SEBI nixes plan of SBI-Onida ex-promoters for ratings firm




Sebi has informed Onicra’s promoters that they have received “adverse reports” from other government agencies. NSEBSEState Bank Of IndiaLoading data…

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              ChartsValuation & Peer ComparisonCommunity BuzzPEER COMPANIESICRAICICI bankCrisilEXPAND TO VIEW ALL The Securities and Exchange Board of India has rejected an application from a combo of State Bank of India and Onida’s former promoters to register their ratings agency, Onicra, as the duo failed the market regulator’s “fit and proper person” test, people directly familiar with the matter said.

              Sebi has informed Onicra’s promoters that they have received “adverse reports” from other government agencies that contained “grave observations” and that it was unable to take a positive view of their application.

              Onicra applied for registration as a ratings agency in July last year after Sonu Mirchandani, a former Onida promoter, roped in SBI as co-promoter in the company. SBI took an equity stake of 10 per cent in Onicra prior to its application to Sebi.

              The registration would have made the agency a strong contender for a share in the Rs 1,200-crore domestic instruments ratings market in which global bigwigs like Moody’s and S&P compete through their local arms.

              “We sought report from the ministry on the company but their response came with adverse comments. Hence, we couldn’t grant them the licence which was communicated to the applicant”, said a senior regulatory official.

              Financial integrity and competence of the applicant and absence of any conviction or restraint orders on its promoters are key criteria for clearing the test.

              ET has learnt that Sebi received negative feedback from the Ministry of Micro, Small and Medium Enterprises (MSME) in April this year which cited several complaints against Onicra, which had been rating SME units as part of a government-sponsored subsidy scheme for the past 10 years. It gave Onicra an opportunity to explain its position on the observations over the following months but finally rejected the application.

              The MSME ministry informed Sebi that Onicra had rated units that were not found to be present on physical inspection, had presented cheques drawn on bank accounts that did not exist to claim ratings subsidy and presented incorrect financial information for the units it rated.

              Sebi did not respond to a detailed questionnaire from ET seeking comments. Mails sent to SBI and Onicra on 1 September and subsequently on 9 September did not elicit response until press time. Phone calls and text messages to Varun Mirchandani, son of Sonu Mirchandani and director of Onicra, also didn’t elicit a response.

              SK Bhattacharya, a former MD at SBI, KS Raman, a former advisor to Samsung, former RAW chief AS Daulat, RC Chopra, a former Department of Electronics (under government of India) official, and Pradeep Miglani, a former RBI executive are the other directors in Onicra.

              Rajiv Soni, a former Kotak bank executive is the president for SME Ratings and Ambar Agarwal, a former ICICI Bank executive is the CFO of the company.

              Onicra has claimed over Rs 100 crore in subsidies from the MSME ministry over the past 10 years for rating close to 40,000 SME units as part of a Performance Credit Rating (PCR) scheme launched in 2005.

              The ministry had tasked the National Small Industries Corporation (NSIC) to implement the scheme. Several ratings agencies such as Moody’s-owned ICRA, S&P-owned CRISIL, Fitch-owned India Ratings, CARE, Brickwork and Smera Ratings have rated units as part of the scheme.

              The ministry subsidises ratings agencies to the extent of 75 per cent of the fees charged for rating small scale units. It prescribes caps on fees which are linked to the turnover of the unit that is being rated.

              Onicra applied to Sebi for approval after the ministry modified norms for ratings agencies in July last year and mandated agencies to get themselves registered with Sebi and RBI to claim benefits from the scheme.

              Sebi lays down certain criteria for applicants seeking registration as a ratings agency. These include that the applicant should either be promoted by a public financial institution, scheduled commercial bank, foreign bank or an international ratings agency or meet certain minimum net worth criteria.

              Onida’s original promoters, brothers Sonu and Gullu Mirchandani, and Vijay Mansukhani, split ten years ago as a feud emerged between the brothers and Sonu and Mansukhani exited from the company.




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