Strategies to expand in global economy

CARE Ratings – JOURNEY TOWARDS EXCELLENCECARE Ratings – JOURNEY TOWARDS EXCELLENCE1

CARE Ratings

Nikhil Soni Zonal Manager

January 23 , 2015

CARE Ratings – JOURNEY TOWARDS EXCELLENCE

STRATEGIES TO EXPAND IN GLOBAL ECONOMY AND BENEFITS OF GETTING RATED

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Identifying Opportunities, Selection and Entry Strategy for International Markets

SURVIVAL STRATEGIES FOR GLOBALCOMPETITIVENESS

Indian SME’s

Agenda

Banker’s role in helping SME’s

Benefits of getting rated

CARE Ratings – JOURNEY TOWARDS EXCELLENCE 4

CARE Ratings – JOURNEY TOWARDS EXCELLENCECARE Ratings – JOURNEY TOWARDS EXCELLENCE 5

Why every one looking at “BEING GLOBAL”?

1.Reduce dependence on existing markets2.Extend sales potential for existing products3.Stabilise seasonal market fluctuation4.Exploit international trade technology5.Enhance potential for expansion of your business6.Maintain cost competitiveness in your domestic market7.Enhancing domestic competitiveness8.International franchising


“Today, market scenario is changing very rapidly across the globe & the same is happening in India also. In India the process of liberalization & WTO regime have thrown this industrial sector to the large & giant multinational companies also posing certain challenges. At the same time it has opened up the world market & the access to it is made possible to all the companies irrespective of their status or position. Enhancing Global Competitiveness of these SME units holds the key to their future development”.

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Identifying Opportunities, Selection and Entry Strategy for International Markets





which markets to enter and how to enter the market Chosen ???

Depending upon the 1.Competitive strength of the firm2.Market opportunities3.The selection of the product or services to be offered4. Target markets is being made



1. The Selection of an Entry Mode:

An SME needs to critically examine several factors while selecting the most appropriate entry mode for international markets. The major factors which need to be examined are as under:

1.Market size2.Market growth3.Regulatory framework4.Structure of competition5. Level of risks.


2. Market Identification and Selection:

Any firm wanting to internationalise its operations may adopt either a 1.Reactive approach2. Proactive approach




.

In conclusion, it might be said that there is no one best way to enter foreign markets. A firm, intending to enter foreign markets, should analyse carefully its strength and weaknesses and the opportunities and conditions in each market before deciding about the type of entry. It should take the initiative on its own. Whatever the firm does, it should always follow a flexible policy ready to change with changes in environment



COMMON BRAND NAME

COLLECTIVE MARKETING

GLOBAL MINDSET


E- COMMERCE

PARTNERSHIP

COOPERATION



The process of globalization have made possible the access to the global market & have given a levelled playing ground for all the firms .At the same time it has posed many challenges through cut throat competition . Hence enhancing global competitiveness of SSI units holds the key to their future development


Banker’s role in helping SME’s


Recommended Interventions


Benefits of getting rated


Registered with SEBI under the Securities & Exchange Board of India (Credit Rating Agencies) Regulations, 1999

Recognized by RBI as an External Credit Assessment Institution (ECAI) for Basel II implementation in India

Incorporated in April 1993 as a credit rating, information & research services company

About CARE Ratings

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Strong Shareholders


• Access to adequate credit in timely manner at competitive cost

Owing to precise opinion on credit risk through rating,

better showcasing of capabilities and

proper documentation / detailed rating report

• Independent third-party and unbiased evaluation

helps in self evaluation

• Benchmarking / comparison vis-à-vis other MSMEs

Tells where they stand in relative terms

• Enhances credibility among

Lenders, suppliers, customers, employees and other stake holders

Benefits of Credit Rating


• Awareness creation and mentoring on benefits of

best practices, regulatory compliance and transparency in financial reporting

• Helps in accessing market

Rating works as an identity - company can publish rating on website, brochure, ads etc..

Facilitates business beyond native regions and exports

Benefits of Credit Rating

CARE Ratings – JOURNEY TOWARDS EXCELLENCECARE Ratings – JOURNEY TOWARDS EXCELLENCE

Basel II – Bank loan ratingsBasel II – Bank loan ratings

•Offers banks a leeway to reduce risk weights for creditworthy borrowers

•Covers both fund based and non fund based facilities

•Opinion on the relative ability and willing-ness of a borrower to full fill obligations on specific fund-based or non-fund based facilities in a timely manner.

NSIC-CARE SSI ratingsNSIC-CARE SSI ratings

•For registered MSEs, having investment of not > Rs. 5 cr in plant & machinery

•Eligible for a 75% fee subsidy from NSIC

•2-D rating matrix – Capability & Financial strength

SME ratingsSME ratings •One-time relative assessment of an SME

•Applicable to all types of entities

Product Offering for MSMEs


• Track record and experience in any business

• Experience of promoter in the current business

• Educational qualifications of the promoter

• Management decision making process

• Presence of formal/informal organizational structure

• Successions planning

• Constitution of the business

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Management / Promoter Evaluation


Industry risk parameters similar to those applicable to large corporates; however, following factors are considered and/or given more emphasis for rating of MSMEs

•Analysis of Cluster Dynamics:– Cluster origins– Key drivers for cluster development– Benefits of operating as a cluster– Presence & strength of a representative body or industry association – Bargaining power vis-à-vis customers, regulatory authorities etc.

•Impact of changes in governmental regulations/policies

•Linkages with other industries

•Comparison within MSME universe

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Industry Risk


Operational risk parameters similar to those applicable to large corporates; however, following factors are considered and/or given more emphasis for rating of MSMEs•Location of the unit

o Rail/Road/Air/Sea Connectivityo Proximity to key marketso Proximity to key raw material sourceso Benefits on account of location-specific Govt. policies

•Range of product/services provided•Level of integration•Customer concentration •Currency of the process technology used•Quality Management•Importance of marketing and adequacy of current set up

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Operational Risk


• Debt servicing track record to banks/lenders/creditors

• Income growth & Gross and Net profitability

• Variability in gross profit margins

• Capital structure & leverage

• Return on capital employed (%) & Return on equity (%)

• Working capital

• Liquidity indicators & Debt service coverage indicators

• Resourcefulness of promoters

• Financial flexibility (Access to bank funding)

• Reliability of accounts

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Financial Risk


• CARE is the only rating agency to have independent rating committee

Mr. Y. H. Malegam Chairman

Former Managing Partner, S.B. Billimoria & Co.; Member of Board of

Directors of a number of companies and organizations including Reserve

Bank of India

Mr. V. Leeladhar Former Dy. Governor, Reserve Bank of India.

Mr. V.K. Chopra Former Whole time Member of Securities & Exchange Board of India and

Chairman and Managing Director of Corporation Bank.

Mr.P.P.Pattanayak Former Managing Director of State Bank of Mysore. Former Dy. Managing Director & Chief Credit Officer of State Bank of India

Mr. D. R. Dogra MD & CEO, CARE

Independent

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Thank You

Small Business & Entrepreneurship

Strategies to expand in global economy