SME Rating Agency of India Ltd

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SME Rating Agency of India Ltd
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SME Expectations for growth
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Challenges faced by lenders

• Numerous SMEs

Limited skills in understanding evaluating
Geographically Dispersed
Lending Institutions
Lack of Reliable Information
Multiple segment Multiple Needs
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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

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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 4800 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.

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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
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Rating Scales

• NSIC
• SMERA

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NSIC Rating Scale
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SMERA Rating Scale
The purpose of using a two part rating is to
ensure peer-to-peer comparison and to rate a
company within its own size category.
Composite Appraisal Indicator reflects a
companys health, stability and overall condition
Size Indicator reflects the tangible net worth of
a company.
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Rating Process Flow
Request for Interview and site visit
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Factors considered while rating
Parameters of Rating
Financial
Non-Financial
Management Quality
Solvency Ratios
Liquidity Ratios
Profitability Ratios
Activity Ratio
Location Advantage
Marketing Network
e.g. Debt-Equity
Current Ratio
RONW
Asset- turnover
Legal Issues
Industry and Macro-Economic Assessment
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Non-Financial Parameters
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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
• ? DB as knowledge partner with global rating
  experience and expertise

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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.

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NSIC - DB - SMERA Rating Fee
Above fees is inclusive of service tax _at_ 10.3
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SMERA Rating Fee
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Thank YouContact DetailsVirendra Goyal-National
Sales ManagerCell-99300-74009.Email-virendra.goya
l_at_smera.in