Extracts from the interview:

Q: When do you plan to tie up with a foreign partner?

A: We are not in a tearing hurry for a tie-up since CARE has no problems with its analytical capability. We have been speaking to some of the foreign credit rating agencies like Fitch Ibca, the third largest credit rating agency in the world, and Thomson BankWatch, which specialises in the credit rating of financial intermediaries. We have also been speaking to Moody's Investor Services. CARE will,however, neither offer a majority stake nor effective control over the rating process to its foreign partner.

Q: Will you opt for an equity expansion?

A: We are looking at both the possibilities -- an issue of fresh equity as well as an offloading of shares by the present shareholders in favour of the new partner. We have not yet worked out how we will go about the allotment of shares to our foreign partner. CARE's current equity base is at Rs 8 crore and our authorised capital is Rs 10 crore. So we can increase our share capital by Rs 2 crore without passing a special resolution at the company's annual general meeting.

Q: Will IDBI, the majority shareholder, offload its stake in favour of the foreign partner?

A: IDBI holds 26 per cent, followed by Canara Bank -- 23 per cent. UTI, Federal Bank and Vijaya Bank along with 10 non-banking finance companies hold the rest. Both IDBI as well as Canara Bank can offload their stakes...

Q: How do you visualise the growth path ofCARE?

A: We will not get into unrelated areas like starting a CARE 500 Index, etc. We will take up only those businesses which have synergy with ratings.Securitisation has a lot of scope in the Indian market today and we will concentrate on that area. Then there are areas like municipality ratings and state government ratings... The credit rating industry in India is in its infancy so no rating agency in India can look at specialisation today. The industry is expected to grow at a pace of 25-30 per cent per annum for the next 10 years at least. The whole business of credit rating is mostly based on relationships. CARE became operational in November, 1993, and was a late entrant in the market. About 1,100 companies were already clients of our competitors at the time we entered the market We have, over the last few years, built up a client base of about 800 companies and currently, CARE has a market share of 30 per cent of all new assignments.

Q: Has the present state of affairs in the NBFC sectorhad an adverse impact on your bottomline?

A: Certainly not. Though there were a number of NBFCs coming to us to get their debt instruments rated, we were not able to break even on the fees we were charging them. We were actually losing money by rating the smaller NBFCs. The minimum rating fee was pegged at Rs 50,000. It was only the larger NBFCs with bigger debt plans that were bringing in the money. You can call it cross-subsidisation... The plantation companies can replace the NBFCs in terms of business generation. We have pegged the minimum rating fee for plantation companies at Rs 1 lakh.

Q: How do you view Sebi's plans of regulating the credit rating agencies?

A: The real issue here is the definition of regulation. It would be absurd for anybody to suggest the rating methodology to credit rating agencies.There should be no interference with the rating agency's autonomy. Ideally, the regulator should lay down norms for setting up a rating agency. It should also lay down a minimum equitybase for all credit rating agencies and other minimum requirements like organisational infrastructure, etc. To that extent, it is fine.

Q: What are your plans after retirement?

A: The board of directors of the company has offered me a further two years as managing director of CARE. I have, however, turned down this offer. I have put in 35 years with IDBI and five years with CARE. I would now like to sit back and have fun. I may take up some assignments... But nothing is certain yet.