Shares of Rating Companies are Soaring High after Sebi Imposes Fine for Missing Default

• Rating companies have faced criticism for missing a number of defaults since the IL&FS collapse

• The defaults include Dewan Housing Finance Corp. and Altico Capital India Ltd.

MUMBAI : Shares of rating companies that missed signs of a default that triggered India’s mini-Lehman moment are soaring after the nation’s markets regulator imposed only a small penalty.

Care Ratings Ltd. posted record gains and Icra Ltd. saw its biggest four-day advance in more than a year after the Securities and Exchange Board of India on December 26 fined them 2.5 million rupees ($35,000) each on charges they overlooked facts while assessing Infrastructure Leasing & Financial Services Ltd. The probes didn’t find any malafide intent.

“The penalty is very low and there has been no major stricture passed against the rating companies," said A.K. Prabhakar, head of research at IDBI Capital Market Services in Mumbai. “Without the overhang of regulatory strictures in connection with the IL&FS default, there’s room for these stocks to rally further."

Rating companies have faced criticism for missing a number of defaults -- including at Dewan Housing Finance Corp. and Altico Capital India Ltd. -- since the IL&FS collapse. Amid the regulatory investigations, Icra terminated the employment of its managing director and Care sent its CEO on leave before he resigned, raising concern the firms would be stiffly punished.

Care has surged 34% since the Sebi order and Icra rose 8.6%.

(Except for the headline, this story has not been edited by Scrabbl staff and is published from a syndicated feed.)