |
Our end-to-end preparatory rating process — from data submission to final report
You submit financial data through our secure form. The AI validates data completeness and flags any anomalies or outliers for review.
The 7-factor model scores each metric against sector-specific benchmarks. Composite score is computed with sector-appropriate weights.
Score maps to the AAA-D scale. A detailed report is generated with the rating, outlook, strengths, weaknesses, and an action plan.