On September 11, 2025, NKR was the first in Russia to approve a methodology for assigning non-credit ratings to public company shares on a five-star scale as part of a Bank of Russia project.
Earlier, in July of this year, the Bank of Russia launched a pilot project for stock rating and approved draft methodologies for assigning ratings to stocks by National Credit Ratings LLC (NCR) and National Rating Agency LLC.
Abroad, similar ratings are assigned to shares by, for example, Morningstar, while ratings focused on corporate governance are assigned by the ESG rating agency ISS.
NCR will assign ratings to shares based on their fundamental value, the quality of corporate governance, and the protection of minority rights.
On September 11, 2025, NKR was the first in Russia to approve a methodology for assigning non-credit ratings to public company shares on a five-star scale as part of a Bank of Russia project.
Earlier, in July of this year, the Bank of Russia launched a pilot project for stock rating and approved draft methodologies for assigning ratings to stocks by National Credit Ratings LLC (NCR) and National Rating Agency LLC. The launch of the new rating could be a positive trend for both investors and issuers. The “star” rating of shares could allow unqualified investors to better navigate the Russian stock market. For issuers, such ratings provide motivation to improve corporate governance and comply with best practices for investor protection.
It should be noted that star ratings appeared following the Moscow Exchange's value creation index and are designed to solve the same problem: to increase the transparency and profitability of the stock market. Only time will tell how these instruments will coexist.
The new NCR methodology has a number of important aspects that issuers wishing to obtain a high rating for their shares should take into account.
Key components of the assessment and stages of assessment
The “star” rating is calculated based on quantitative assessment and qualitative factors and represents the sum of the ratings obtained during quantitative and qualitative analysis.
The basis for the quantitative assessment is a comparison of the current market value and the estimated (expected) value of the issuer's share capital (capitalization).
Qualitative factors reflect the conditions for convergence between the current market value and the estimated value, including the issuer's corporate governance parameters, the liquidity of the security, and investors' perception of its attractiveness.
The assessment consists of three stages:
in the first stage, analysts assess the potential return, determined by the ratio of the market price of the share to its calculated price and dividend yield;
in the second stage, the NCR determines the need for and extent of adjustments to the above assessment, taking into account the factor of “Investor Protection.”
in the third stage, the NCR determines the final rating using additional expert adjustments.
Impact of the “Investor Rights Protection” criterion on the final rating
Corporate governance
As part of assessing a company's compliance with the “Investor Rights Protection” factor, the NCR considers aspects of its activities that that comprehensively characterize the quality of management in the company in terms of its impact on the potential for share price growth, including risks associated with insufficient transparency of activities, inadequate observance of shareholder rights, the specifics of the organization of the board of directors, etc.
Based on the results of the assessment of this factor, the rating may be lowered by two levels relative to the assessment of potential profitability, since deficiencies in corporate governance may have a significant negative impact on the realization of growth potential up to the estimated share price.
Impact of the “Investor Rights Protection” criterion on the final assessment Most of the corporate governance requirements specified in the methodology are well known to public companies and are most often complied with by the latter due to the fact that their shares are traded on the Moscow Exchange List.
At the same time, the methodology also focuses on certain additional aspects of corporate governance, investor relations, and other factors not reflected in the Moscow Exchange Listing Rules and the Corporate Governance Code.
These aspects include:
compliance of the issuer's corporate governance with the recommendations published by the Bank of Russia in the field of corporate governance (in particular, recommendations on the formation and continuity of the board of directors of public joint-stock companies; recommendations on the participation of the board of directors in the processes of developing and managing information technologies and managing information security risks in public joint-stock companies);
the degree of digitization of corporate procedures in the company (the availability of electronic bulletins, webcasts, the ability of shareholders to quickly obtain relevant answers to questions);
the presence of at least one-third of independent directors on the company's board of directors (while the Listing Rules declare the need for at least one-fifth of independent directors on the board of directors as a mandatory requirement for the inclusion of issuers' shares in the First Level of the List);
the existence of separate committees of the board of directors (in addition to the standard audit committee and human resources and remuneration (nomination) committee, the NCR encourages the creation of a risk management committee within the company);
the existence of a formalised system of ethical standards within the company;
annual publication of the corporate secretary's report on compliance with the company's internal regulations and corporate calendar;
the existence of a long-term incentive program in the company, the publicity/availability of the bonus calculation formula, and the existence of non-financial KPIs (e.g., ESG, customer loyalty, etc.).
In this regard, issuers should carefully analyze the NCR requirements in this area and pay special attention to refining corporate governance, corporate procedures, and internal documents of the company and its controlled organizations, taking into account the atypical requirements set forth in the methodology.
Respect for investor rights
Due to the specific nature of our activities in terms of the NCR's requirements for respecting investor rights, we would like to note the NCR's assessment of the practice of additional share issues.
The NCR notes that companies should avoid practices that infringe on the rights of minority shareholders, resulting in a change in the structure of share capital in favor of the majority shareholder or management, and where there is no justification for such a change. Placements carried out in violation of the preemptive rights of minority shareholders to purchase shares are also discouraged.
Another interesting point reflected in the methodology is the NCR's negative assessment of the presence of quasi-treasury shares of the issuer on the balance sheet of subsidiaries. In order to obtain a high valuation of their shares, companies should, in the opinion of the NCR, avoid having subsidiaries hold shares in parent companies, as this increases the risk of a hidden increase in the controlling shareholder's voting shares and a dilution of the actual share of minority shareholders.
At the same time, in our experience, having quasi-treasury shares can be an advantage for a company. Such shares can be used as a flexible tool for raising finance. Evidence of this was the successful placement of structured bonds linked to Promomed's quasi-treasury shares, which we supported this year.
Information base for conducting the assessment
An important aspect of conducting the assessment is the information base on which the analysis of companies is based.
Thus, in addition to accounting (financial) statements, internal company documents, and other publicly disclosed information, the NCR may use other non-public information when assigning a rating (the company's operational and financial models; data obtained during meetings with representatives of the issuer, etc.). The list of information on which the agency bases its assessment is not exhaustive.
In particular, when forecasting cash flows at the first stage of the assessment, the agency may use a forecast financial model: “In order to limit the impact of adjustments on the quantitative assessment of potential profitability, NCR seeks to obtain from issuers forecast financial models with a horizon of at least 60 months.”
The absence of certain significant information from the agency may potentially be considered as a basis for applying conservative estimates or for refusing to assign a rating.
In this regard, issuers need to take this feature of the assessment methodology into account and provide NCR with as much information as possible about the company and its subsidiaries (including forecast information) for the assessment.