The MoU on the deal was signed in Mumbai on Tuesday. The allotment will be made once the deal is cleared by the FIPB and the Icra shareholders at an extraordinary general meeting (EGM) being convened in January.

With Moody's picking up a 11 per cent stake, Icra's paid-up capital will go up from Rs 7.80 crore to Rs 8.80 crore. The domestic rating agency's authorised capital is pegged at Rs 10 crore. Icra is likely to hike its paid-up equity to Rs 10 crore in the near future and will offer Rs 1.20 crore worth of equity to its shareholders.

Following the development, Moody's will become the third largest shareholder in Icra after Industrial Finance Corporation of India (IFCI) and State Bank of India (SBI), ahead of LifeInsurance Corporation and Unit Trust of India.The Moody's decision to pick up an equity stake in Icra comes a little over a year after Standard & Poor's announced that it would pick up a 9.6 per cent stake in Credit Rating Information Services of India Ltd (Crisil).

``Technically none of the existing shareholders have divested their stake... Icra made a rights issue in 1996 which was not fully subscribed to by the shareholders in anticipation of Moody's coming in.... The global rating agency has picked up the rights issue at Rs 60 per share,'' sources said.

Moody's president John Rutherford refused to comment on the pricing of the stake. ``This is Moody's second joint venture abroad. We had picked up a minority stake in Korean Investors Service in August this year. We are becoming more active commercially,'' Rutherford said. ``Hiking our stake in Icra would depend upon the wishes of other existing shareholders,'' he added.

Commenting on the partnership, Icra chairman DN Ghosh said, ``rating standards inthe country will have to improve to international levels. This has driven us towards this agreement.''