SME Rating Agency PPT

PRESENTED BY GROUP NO. 9

• ANIRUDDHA SAHSARABUDDHE - 41

• SUSINA KUVACHERRY - 28

• ASHISH KANOJIA - 21

• VAIBHAV KAMTEKAR - 20

• VINOD JAISWAR - 46

SME Rating Agency of India Ltd

Minimise lending risk thru ratings 3

SMERA – An Introduction

• Only rating agency dedicated to the SME segment offering qualitative services at competitive prices.

• Joint initiative of SIDBI, Dun & Bradstreet and 11 leading banks operating in SME segment.

• Launched on the 5th September 2005 by the Hon. Finance Minister, Shri P Chidambaram.

• Completed around 2300 ratings till date.

• Greater acceptability in banks (MOU with 22 leading banks). 14 Banks offer interest rate and security concessions for well rated SMERA customers.


Relevance for a rating Agency dedicated for SMEs

• Focused approach towards SMEs

• Strong data & knowledge-base about SMEs

• Different evaluation approach based on size and industry

• Ability to analyze in limited and lesser reliable information

• Emphasis on non-financial parameters

TO BRIDGE THE GAP BETWEEN FINANCIERS AND SMEs


SME Expectations for growth


SMERA Contribution & Challenges

SMERA undertakes risk profiling of SME clusters as an ongoing activity.

Participated / organized more than 250 seminars / workshops / customers meets, etc.

Published Emerging SMEs in India in association with D&B - auto components, textiles, food processing, pharmaceutical, engineering and chemicals segments.

To provide information on SMEs

To demonstrate advantages of rating to SMEs and lenders


Highlights of SMERA Ratings

Provides ratings that are :

Independent

Comprehensive

Transparent

Enables better understanding of SMEs by lenders while taking credit decisions.

Neutral Risk Assessment

Conducts an exhaustive due diligence process

Rating Rationale discussed with rated entities


Rating Process Flow

Request for Interview and

site visit

Rating Request SMERA Site visit Enterprise

Questionnaire

Documents, audited results

& certified projections

Site Visit Assessment

Report

ROC Information

Rating Model

Industry Assessment and Cluster

data

Rating Analyst

Peer Review

Third Party Data – e.g. Litigation

Information

Conducts site visit and

interviews Management

Documents Obtained

External Data

SMERA Database

Entity RatingFinal Rating


SMERA Rating Scale


Factors considered while rating

Parameters of Rating

Financial Non-Financial

Solvency Ratios

Liquidity Ratios

Profitability Ratios

Activity Ratio

Management Quality

Location Advantage

Marketing Network

Legal Issues

Industry and Macro-Economic Assessment

e.g. Debt-Equity Current Ratio RONW Asset- turnover


Non-Financial Parameters


Above fees is inclusive of service tax @ 10.30%

NSIC - D&B - SMERA Rating Fee

Category Fees Service Tax Total

Turnover Rs. Rs. Rs.

< 50 Lacs 7,500 7,73 8273

50 to 200 Lacs 9,000 927 9,927

> 200 Lacs 12,000 1,236 13236


SMERA Rating Fee

Category Fees Service Tax Total

Turnover Rs. Rs. Rs.

< 50 Lacs 30,000 3,090 33,090

50 to 200 Lacs 36,000 3,708 39,708

> 200 Lacs 48,000 4,944 52,944


Why SMERA?

SME focus – independent, transparent, comprehensive rating

Systematic and scientific basis for industry specific rating models

Partnership with banks spanning the Indian Banking Space

D&B as knowledge partner with global rating experience and expertise


Advantage – External Rating

External Risk Rating Models

Emphasis mainly on pst relationship & financial aspects

Industry benchmarking – nil or limited

Generalization of SMEs across geographic boundaries

Banks are involved as financiers;

Looking to the past

Enterprise Rating by SMERA

Rating beyond financials

Robust industry benchmarking and also linked to size

Consideration to parameters specific to a geographic location

Ratings are neutral; credit enhancement measures are not reckoned Looking beyond


Benefits of SMERA Rating

• Third party credit rating helps in extending additional comfort for internal decision making.

• Validation of the internal ratings.

• Intrinsic Strengths of SME units captured as model also considers qualitative parameters in addition to financial results.

• Strengthening of Credit Portfolio thru rating/review ratings – early warning signals.

• Impact of industry related cyclical trend considered in rating.

• Cluster centric approach.


SMERA Milestones

SMERA has been sanctioned technical assistance under the World Bank led multi-lateral SME Financing & Development Programme.

Adjudged as Best SME Development Project in Asia-Pacific region

Offices at - Ahmedabad, Bangalore, Chandigarh, Chennai, Coimbatore, Delhi, Hyderabad, Jamshedpur, Kolkata, Ludhiana, Mumbai, Nagpur, Nasik, Surat, Rajkot Surat & Pune.

SMERA rated clients receive preferential treatment from lenders

THANKING YOU