.

Chapter-1

NEED FOR THE STUDY

In the process of globalization, economic growth, organization of large, medium and small size are being posed with a large number of challenges. At this junction, the economic growth and sustainability of any country is equally or largely depended on the process and development of small size industries. In a country like India which is showing substantial growth, the part pledged by small scale industry is very significant. There is a great need for the encouraging and supporting and assisting these small scale industries and many agencies in India are playing a major role in this process. This study aims at understanding and analyzing the role played by NSIC, one of the government agencies in the development and assistance of small scale industries.

The NSIC does small scale industries in various ways like export development, rating SSIs, leasing, financing etc., however my project is restricted to the study of credit rating system followed by NSIC. It also aims at finding out the importance of credit rating, its role, benefits and pried is briefly understood the issues involved in credit rating.

OBJECTIVES OF THE STUDY

The primary objective of the study is to find out the credit rating system followed by NSIC for SMEs (small medium enterprises) To study the importance and advantages of credit rating for SMEs with reference to NSIC To study the grading system and procedure followed by NSIC in credit rating To study the profile of credit rating system followed by various agencies in India To briefly identify the differences in procedures followed by different credit rating agencies To study credit rating method and process of NSIC by taking two companies financial statement details. To study the methodology by comparing the two companies financial details.

RESEARCH METHODOLOGY
Primary collection method This method includes the data collected from the personal discussion with the authorized clerks of the organization Secondary collection method Secondary collection method includes data collected from recommended books, companies website, companies annual report

LIMITATIONS OF THE STUDY

The major limitations of the research study are as follows The study has been conducted only based on two companies with two rating agencies Major source of information being only through secondary data i.e.companies annual reports. Websites etc The people concerned for the data were not able to provide the requisite feedback Detailed study of the topic was not possible due to limited size of the project. There was a constraint with regards to time allocation for the research study i.e. for a period of two months

Chapter 2 REVIEW OF LITERATURE: CREDIT RATING Introduction;

Credit rating is an assessment of the capacity of an issuer of debt security, by an independent agency, to pay interest and repay the principal as per the terms of issue of debt A rating agency collects the qualitative as well as quantitative data from a company which has to be rated and assesses the relative strength and capacity of company to honor its obligation contained in the debt instrument throughout the duration of the instrument In other words, credit rating provides a simple system of graduation by which the relative capacities of companies (borrower) to make timely repayment of interest and principal on a particular type of debt/financial instrument can be noted * These ratings are expressed in code number which can be easily comprehended even

by the lay investors. The ratings are the quickest way of understanding a companys financial standing without going into complicated financial reports * Credit rating is only a guidance to the investors and not a recommendation to a particular debt instrument * No rating agency tells that it is an indicator of the financial status of the company. All that a rating agency claims is that the capacity of the company to honour the terms of contract of a debt instrument

*A credit rating is not a one time evaluation of credit risk, which can be regarded as valid for entire life of the security. It is an on going appraisal.

Definitions of CREDIT RATING: Ratings are designed exclusively for the purpose of grading bonds according to their investment qualities Moodys

According to CRISIL, Credit rating is an unbiased and independent opinion as to issuers capacity to meet its financial obligations. It does not constitute a recommendation to buy/sell or hold a particular security CREDIT RATING IN INDIA The capital market has witnessed a tremendous growth in past few years. Companies are relying on capital markets for financing existing operations as well as for new projects rather than on institution. As the number of companies borrowings directly from capital markets increase, investors find that the companys size or name is no longer a sufficient assurance of the timely payment of interest and principal. Default by large and well known companies recently in payment of interest on fixed deposits or debentures has reinforced this belief among investors They felt the need for an independent and credible agency which judges the quality of debt obligation of different companies and assist individual and institutional investors in making investments decisions.

FRAME WORK OF CREDIT RATING AGENCIES; Credit rating agencies are regulated by the SEBI. The main elements of its Credit Rating Agencies Regulations are Their registration Their general obligation Restriction on the rating of security Procedure for inspection and investigation Action in case of default

Their Registration Regulations with RBI is mandatory for carrying on the rating business The application for the grant of registration by SEBI should be submitted in and accompanied by non-refundable fee of Rs.50000 Promoters of credit rating agency A credit rating agency can be promoted by Public financial institution Scheduled bank Foreign bank operating in India with RBI approval . Foreign credit rating agency, having atleast 5yrs of rating experience

General Obligations A credit rating agency should Make all the efforts to protect the interest of investors Fulfil its obligation in a prompt, ethical and professional manner At all times exercise due diligence, ensure proper care and exercise independent professional judgement in order to achieve and maintain objectivity and independence in the rating process Have a reasonable and adequate basis for performing rating evaluation, with the support of appropriate and in depth rating research. It should also maintain records to support its decision Do not indulge in any unfair competition

Keep track record of all important changes relating to client companies and develop efficient and responsive system to yield timely and accurate ratings Develop its rating methodology to clients, users and the public. Maintain an appropriate level of knowledge and competence and abide by the provision of the SEBI Act, regulations and circular, which may be applicable and relevant to the activities carried on by it. Not to render, directly or indirectly any investment advice about any security in the public accessible media

 Ensure that any change in registration status/any panel action taken by SEBI or any material changes in financials which may adversely affect the interest of clients/investors is promptly informed to the clients and any business remaining outstanding is transferred to another registered person in accordance with any instruction of the affected clients/investors. Maintain an arms length relationship between its credit rating activity and any other activity, Ensure that there is no misuse of any privileged information including prior knowledge of rating decisions or changes. Provide adequate freedom and powers to its compliance officer for the effective discharge of his duties. Ensure that good corporate policies and corporate governance are in place. Ensure that the senior management, particularly decision maker have access to all relevant information about the business on a timely basis

Restrictions on Rating of Security

Restrictions on rating by CRAs relate to securities issued by promoters certain other entities

Securities issued by promoters

A CRA is prohibited from rating securities issued by its promoters, who hold 10%, or more, of its shares. If the promoter is a lending institution, its chairman / director / employee cannot hold a similar position in the CRA or its rating committee .How ever a CRA may rate a security issued by its associate having a common independent director (i.e. a directors who apart from receiving remuneration as a director does not have any other material pecuniary relationship / transaction with the company / its promoters / its management / its subsidiaries which in the judgment of the board of the company may affect the independence, of the judgment of such director) with it or rating company if the independent director does not participate in the discussion in the rating decision the CRA makes a disclosure in the rating announcement of such associate (about the existence of common independent director)on its board of the company

Securities Issued by Certain Entities

The securities of an entity cannot be rated by a CRA if it is (a) a borrower of its promoter (b) a subsidiary of its promoter (c) an associate (i.e. a person holding at least 10% of the share capital ) of its promoter, when there are common chairman/directors employees common to the CRA and these entities there are common chairman/director/employees on the rating committee

Procedure for Inspection/investigation

The SEBI is empowered to appoint inspecting officers to undertake inspection/investigation of the books of account/records/documents of the CRAs to ascertain whether they are being maintained properly to ascertain whether the provisions of SEBI act/ these regulations are being complied with to investigate into complaints from investors/clients , whose securities are rated by another person, regarding any matter having a bearing on in the activities of the CRA in the interest of the securities market/investors in the interest of the securities market/investors in the interest of the securities market/investors

Action in Case of Default

The CRAs that (a) fail to comply with any condition, subject to which certificate of registration had been granted (b) contravene any of the provisions of the SEBI act / these regulations/any other regulation under the SEBI act ,would be dealt with the manner provided under the SEBT procedure for holding enquiry by enquiry officer and imposing penalty regulations,2002.

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CREDIT RATING AGENCIES IN INDIA

This session provides a brief profile of the credit rating agencies in the country namely CRISIL Ltd ICRA Ltd CARE Ltd ONICRA Ltd SMERA Ltd

* CREDIT RATING INFORMATION SERVICE LTD (CRISIL)

First credit rating agency in India, CRISIL was promoted in 1987 jointly by the ICICI Ltd and the Unit Trust of India. Other shareholders include the Asian Development Bank, Life Insurance Corporation of India, HDFC Ltd, General Insurance Corporation of India and several foreign and Indian banks. It commenced operation on January 1, 1988. CRISIL Ratings is India's largest rating agency, having rated more than 24,541 debt instruments, of more than USD 655 billion (Rs.30,714,59 crores), issued by over 7938 companies. CRISIL Ratings has a 70 per cent penetration in the domestic debt market. CRISIL Ratings rates virtually every kind of organisation, including industrial companies, banks, SMEs, non-banking financial institutions, insurance providers, mutual funds, infrastructure entities, state governments, and urban local bodies. It also rates securitised paper. CRISIL is India's leading rating agency, and is the fourth largest in the world. With over a 70% share of the Indian Ratings market, CRISIL Ratings is the agency of

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choice for issuers and investors. CRISIL Ratings is a full service rating agency that offers a comprehensive range of rating services. CRISIL Ratings provides the most reliable opinions on risk by combining its understanding of risk and the science of building risk frameworks, with a contextual understanding of business. CRISIL is the only rating agency to operate on the basis of a sectoral specialisation, which underpins the sharpness of analysis, responsiveness of the process and large-scale dissemination of opinion pieces. CRISIL has rated over 24,541 debt instruments worth Rs.30.71 trillion (over USD 654.985 billion)* issued by over 7,938 debt issuers, including manufacturing companies, banks, financial institutions (FIs), state governments and municipal corporations.

OBJECTIVES
To assist both individual and institutional investors in making investment decision in fixed interest securities To enable companies to mobilize funds in large amounts from a wide investor base, at fair cost To enable intermediaries to place debt instruments with investors by providing them with an effective marketing tool To provide regulators with a market driven system for bringing about discipline and a healthy growth of capital markets.

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BENEFITS
A Trusted Third Party Opinion: A rating from CRISIL is a stamp of quality from the most renowned rating agency in India. Access to Funding: A good rating from CRISIL carries weight with lenders, and can help you get faster and cheaper credit. The Indian Banks' Association (IBA) has endorsed the NSICCRISIL rating, and informed its member banks of the same. CRISIL has working arrangement with 29 banks and financial organisations and extends concessional pricing to their borrowers. Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank The Dhanalakshmi Bank Ltd State Bank of India The Federal Bank Ltd HDFC Bank Ltd ICICI Bank Ltd Indian Bank Indian Overseas Bank Punjab National Bank State Bank of Bikaner & Jaipur State Bank of Hyderabad United Bank of India Vijaya Bank State Bank of Indore State Bank of Mysore State Bank of Saurashtra State Bank of Travancore Syndicate Bank Union Bank of India

Kerala Financial Corporation UCO Bank

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Credit Rating is an indicator of your performance capability and financial strength. A good rating gives comfort to

New Customers Foreign Partners Suppliers Collaborations for Joint Ventures Added advantage while bidding and tenders filings Self-improvement tool: With its rating, CRISIL gives you a detailed analytical report on your company's strengths and weaknesses. The report will help you strengthen your operations and improve the working of your company. This insightful, credible and independent feedback is supported by the strongest industry and company research in India. Improved Visibility: With the CRISIL rating, your company will get a free listing in CRISIL's RatingScan, a publication that is used as a reference for lending decisions by banks. We will also feature your company on CRISIL's website. In addition, your company name will also feature in the monthly newsletter CRISIL SME Connect that is sent to more than 1800+ bankers and 3000+ companies across India.

RATING CRITERIA OF CRISIL

This section carries the research backing the 'rating criteria' adopted by CRISIL which forms the basic framework for rating and helps in adopting a uniform and consistent

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approach in assigning the ratings. These rating criteria are regularly disseminated by CRISIL in line with its stated policy of improving transparency in the rating process. CRISIL's Criteria for Consolidation A company may choose to conduct new businesses as undertakings of its own. Or it may, for legal, tax, and regulatory considerations, choose to conduct these businesses as part of a separate legal entity a subsidiary, a special purpose vehicle (SPV), or associate/group company. CRISIL's rating approach towards restructuring of bank loans CRISIL has noticed a significant increase in the volume of loan restructuring, and the applications filed for such restructuring, in the past few weeks. According to the available data, banks have already restructured loans aggregating to more than Rs. 700 billion in 2008-09 (refers to financial year, April 1 to March 31), most of them in the last quarter. Single-loan sell-downs: down but not out After recording phenomenal growth in 2007-08 (refers to financial year, April 1, to March 31) and the first half of 2008-09, the corporate single-loan sell-down (SLSD) market cooled off rapidly. Clear default definition critical for reliable credit rating The importance of reliable credit risk assessment in financial markets has increased over the years. Credit rating agencies are the foremost providers of third-party credit risk assessment; the efficacy of their performance can therefore have a profound impact on credit markets. Basel II - a catalyst in bond market deepening CRISIL believes that Basel II has opened up wider avenues for investors in the Indian debt market: the growing number of Bank Loan Ratings (BLRs) has reinforced the acceptability of ratings in the mid-range, 'A' and 'BBB' categories. CRISIL's Approach to Recognising Default In most financial markets, bond investors prefer to have default recognised as soon as a debt servicing payment is missed, in contrast to the relative forbearance that the loan markets exhibit. The Rating Process

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CRISIL's rating process is designed to ensure that all ratings are based on the highest standards of independence and analytical rigour Understanding CRISIL's Ratings and Rating Scales A CRISIL credit rating indicates CRISIL's current opinion on the probability of default. In other words, the credit rating indicates the probability of an investor in rated instruments, or a lender to a rated entity, not receiving interest and principal payments due on time and in accordance with the terms of the initial contract. CRISIL's Approach to Financial Ratios The analysis of a company's financial ratios is core to CRISIL's rating process. Hence, users of CRISIL's ratings, including investors in corporate debt, need to understand CRISIL's approach to financial ratios and the formulae employed in computing them. CRISIL's Treatment of Corporate Sector Hybrids in Credit Ratings Hybrid instruments are securities that combine the characteristics of both debt and equity. Such instruments have come in vogue as issuers, investors, regulators and other stakeholders have begun to appreciate their ability to marry different interests. Hybrid Capital: New Avenues for Banks CRISIL's treatment of hybrids in its bank rating analyses coincides with the instruments' regulatory treatment. One of the main parameters CRISIL examines is the instrument's 'loss absorption capacity'. Rating Criteria for Hybrid Capital in Banks The Reserve Bank of India (RBI) has allowed Indian banks to raise hybrid Tier I and Tier II capital. Using these instruments, banks can augment their capital adequacy levels to meet both current and upcoming requirements arising on account of market and operational risks.

Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support CRISIL developed its comprehensive notch-up criteria for parent-supported ratings in mid-1999. CRISIL notches up ratings for parent support on the hypothesis that an entity's

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creditworthiness is not only dependant on its own business and financial strengths but also on its lineage and the relationship that it enjoys with its parent. Criteria for Notching up Stand Alone Ratings of Companies based on Group Support CRISIL developed its comprehensive notch-up criteria for group-supported ratings in mid-1999. CRISIL notches up for group support when more than one entity belonging to a single group has a significant shareholding in the entity to be rated. Criteria for Notching up Stand Alone Ratings of Entities Based on Government Support Just as CRISIL's ratings of private sector entities not only reflect the standalone credit quality of an entity but also factor in the support that it may enjoy from its parent, in the case of government-owned entities too, CRISIL factors in the likely support from the government while assigning its ratings. Translating Global Scale Ratings onto CRISIL's Scale In an increasingly globalised investment environment, one of the issues that Indian investors frequently face is the correlation between the rating symbols of domestic and global rating agencies. Rating Criteria for Commercial Paper and Short-Term Debt CRISIL has been assigning short-term ratings for over 15 years for commercial paper (CP) and short-term debt (STD), and has rated issues made by more than 700 issuers. CRISIL's Bank Loan Ratings CRISIL assigns bank loan ratings to a variety of facilities provided by banks: these include working capital demand loans, cash credit, project and general corporate loans, and non-fund based facilities. Criteria for Computing Short-Term Debt Limits for NBFCs The attractiveness of raising relatively low-cost funds at the shorter end of the maturity spectrum has, over time, spurred a number of non-banking finance companies (NBFCs) to use this as a means of reducing their overall cost of funds.

Treatment of Securitization in CRISIL's Ratings of Finance Companies

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The effect of securitisation on the balance sheets of finance companies is fast becoming a crucial credit quality consideration, given the interest that banks and finance companies have shown for securitisation.

CRISIL RATING SYMBOLS

CRISIL Rating Symbols For Long Term Ratings AAA (Triple A) Highest Safety AA (Double A) High Safety Instruments rated 'AAA' are judged to offer the highest degree of safety with regard to timely payment of financial obligations. Any adverse changes in circumstances are most unlikely to affect the payments on the instrument Instruments rated 'AA' are judged to offer a high degree of safety with regard to timely payment of financial obligations. They differ only marginally in safety from `AAA' issues. Instruments rated 'A' are judged to offer an adequate degree of A Adequate Safety safety with regard to timely payment of financial obligations. However, changes in circumstances can adversely affect such issues more than those in the higher rating categories. Instruments rated 'BBB' are judged to offer moderate safety with BBB (Triple B) Moderate Safety regard to timely payment of financial obligations for the present; however, changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal than for instruments in higher rating categories. BB (Double B) Inadequate Safety Instruments rated 'BB' are judged to carry inadequate safety with regard to timely payment of financial obligations; they are less likely to default in the immediate future than instruments in lower rating categories, but an adverse change in circumstances could lead to inadequate capacity to make payment on financial

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obligations. Instruments rated 'B' are judged to have high likelihood of default; B High Risk while currently financial obligations are met, adverse business or economic conditions would lead to lack of ability or willingness to pay interest or principal. Instruments rated 'C' are judged to have factors present that make them vulnerable to default; timely payment of financial obligations is possible only if favourable circumstances continue. Instruments rated 'D' are in default or are expected to default on scheduled payment dates. Instruments rated 'NM' have factors present in them, which render NM Not Meaningful the outstanding rating meaningless. These include reorganisation or liquidation of the issuer, the obligation being under dispute in a court of law or before a statutory authority etc.

C Substantial Risk

D Default

Credit Rating Symbols for Fixed Deposits

FAAA ("F Triple A") Highest Safety FAA This rating indicates that the degree of safety regarding timely payment of interest and principal is very strong. This rating indicates that the degree of safety regarding timely

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("F Double A") High Safety

payment of interest and principal is strong. However, the relative degree of safety is not as high as for fixed deposits with 'FAAA' ratings. This rating indicates that the degree of safety regarding timely

FA Adequate Safety

payment of interest and principal is satisfactory. Changes in circumstances can affect such issues more than those in the higher rated categories. This rating indicates inadequate safety of timely payment of

FB Inadequate Safety

interest and principal. Such issues are less susceptible to default than fixed deposits rated below this category, but the uncertainties that the issuer faces could lead to inadequate capacity to make timely interest and principal payments. This rating indicates that the degree of safety regarding timely

FC High Risk

payment of interest and principal is doubtful. Such issues have factors at present that make them vulnerable to default; adverse business or economic conditions would lead to lack of ability or willingness to pay interest or principal.

FD Default

This rating indicates that the fixed deposits are either in default or are expected to be in default upon maturity. Instruments rated 'NM' have factors present in them, which

NM Not Meaningful

render the outstanding rating meaningless. These include reorganisation or liquidation of the issuer, the obligation being under dispute in a court of law or before a statutory authority

CRISIL Rating Symbols For Short Term Instruments P1 This rating indicates that the degree of safety regarding timely payment on the instrument is very strong. This rating indicates that the degree of safety regarding timely P2 payment on the instrument is strong; however, the relative degree of safety is lower than that for instruments rated 'P1'.

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This rating indicates that the degree of safety regarding timely P3 payment on the instrument is adequate; however, the instrument is more vulnerable to the adverse effects of changing circumstances than an instrument rated in the two higher categories. This rating indicates that the degree of safety regarding timely P4 payment on the instrument is minimal and it is likely to be adversely affected by short-term adversity or less favourable conditions. P5 This rating indicates that the instrument is expected to be in default on maturity or is in default. Instruments rated 'NM' have factors present in them, which render NM Not Meaningful the rating outstanding meaningless. These include reorganisation or liquidation of the issuer, the obligation being under dispute in a court of law or before a statutory authority etc.

OBJECTIVES
The objectives of ICRA are same as in case of CRISIL To assist both individual and institutional investors in making investment decision in fixed interest securities To enable companies to mobilize funds in large amounts from a wide investor base, at fair cost 21

 To enable intermediaries to place debt instruments with investors by providing them with an effective marketing tool To provide regulators with a market driven system for bringing about discipline and a healthy growth of capital markets.

RATING PROCESS AND METHODOLOGY

Rating Process ICRAs Rating process is initiated on receipt of a formal request (or mandate) from the prospective issuer. A Rating team, which usually consists of two analysts with the expertise and skills required to evaluate the business of the issuer, is involved with the Rating assignment. An issuer is provided a list of information requirements and the broad framework for discussions. These requirements are worked out on the basis of ICRAs understanding of the issuers business, and broadly cover all aspects that may have a bearing on the

Rating. ICRA also draws on secondary sources of information, including its own Research Division, while working on the Rating assignment. The Rating involves assessment of a number of qualitative factors with a view to estimating the future earnings of the issuer. This requires extensive interactions with the issuers management, specifically on subjects relating to plans, outlook, competitive position, and funding policies.

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In the case of manufacturing companies, plant visits are made to gain a better understanding of the issuers production process, make an assessment of the state of equipment and main facilities, evaluate the quality of technical personnel, and form an opinion on the key variables that influence the level, quality and cost of production. These visits also help in assessing the progress of projects under implementation.

After completing the analysis, a Rating Report is prepared, which is then presented to the ICRA Rating Committee. A presentation on the issuers business and management is also made by the Rating Team. The Rating Committee is the final authority for assigning Ratings. The assigned Rating, along with the key issues, is communicated to the issuers top management for acceptance. Non-accepted Ratings are not disclosed and complete confidentiality is maintained on them unless such disclosure is required under any laws/regulations.

If the issuer does not find the Rating acceptable, it has a right to appeal for a review. Such reviews are usually taken up if the issuer provides certain fresh inputs. During a review, the issuers response is presented to the Rating Committee. If the inputs and/or fresh clarifications so warrant, the Rating Committee would revise the initial Rating decision. As part of a mandatory surveillance process, ICRA monitors all accepted Ratings over the tenure of the Rated instruments. The Ratings are generally reviewed once every year, unless the circumstances of the case warrant an earlier review. The Rating outstanding may be retained or revised (that is, upgraded or downgraded) on

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surveillance.

Methodology ICRA considers all relevant factors that have a bearing on the future cash generation of the issuer. These factors include: industry characteristics, competitive position of the issuer, operational efficiency, management quality, commitment to new projects and other associate companies, and funding policies of the issuer. A detailed analysis of the past financial statements is made to assess performance under "real world" business dynamics. Estimates of future earnings under various sensitivity scenarios are drawn up and evaluated against the claims and obligations that require servicing over the tenure of the instrument being Rated. Primarily, it is the relative comfort level on the issuers cash flows to service obligations that determines the Rating.

CARE Ltd
The CARE Ltd is a credit rating and information service company promoted by the Industrial Development Bank of India (IDBI) jointly with financial institutions, public/private sector banks and private finance companies. It commenced its credit rating operations in October 1993 and offers a wide range of products and services in the field of credit information and equity research. Currently it offers the following services

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 Credit Rating it undertakes credit rating of all types of debt instruments, both short term and long term Advisory Services CARE privides advisory services in the area of

securitization transactions structuring financial instruments financing of infra structure projects and municipal finances Information Services

The board objective of the information services is to make available information on any company, industry or sector required by a business enterprise. The value addition, through inclusive analysis enables the users of the services, like individuals, mutual funds, investment companies, residents or non-residents, to make informed decisions regarding investments.

Equity Research

Equity research involves an extensive study of the shares listed/to be listed in the major stock exchange, and identification of the potential winners and losers among them

Rating Experience: (As at December 2009)

Total Assignments Completed 7075

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Total Instruments Rated Total Volume of Debt Rated Total Issuers Rated

6647 Rs.20,988 bn 2549

Credit Rating of Debt instruments A. Long /Medium -term instruments (NCD/FD/CD/SO/CPS/RPS/L) Symbols Rating Definition CARE AAA Instruments with this rating are considered to be of the best credit quality, offering highest safety for timely servicing of debt obligations. Such instruments carry minimal credit risk . CARE AA Instruments with this rating are considered to offer high safety for timely servicing of debt obligations. Such instruments carry very low credit risk.

CARE A Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk. CARE BBB Instruments with this rating are considered to offer moderate safety for timely servicing of debt obligations. Such instruments carry moderate credit risk. CARE BB Instruments with this rating are considered to offer inadequate safety for timely servicing of debt obligations. Such instruments carry high credit risk.

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CARE B Instruments with this rating are considered to offer low safety for timely servicing of debt obligations and carry very high credit risk. Such Instruments are susceptible to default. CARE C Instruments with this rating are considered to be having very high likelihood of default in the payment of interest and principal. CARE D Instruments with this rating are of the lowest category. They are either in default or are likely to be in default soon.
.B. Short term instruments

Symbols Rating Definition

PR1

Instruments with this rating would have strong capacity for timely payment of short-term debt obligations and carry lowest credit risk. Within this category, instruments with relatively better credit characteristics are assigned PR1+ rating. PR2 Instruments with this rating would have adequate capacity for timely payment of short-term debt obligations and carry higher credit risk as compared to instruments rated higher. PR3 Instruments with this rating would have moderate capacity for timely repayment of short term debt obligations at the time of rating and carry higher credit risk as compared to instruments rated higher.

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PR4 Instruments with this rating would have inadequate capacity for timely payment of short-term debt obligations and carry very high credit risk. Such Instruments are susceptible to default. PR5 The instrument is in default or is likely to be in default on maturity.

Rating process of CARE

The rating process takes about three to four weeks, depending on the complexity of the assignment and the flow of information from the client. Rating decisions are made by the Rating Committee.

FREQUENCY OF RATING ACTIONS : client along with a detailed rationale.

The rating assigned is communicated to the

The ratings accepted by the clients are published and then monitored on a continuous basis over the life of the instrument.

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CARE has a comprehensive in-house data base which facilitates surveillance of the various industries and companies operating in these industries. Each rating is reviewed formally at least once a year, when analysts meet the issuer's management. A review can also be triggered by a major development in the company or in the industry, which may have a significant bearing on the credit-worthiness of the company.

As a part of the review exercise, actual financial performance is analysed in the light of the estimates made earlier and deviations are examined. CARE puts the rating under Credit Watch, when any event or deviation from the expected trend has occurred or is expected and additional information is necessary to take rating action.

ONICRA
Onicra credit rating is a path breaking innovative organization that analyses data and provides rating solutions for individual and small and medium entreprisea(SMEs) Over the years, Onicra has developed a long list of esteemed clients. This includes some of India Inc's top 100 companies: Mahindra & Mahindra, Reliance, Volkswagen, HDFC and Genpact. Onicra has been acknowledged as pioneers in the field of credit rating by the Ministry of Finance in the Economic Survey (1993-1994). It is also recognized and empanelled by the likes of NSIC (National Small Industries Corporation) for SSI (Small Scale Industry) assessment. Our rating has also been accepted by the IBA(Indian Banks Association).

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Rating Process Submission of application by MSME unit

Application has to be accompanied by the list of documents and MSME share of rating fee (i.e.25 should be in the name of "Onicra Credit Rating Agency of India Ltd." payable at Delhi) Collection of information from MSME unit Conduct basic research Site visit & meeting with MSME management Research analysis and preparation of report approval by rating committee Approval of rating by the Rating Committee Communicate rational of Rating to MSME and NSIC

ONICRA will assign rating within a month after the receipt of all the documents from the MSME

Eligibility

A Registered MSME Unit in India is eligible to avail the benefit of the rating scheme. A proof of registra

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Rating Scale

The rating scale is based on parameters of Performance and Credit assessments in 5 X 3 matrix methodol highest to poor performance. A, B, C for high, moderate, low financial strength. Performance Financial Strength High Moderate Low capability Highest SE 1A SE 1B SE 1C High SE 2A SE 2B SE 2C Moderate SE 3A SE 3B SE 3C Weak SE 4A SE 4B SE 4C Poor SE 5A SE 5B SE 5C

SMERA
SME Rating Agency of India Limited (SMERA) is a joint initiative by SIDBI Dun & Bradstreet Information Services India Private Limited (D&B) and several leading banks in the country. SMERA is the country's first rating agency that focuses primarily on the Indian SME segment. SMERA's primary objective is to provide ratings that are comprehensive, transparent and reliable. This would facilitate greater and easier flow of credit from the banking sector to SMEs.

SMERA Rating is an independent third-party comprehensive assessment of the overall condition of the SME, conducted by SME Rating Agency of India Limited

It takes into account the financial condition and several qualitative factors that have bearing on creditworthiness of the SME

SMERA Rating consists of 2 parts,a Composite Appraisal/Condition indicator and a size indicator

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SMERA Rating categorises SMEs based on size, so as to enable fair evaluation of each SME amongst its peers An SME unit having SMERA Rating would enhance its market standing amongst trading partners and prospective customers

RATING SCALE OF SMERA

NSIC - D&B - SMERA Rating Scale

RATING INDICATOR Financial Strength High Highest High Performance Capability Moderate Weak Poor SE1A SE2A SE3A SE4A SE5A Moderate SE1B SE2B SE3B SE4B SE5B Low SE1C SE2C SE3C SE4C SE5C

SMERA Rating Model

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SMERA adopts a hybrid credit evaluation methodology that encompasses financial elements, non-financial qualitative parameters and certain specific event triggers that have a material impact on the company's rating. The choice of rating factors and the weighting schema is an amalgamation of statistical analysis and expert judgment.

Dun & bradstreet

New York-based D&B is a specialist information service provider that during the second half of last century encompassed US printing, audience research and broadcasting interests. As of 2002 its revenue was around US$1.4 billion, with approximately 9,000 employees worldwide. In 2001 it spun off the Moodys financial data service. History D&B dates from 1841, with the establishment by Lewis Tappan (1788-1873) of a commercial credit service, the Mercantile Agency.The rough and ready nature of reporting was demonstrated in the landmark defamation action by John Beardsley, commenced in 1848 and lasting for 23 years, that privileged reporting agencies and in the words of critic Scott Sandage saw the US RG Dun was incorporated by his grandson in 1859: employees included Abraham Lincoln, Ulysses S Grant, Grover Cleveland and William McKinley. Its subscribers grew from 7,000 in the 1870s to 40,000 in the 1880s. By 1900 its reports covered over a

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million US businesses. In 1933 Dun merged with The Bradstreet Companies (a competitor founded in 1849). John Moody (1868-1958) established what became Moody's Investors Service - acquired by Dun & Bradstreet in 1962 and spun off in 2000 when he published Moody's Manual of Industrial & Corporation Securities. There is an account of the company in his autobiography The Long Road Home (1933) and Fast by the Road (1942). Dun & Bradstreet, like its competitors, acquired and shed a range of general and specialist media interests during the 1980s and 1990s.It sold its television stations in 1984 and bought the ACNielsen audience measurement group (profiled here), founded in 1923. Nielsen was spun off in 1996. In 2001 Dun & Bradstreet rebadged itself as D&B. In 2002 it paid US$117 million for the Hoovers information service.

Studies
There has been no major independent study of Dun & Bradstreet, regrettable given its significance for the rise of the modern corporation and what has been characterised as the information economy.

34

Schema of Rating Factors of D & B

Rating Factor Schema

Financial Parameters

Non-Financial Parameters

Management Quality Solvency Ratios Liquidity Ratios Profitability Ratios Activity Ratios Trend Analysis Location Advantage Marketing Network

An exhaustive list of qualitative and quantitative factors considered for rating. Each financial parameter is benchmarked within its industry-size peer group

Legal Issues Industry and MacroEconomic Assessment

CHAPTER 3

ORGANISATION PROFILE

NSIC profile
National Small Industries Corporation Ltd. (NSIC), an ISO 9001 certified company, since its establishment in 1955, has been working to fulfill its mission of promoting, aiding and fostering the growth of small scale industries and industry related small scale 35

services/business enterprises in the country. Over a period of five decades of transition, growth and development, NSIC has proved its strength within the country and abroad by promoting modernization, upgradation of technology, quality consciousness, strengthening linkages with large medium enterprises and enhancing exports - projects and products from small industries. NSIC operates through 9 Zonal Offices, 33 Branch Offices, 14 Sub Offices, 10 NSIC Business Development Extension Offices, 5 Technical services Centres, 3 Extension Centres and 2 Software Technology Parks supported by a team of over 500 professionals spread across the country. To manage operations in African countries, NSIC operates from its office in Johannesburg. NSIC carries forward its mission to assist small enterprises with a set of specially tailored schemes designed to put them in a competitive and advantageous position. The schemes comprise of facilitating marketing support, credit support, technology support and other support services. NSIC carries forward its mission to assist small enterprises with a set of specially tailored schemes designed to put them in a competitive and advantageous position. The schemes comprise of facilitating marketing support, credit support, technology support and other support services.

Marketing Marketing, a strategic tool for business development, is critical to the growth and survival of small enterprises in today's intensely competitive market. NSIC acts as a facilitator to promote small industries products and has devised a number of schemes to support small enterprises in their marketing efforts, both in an outside the country. These schemes are briefly described as under:

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Consortia and Tender Marketing: Small Enterprises in their individual capacity face problems to procure & execute large orders, which inhibit and restrict their growth. NSIC, accordingly adopts Consortia approach and forms consortia of units manufacturing the same products, thereby easing out marketing problems of SSIs. The Corporation explores the market and secures orders for bulk quantities. These orders are then distributed to small units in tune with their production capacity. Testing facilities are also provided to enable units to improve and maintain the quality of their products conforming to the standard specifications. Single point Registration for Government Purchase: NSIC operates a single Point Registration Scheme under the Government Purchase Programme, wherein the registered SSI units get purchase preference in Government purchase programme, exemption from payment of Earnest Money Deposit etc.

Issue of tender sets free of cost. Advance intimation of tenders issued by DGS&D. Exemption from payment of earnest money. Waiver of security deposit up to the monetary limit for which the unit is registered. Issue of competency certificate in case the value of an order exceeds the monetary limit, after due verification.

Exhibitions and Technology Fairs: To showcase the competencies of Indian SSIs and to capture market opportunities, NSIC participates in select International and National Exhibitions and Trade Fairs every year. NSIC facilitates the participation of the small enterprises by providing concessions in rental etc. Participation in these events exposes SSI units to international practices and enhances their business prowess. Buyer-Seller meets: Bulk and departmental buyers such as the Railways, Defence, Communication departments and large companies are invited to participate in buyerseller meets to enrich SSI unit?s knowledge regarding terms and conditions, quality

37

standards, etc required by the buyer. These programmes are aimed at vendor development from SSI units for the bulk manufacturers. Export of Products and Projects: NSIC is a recognized Export House and exporting products and projects of small industries of India to other countries. The major areas of operation are:

Export of products such as handicrafts, leather items, hand tools, pipes/fittings, builders? hardware etc. Supply of Small Industry projects on turnkey basis.

Credit Support:NSIC facilitates credit requirements of small enterprises in the following areas Financing for procurement of Raw Material (Short term) NSIC?s Raw Material Assistance Scheme aims at helping Small Scale Industries/ Enterprises by way of financing the purchase of Raw Material (both indigenous & imported). The salient features are 1. Financial Assistance for procurement of Raw Materials upto 90 days. 2. Bulk purchase of basic raw materials at competitive rates. 3. NSIC facilitates import of scares raw materials. 4. NSIC takes care of all the procedures, documentation & issue of letter of credit in case of imports. Financing for Marketing Activities (Short term) NSIC facilitates financing for marketing actives such as Internal Marketing, Exports and Bill Discounting. Finance through syndication with Banks In order to ensure smooth credit flow to small enterprises, NSIC is entering into strategic alliances with commercial banks to facilitate long term / working capital financing of the small enterprises across the country. The arrangement envisages forwarding of loan

38

applications of the interested small enterprises by NSIC to the banks and sharing the processing fee. Performance and Credit Rating Scheme for small industries To enable small enterprises to ascertain the strengths and weaknesses of their existing operations and take corrective measures to enhance their organizational strength. NSIC is operating a Performance and Credit Rating Scheme through empanelled agencies like ICRA, ONICRA, Duns & Bradstreet(D&B), CRISIL, FITCH, CARE and SMERA. Small enterprise has the liberty to choose among any of the rating agencies empanelled with NSIC. Rating agencies will charge the credit rating fee according to their policies. The benefits to small enterprises are as follows:

An independent, trusted third party opinion on capabilities and credit worthiness of SSI units. Good rating to enhance the acceptability of the SSI units with Banks. FIs, SSI?s customers and buyers. Facilitate prompter credit decisions from Banks on proposals of SSI units. 75% of the credit rating fee subject to a maximum of Rs. 25,000/- will be reimbursed to the small enterprise having a turnover upto Rs.50 lakh by way of grants.

75% of the credit rating fee subject to a maximum of Rs. 30,000/- will be reimbursed to the small enterprise having a turnover above Rs.50 lakh to Rs.200 lakh by way of grants.

75% of the credit rating fee subject to a maximum of Rs. 40,000/- will be reimbursed to the small enterprise having a turnover above Rs.200 lakh by way of grants.

Technology Support Technology is the key to enhancing a company?s competitive advantage in today?s dynamic information age. Small enterprises need to develop and implement a technology strategy in addition to financial, marketing and operational strategies and adopt the one that helps integrate their operations with their environment, customers and suppliers.

39

NSIC offers small units the following support services through its Technical Services Centres and Extension Centres 1. Advising on application of new techniques 2. Material testing facilities through accredited laboratories 3. Product design including CAD 4. Common facility support in machining, EDM, CNC, etc. 5. Energy and environment services at selected centres 6. Classroom and practical training for skill upgadation NSIC Technical Services Centres are located at the following places Name of the Centre Chennai Howrah Hyderabad New Delhi Rajkot Rajpura (Pb) Aligarh (UP) Focus area Leather & Footware General Engineering Electronics & Computer Application Machine Tools & related activities Energy Audit & Energy Conservation activities Domestic Electrical Appliances Lock Cluster & Die and Tool making

Infomediary Services Information today is becoming almost as vital as the air we breathe. We need it every minute of our working lives. With increase in competition and melting away of international boundaries, the demand for information is reaching new heights. NSIC, realizing the needs of MSMEs, is offering Infomediary Services which is a one-stop, onewindow bouquet of aids that will provide information on business, technology and finance, and also exhibit the core competence of Indian SMEs. Membership Benefits

Tender & Trade Information. Banner display on NSIC?s Website

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Access to a wide range of technologies from India and abroad. Access to national and international business leads, JV opportunities and trade information. Comprehensive information on Government policies, rules and regulations, schemes and incentives. Access to industrial databases and members? directory. Various value added, specialized services for Infomediary Service?s members.

Software Technology Parks NSIC Software Technology Parks (STPs) facilitate small industries in setting up 100% export-oriented units for software exports. They also act as nodal point to activate software exports directly through NSIC. These STPs extend support in terms of the requisite infrastructure to the SSI units to start business operations with a minimum lead time.The scheme is governed by STPI regulations of the Ministry of Information Technology, Government of India. NSIC established the first STP at Okhla, New Delhi in 1995 and second in Chennai in 2001. Several small scale units have taken advantage of these parks and contributed export earnings to the exchequer. Technology Business Incubators Enterprise development is one of the thrust areas for nurturing the development and growth of micro and small enterprises in the country that is being facilitated by providing handholding support to the micro and small enterprises in every field of business. Incubation is one of the appropriate tools to achieve this goal, as it provides necessary facilities for the prospective entrepreneurs and start-up companies to learn product manufacturing processes coupled with technology development, business development under one roof. In these incubators working projects depicting appropriate technology for small enterprises are displayed in working conditions. Small Enterprise Establishment Programme(SEEP) This programme facilitates setting up of new enterprises all over the country by creating

41

self-employment opportunities for the unemployed persons. The objective of this scheme is to facilitate establishment of new small enterprises by way of providing integrated services in the areas of training for entrepreneurial skill development, selection of small projects, preparation of project profiles/reports, identification and sourcing of plant, machinery and equipments, facilitating sanction of credit facility and providing other support services in order to boost the development of small enterprises in manufacturing and services sectors. International Cooperation NSIC facilitates sustainable international partnerships. The emphasis is on sustainable business relations rather than on one-way transactions. Since its inception, NSIC has contributed to strengthening enterprise-to-enterprise cooperation, south south cooperation and sharing best practices and experiences with other developing countries, especially those in the African, Asian and Pacific regions. The features of the scheme are:

Exchange of Business/Technology missions with various countries. Facilitating Enterprise to Enterprise cooperation, JVs, Technology Transfer & other form of sustainable collaboration. Explore new markets & areas of cooperation: Identification of new export markets by participating in sector- specific exhibitions all over the world.

Sharing of Indian experience with other developing countries International Consultancy Services For the last five decades, NSIC has acquired various skill sets in the development process of small enterprises. The inherent skills are being networked to offer consultancy services for other developing countries. This activity has been started during 2004-05 and is expected to occupy a place in the future service profile of the Corporation. The areas of consultancy are as listed below: 1. Capacity Building 2. Policy & Institutional Framework 42

3. Entrepreneurship Development 4. Business Development Services Insurance of Export Credit for Micro and Small Enterprises NSIC is facilitating micro and small enterprises to insure their export credits by entering into strategic alliance with Export Credit Guarantee Corporation of India Limited (ECGC). MSEs would be helped in insuring their export credits through any office of the Corporation, located all over the country. This arrangement is made to strengthen promotion of exports from small enterprises.

Marketing assisstance 1. BACKGROUND

The Micro, Small and Medium Enterprises (MSMEs) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and contribute enormously to the socio-economic development of the country. Fast changing global economic scenario has thrown up various opportunities and challenges to the MSMEs in India. While on the one hand, many opportunities are 43

opened up for this sector to enhance productivity and look for new markets at national and international level, it has also, on the other hand, put an obligation to upgrade their competencies to meet the competition as new products are launched at an astonishing pace and are available world wide in short time. Micro, Small & Medium Enterprises do not have any strategic tools / means for their business/ market development as available with large industries. In the present competitive age, Marketing is one of the weakest areas wherein MSMEs face major problems. 2. MARKETING ASSISTANCE SCHEME

Marketing, a strategic tool for business development, is critical for the growth and survival of micro, small & medium enterprises. Marketing is the most important factor for the success of any enterprise. Large enterprises have enough resources at their command to hire manpower to take care of marketing of their products and services. MSME sector does not have these resources at their command and thus needs institutional support for providing these inputs in the area of marketing. Ministry of Micro, Small & Medium Enterprises, inter-alia, through National Small Industries Corporation (NSIC), a Public Sector Enterprise of the Ministry, has been providing marketing support to Micro & Small Enterprises (MSEs) under Marketing Assistance Scheme. Emergence of a large and diverse services sector in the past years had created a situation in which it was no longer enough to address the concerns of the small scale industries (SSI) alone but essential to include the entire gamut of enterprises, covering both SSI Sector and related service entities, in a seamless web. There was a need to provide space for the small enterprises to grow into medium scale enterprises, for that is how they will be able to adopt better and higher levels of technology and remain competitive in a fast globalizing world. Thus, as in most developed and developing countries, it was necessary that in India too, the concerns of the entire range of enterprises micro, small and medium, were addressed and the sector was provided with a single legal 44

framework. The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 addresses these issues and also other issues relating to credit, marketing, technology upgradation etc concerning the micro, small and medium enterprises. The enactment of MSMED Act 2006, w.e.f. from 2nd October, 2006 has brought medium scale industries and service related enterprises also under the purview of the Ministry, accordingly the name of Ministry has also been changed. The need of the hour presently is to provide sustenance and support to the whole MSME sector (including service sector), with special emphasis on rural and micro enterprises, through suitable measures to strengthen them for converting the challenges into opportunities and scaling new heights. Thus although the medium enterprises are also proposed to be included as the target beneficiaries in the scheme, special attention would be given to marketing of products and services of micro and small enterprises, in rural as well as urban areas.

NSIC MARKEING SCHEMES 3. OBJECTIVES:

The broad objectives of the scheme, inter-alia, include: To enhance marketing capabilities & competitiveness of the MSMEs. To showcase the competencies of MSMEs. To update MSMEs about the prevalent market scenario and its impact on their activities. To facilitate the formation of consortia of MSMEs for marketing of their products and services. To provide platform to MSMEs for interaction with large institutional buyers.

45

To disseminate/ propagate various programmes of the Government. To enrich the marketing skills of the micro, small & medium entrepreneurs. 4. MARKETING SUPPORT TO MSMEs

Under the Scheme, it is proposed to provide marketing support to Micro, Small & Medium Enterprises through National Small Industries Corporation (NSIC) and enhance competitiveness and marketability of their products, through following activities:

4.1

Organizing International Technology Exhibitions in Foreign Countries by NSIC and participation in International Exhibitions/Trade Fairs:

International Technology Expositions / exhibitions may be organized by NSIC with a view to providing broader exposure to Indian micro, small & medium enterprises to facilitate them in exploring new business opportunities in emerging and developing markets. These exhibitions may be organised in consultation with the concerned stakeholders and industry associations etc. The calendar for these events may be finalised well in advance and publicised widely amongst all participants/stakeholders. The calendar of events would also be displayed on the Web-site of NSIC. Such expositions showcase the diverse technologies, products and services produced/rendered by Indian MSMEs and provide them with excellent business opportunities, besides promoting trade, establishing joint ventures, technology transfers, marketing arrangements and image building of Indian MSMEs in foreign countries. In addition to the organisation of the

46

international exhibitions, NSIC would also facilitate participation of Indian MSMEs in the select international exhibitions and trade fairs. Participation in such events exposes MSMEs to international practices and enhances their business prowess. These events provide a platform to MSMEs where they meet, discuss, and conclude agreements on technical and business collaborations.

4.1.1 Scale of Assistance: A. Organizing Technology Exhibitions in Foreign Countries: S. No. 1. Eligible Items Space rent (Built up stall) Scale of Assistance For General Category Entrepreneurs: Micro Enterprises Small Enterprises : 75% of the actual charges : 60% of the actual charges

Medium Enterprises: 25% of the actual charges For the Enterprises belonging to NE Region/ Women/ SC/ST entrepreneurs: Micro Enterprises : 95% of the actual charges

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 Small Enterprises

: 85% of the actual charges

Medium Enterprises: 50% of the actual charges

2.

Freight goods transported to the events. Air fare:

Actuals subject to maximum of 25000/- (Rs. 37500/- for Latin

charges for the American countries), each way per entrepreneur.

3.

For General Category Entrepreneurs: Micro Enterprises : - 85% of the economy class return fare (for one representative from one enterprise). Small Enterprises - 75% of the economy class return fare (for one representative from one enterprise). Medium Enterprises: - 25% of the economy class return fare (for one from one enterprise). For the Enterprises belonging to NE Region/ Women/ SC/ST entrepreneurs: Micro Enterprises: 95% of the economy class return fare representative

48

(for one representative from one enterprise). Small Enterprises: 85% of the economy class return fare (for one representative from one enterprise). Medium Enterprises: 50% of the economy class return 4. Maximum amount of Assistance Micro fare (for one representative from one enterprise). General Category Latin America Rs. 2.40 lakh Other countries Rs. 2.00 lakh Rs. 1.75 lakh Rs. 1.00 lakh

towards air fare, Enterprises Small Enterprises Rs. 2.10 lakh space rental & Medium Rs. 1.25 lakh shipping / Enterprises transportation charges:

Enterprises belonging to NE Region/ Women / SC/ST category Latin America Rs. 2.70 lakh Other countries Rs. 2.25 lakh Rs. 2.00 lakh Rs. 1.25 lakh

Micro

Enterprises Small Enterprises Rs. 2.40 lakh Medium Rs. 1.60 lakh 5.

Enterprises Advertisement, 20% of the total subsidy admissible under the above four subpublicity and heads subject to a maximum of Rs. 20 lakhs.

theme pavilion Normally, in such events, at least 20 or more MSMEs should participate. However, the Screening Committee may also consider proposals of organising international technology exhibitions, wherein less than 20 MSMEs are participating, after recording reasons thereof. The Screening Committee shall also recommend the number of representatives of NSIC to be deputed for organising such events, keeping the number to the minimum possible. The Screening Committee would submit the proposal, with proper justification and recommendation, to CMD NSIC for approval. However, in case

49

where budgetary support for an event exceeds Rs. 50 lakhs, the approval of the Administrative Ministry would be required. B. Participation in International Exhibitions/Trade Fairs held in Foreign

Countries: S. Eligible Items Scale of Assistance

No. 1. Space rent (Built For General Category Enterprises: up stall) Micro Enterprises Small Enterprises : 75% of the actual charges : 60% of the actual charges

Medium Enterprises: 25% of the actual charges For the Enterprises belong to NE Region/ Women/ SC/ST entrepreneurs: Micro Enterprises Small Enterprises : 95% of the actual charges : 85% of the actual charges

Medium Enterprises: 50% of the actual charges

2.

Freight charges Actuals subject to maximum of Rs.15000/- (Rs. 20000/- for Latin for the goods transported to the events Air fare: American countries) per entrepreneur.

3.

For General Category Enterprises: Micro Enterprises : -85% of the economy class return fare (for one representative

50

from one enterprise). Small Enterprises - 75% of the economy class return fare (for one representative from one enterprise). Medium Enterprises: - 25% of the economy class return fare (for one from one enterprise). For the Enterprises belong to NE Region/ Women/ SC/ST entrepreneurs: Micro Enterprises: 95% of the economy class return fare (for one representative from one enterprise). Small Enterprises: 85% of the economy class return fare (for one representative from one enterprise). Medium Enterprises: 50% of the economy class return 4. Maximum amount of Assistance towards air fare, space rental & shipping / transportation charges: Micro fare (for one representative from one enterprise). General Category Latin America Rs. 1.75 lakh Other countries Rs. 1.50 lakh Rs. 1.25 lakh Rs. 0.75 lakh representative

Enterprises Small Enterprises Rs. 1.50 lakh Medium Rs. 1.00 lakh Enterprises

Enterprises belonging to NE Region/ Women / SC/ST category Latin America Other countries

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Micro

Rs. 2.00 lakh

Rs. 1.75 lakh Rs. 1.50 lakh Rs. 1.00 lakh

Enterprises Small Enterprises Rs. 1.75 lakh Medium Rs. 1.25 lakh 5. Advertisement, publicity and theme pavilion,

Enterprises 20% of the total subsidy admissible under the above four subheads subject to a maximum of Rs. 5 lakhs.

etc. (i) Normally, in such events, at least 5 MSMEs should participate. In case of participation of up to 10 MSMEs, 1 representative each from the Ministry of MSME and the NSIC may accompany the participating MSMEs. However, in case of participation of more than 10 MSMEs, the Screening Committee may consider a proposal for deputing 1 additional NSIC official for such event depending upon the requirement. The Screening Committee, with proper justification and recommendation, would submit the proposal to CMD, NSIC for approval. (ii) The maximum net budgetary support for participating in an international exhibition/trade fair would normally be restricted to an overall ceiling of Rs. 20 lakh per event (Rs. 25 lakh for Latin American countries). In cases where budgetary support for an event exceeds Rs. 20 lakhs (Rs. 25 lakh for Latin American countries), the approval of the Administrative Ministry would be required.

4.2 Organizing Domestic Exhibitions and Participation in Exhibitions/ Trade Fairs in India: In order to provide marketing opportunities to MSMEs within the country, certain theme based exhibitions / technology fairs etc. may be organized by NSIC, focused on products and services offered by MSMEs, including technologies suitable for employment generation, products from specific regions or clusters (like North Eastern Region, Food processing, Machine-tools, Electronics, Leather etc). Micro, Small & Medium Enterprises would be provided space at concessional rates to exhibit their products and services in such exhibitions/fairs. Apart from above NSIC may also facilitate

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participation of MSMEs in the exhibitions / trade fairs / events being organized by various State Government departments, industry associations and other institutions, all over the country to exhibit their products and services. These exhibitions may be organised in consultation with the concerned stakeholders and industry associations etc. The calendar for these events may be finalised well in advance and publicised widely amongst all participants/stakeholders. The calendar of events would also be displayed on the Web-site of NSIC. Participation in such events is expected to help the MSMEs in enhancing their marketing avenues by way of capturing new markets and expanding existing markets. This would also help them in becoming ancillaries, partners in joint ventures and sub-contracting for large companies. 4.2.1 Scale of Assistance: Built up space would be provided by the implementing agency i.e. NSIC, to MSMEs in various domestic exhibitions at subsidised rates to enable them to exhibit their products and services. The rates of subsidy available on space charges would be as under: General Category Micro Enterprises Small Enterprises : : 75% 60% 25%

Medium Enterprises:

Enterprises belonging to NE Region/ Women / SC/ST category Micro Enterprises Small Enterprises : : 95% 85% 50%

Medium Enterprises:

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The budget for organising the Domestic exhibition/trade fair would depend upon the various components of the expenditure, i.e. space rental including construction and fabricating charges, theme pavilion, advertisement, printing material, transportation etc. However, the budgetary support towards net expenditure for organising such exhibition/trade fair would normally be restricted to a maximum amount of Rs. 30 lakhs. The corresponding budgetary limit for participation in an exhibition/trade fair shall be Rs. 10 lakhs. In cases exceeding the above budgetary limits, the approval of Administrative Ministry would be required. 4.2.2 "Techmart" exhibition by NSIC

NSIC has been organising "Techmart" exhibition every year during India International Trade Fair (IITF) in the month of November. This is an international exhibition showcasing the best MSME products, technologies and services of India. No subsidy would be available to General Category entrepreneurs participating in this exhibition. Upto 30% of the total area may be allocated for the entrepreneurs belonging to the Special Category i.e. Entrepreneurs belonging to NE Region/ Women / SC/ST category, keeping in mind the instructions and guidelines issued in this regard from time to time. The rates of subsidy available on space charges for the Special category would be as under:Micro Enterprises Small Enterprises : : 95% 85% 50%

Medium Enterprises:

The total budgetary support for organizing "Techmart" would normally be restricted to Rs. 75 lakhs only. The proposal exceeding this limit would require approval of the Administrative Ministry.

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4.3

Support for Co-sponsoring of Exhibitions organized by other organisations/ industry associations/agencies:

Support may be provided to various institutions, industry associations and organisations engaged in promotion & development of MSMEs, for organizing exhibitions/ fairs within the country for the benefit of MSME sector. This support would be in the form of cosponsoring of the event by NSIC. In order to apply for co-sponsoring of an event by NSIC, the applicant organisation/agency must fulfil the following criteria/conditions: (a) The applicant organization / industry association / institution should be engaged in the development of MSMEs for at least three years and should be able to demonstrate sufficient experience and capability for holding such events. (b) The event to be organized should have at least 5000 sq ft covered area exclusively for stalls/shops and must have participation from at least 50 MSME units. The organizer shall be required to submit a blueprint / layout of the proposed exhibition along with his application. (c) The organizer would provide a stall of at least 100 sq. ft. to NSIC, to disseminate information about the promotional and other schemes of the Ministry and its organisations. (d) The name of event would be prefixed with NSIC and also display prominently that the event is for the MSMEs and supported by Ministry of MSME. (e) The names of NSIC and Ministry of MSME would be prominently displayed in all publications, literature, banners, hoardings etc. of the event. 4.3.1 Scale of Assistance:

The scale of assistance to the applicant organisation/agency for co-sponsoring of an exhibition/trade fair would depend on the place of the event. The budgetary support towards partially meeting the expenditure on hiring of exhibition ground/hall, erection of stalls, publicity etc. for co-sponsoring the event and would be limited to 40 % of the net expenditure (gross expenditure - total income), subject to maximum amount of 55

Rs. 5 lakh in case of A class cities. Rs. 3 lakh in case of B class cities. Rs. 2 lakh in case of C class cities. Rs. 1 lakh in case of rural areas. The assistance towards co-sponsoring the event shall be provided to the applicant organisation on reimbursement basis after the event, on submission of event report and other relevant documents. 4.4 Buyer-Seller Meets:

Buyers-Sellers Meets are organized to bring bulk buyers / Government departments and micro, small & medium enterprises together at one platform. Bulk and departmental buyers such as the Railways, Defence, Communication departments and large companies are invited to participate in buyer-seller meets to bring them closer to the MSMEs for enhancing their marketing competitiveness. These programmes are aimed at vendor developments from micro, small & medium enterprises for the bulk manufactures. Participation in these programmes enables MSMEs to know the requirements of bulk buyers on the one hand and help the bulk buyers to know the capabilities of MSMEs for their purchases. These Buyers-Seller Meets may be organised in consultation with the concerned stakeholders, including industry associations and other agencies involved in industrial development, and the calendar for these events may be finalised well in advance and publicised widely. 4.4.1 Scale of Assistance: No subsidy would be available to General Category entrepreneurs participating in such meets. However, the entrepreneurs belonging to North-East/women/SC/ST category, would be provided space at subsidized rates for participation in Buyer-Seller Meets as per the rates mentioned hereunder:-

56

Micro Enterprises Small Enterprises

: :

95% 85% 50%

Medium Enterprises:

Upto 30% of the total area in such Buyer-Seller Meets may be allocated for the entrepreneurs belonging to the Special Category i.e. Entrepreneurs belonging to NE Region/ Women / SC/ST category, keeping in mind the instructions and guidelines issued in this regard from time to time. The budget for organising the Buyer-Seller Meet would depend upon the various components of the expenditure, i.e. space rental, interior decoration, advertisement, printing material, transportation etc. However, the net budgetary support for the BuyerSeller Meet would be subject to the following limits:Rs. 5 lakh in case of the meet is held in A class cities. Rs. 3 lakh in case of the meet is held in B class cities. Rs. 2 lakh in case of the meet is held in C class cities. Rs. 1 lakh in case of the meet is held in rural areas. 4.5 Intensive Campaigns and Marketing Promotion Events:

Intensive Campaigns and Marketing Promotion Events are conducted all over the country to disseminate information about the various schemes for the benefit of the micro, small & medium enterprises. They are also facilitated to enrich their knowledge regarding latest developments, quality standards etc. and improve the marketing potential of their products and services.

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4.5.1

Scale of Assistance:

Expenditure incurred for organizing Intensive Campaigns and Marketing Promotion Events would be met out of the budgetary support provided by the Government under the Scheme, subject to a maximum limit of : Rs. 80,000 in case of A class cities. Rs. 48,000 in case of B class cities. Rs. 32,000 in case of C class cities. Rs. 16,000 in case of rural areas. No financial assistance would be given to the participating units for attending the event. The participating MSMEs have to attend these programmes at their own cost. 4.6 Other Support Activities:

Under the Scheme, the following activities for supporting the marketing efforts of MSMEs may be undertaken by NSIC: Development of Display Centres, Show windows and hoarding etc. for

promoting products and services of MSMEs. Printing of Literature, Brochures and Product-specific Catalogues and

CDs etc. and preparation of short films for disseminating information Development of website/portal for facilitating the marketing of MSME products and services. Development and dissemination of Advertising and Publicity material

about various programmes / schemes for MSME sectors and events. Preparation and Upgradation of MSME Manufacturers/Suppliers

/Exporters Directory.

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 Documentation of the success stories of MSMEs. Conducting studies to explore and assess new markets/businesses and product ranges for both domestic & International markets. Hosting international delegations and networking events. The maximum amount of budgetary support for such activities would be limited to 5% of the total annual budget for the scheme and for an individual proposal, the maximum permissible limit for any of the above event/activity would be Rs. 5.00 lakh only

5.

PROCEDURE FOR IMPLEMENTAION OF THE SCHEME:

Ministry of MSME shall implement the scheme through National Small Industries Corporation (NSIC), which shall carry out the various activities under the Scheme through its offices located all over the country. Funds for implementing the scheme shall be placed at the disposal of NSIC, which shall be wholly responsible for proper utilisation of the same and submission of Utilisation Certificates and other reports as required. The applications/proposals for seeking assistance under the scheme shall be submitted directly to NSIC, with full details and justification. The consolidated proposal shall be put up before the Screening Committee, set up under para 6 of the scheme, for consideration. The Screening Committee shall examine and consider the proposals, keeping in view the eligibility conditions and other criteria laid down under the scheme. While processing the proposals preference shall be given to participants/units who have not availed of the benefits under this scheme or other such schemes of the Ministry earlier. The proposals, after processing by the Screening Committtee, shall be put up for approval by the Chairman-cum-Managing Director of NSIC alongwith its recommendations.

59

The proposals requiring approval of the Administrative Ministry shall be forwarded by CMD, NSIC, with proper justification, for consideration and approval of the Ministry, in consultation with IFD. The assistance shall be released to the concerned applicant organisation on reimbursement basis on receipt of the event report and other prescribed documents, including feedback from the participants. 6. SCREENING COMMITTEE

The proposals received under the Marketing Assistance Scheme shall be examined by a Screening Committee headed by Director (Planning & Marketing), NSIC which shall also include representatives from Finance and Exhibitions divisions. The Screening Committee shall meet at least once every month or as and when required. 7. ADMINISTRATIVE EXPENDITURE

NSIC is the nodal agency for implementing the Marketing Assistance Scheme of Ministry of MSME. The administrative expenditure to the tune of 10% of the total expenditure of the Marketing Assistance Scheme shall be reimbursed to NSIC for implementing the scheme. The administrative expenditure includes overheads as well as the cost of the manpower and efforts put in by the NSIC for implementation of the scheme. 8. MONITORING AND EVALUATION

The progress of the scheme shall be reviewed and monitored by NSIC as well as Ministry of MSME from time to time and periodic reports on the progress shall be submitted to the Ministry. The impact and benefits of the scheme shall also be evaluated through internal studies, sample surveys, feedback reports etc. as well as

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NSIC Performance & Credit Rating Scheme for Small Industries

61

Performance & Credit Scheme for Rating of Small Scale Industries

BACKGROUND
The Small Scale Sector occupies an important position in any developing economy the world over. Fast changing global economic scenario has thrown up many opportunities and challenges to the Small Scale Industries in India. While, on the one hand, many opportunities have opened up for the small scale sector to enhance productivity and look for new markets in other countries, it has also put an obligation on them to upgrade their competence in terms of technology, management & financial strength to successfully meet the global competition. Therefore, there is a need to create awareness amongst Small-Scale Units about the strengths and weaknesses of their existing operations and to provide them an opportunity to enhance their organizational strengths. As a step in this direction, a need was felt for introducing a Rating Scheme for the Small Scale Industries. It is expected that the Rating Scheme would encourage SSI sector in improving its contribution to the economy by way of increasing their productivity, since a good rating would enhance their acceptability in the market and also make access to credit quicker and cheaper and thus help in economizing the cost of credit. Besides, the rating would also infuse a sense of confidence amongst the buyers for taking a decision on the options of sourcing material from Small Scale Units. With above background, a Performance & Credit Rating Scheme for Small Scale Industries has been formulated in consultation with various stakeholders i.e. Small Industries Associations, & Indian Banks Association and various Rating Agencies viz. CRISIL, ICRA, Dun & Bradstreet (D&B) and ONICRA. It has the approval of the Government. 62

TITLE OF THE SCHEME The scheme is titled:

PERFORMANCE & CREDIT RATING SCHEME FOR SMALL INDUSTRIES

SALIENT FEATURES OF THE SCHEME

1. APPROACH FOR RATING OF SSI UNITS i. NSIC is the nodal agency for implementing the scheme of performance and credit rating for Small Scale Industries through its various branches/offices located in the country. ii. The units rating shall be a combination of performance and credit worthiness of the unit. The SSI rating methodology shall cover a combination of credit and performance factors including parameters measuring operational, financial, business and management risks. iii. The Rating Agencies shall be empanelled by NSIC Head Office, for implementing the Scheme in order to facilitate the Rating process. iv. NSIC shall maintain a database about the units awarded Rating by vdifferent Rating Agencies.

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2. SELECTION OF THE RATING AGENCY BY SSI UNITS The Small Scale Unit shall be at liberty to select any of the rating agencies empanelled under the rating scheme with NSIC. The rating agency chosen by the unit shall be mentioned in its request for obtaining the rating..

1.

RATING PROCESS

The rating process will be undertaken in the following manner: STEPS RATING PROCESS 1. Request for Rating from SSI units 2. Collection of Information from the SSI unit(s) 3. Onsite meeting with SSI Management 4. Analysis of Information obtained from the SSI Unit(s) 5. Assign Rating The validity of a rating shall be for a period of one year from the date of issue of the rating letter.

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1. RATING FEE The Rating Agencies have different fee structure for their rating of various clients including Small-Scale Units. The Rating Agencies will devise their fee structure for SSI units under this Scheme separately. As the evaluation criteria for award of Rating is different with various Rating Agencies and their acceptability also varies with the users, the rating fee to be charged by the Rating Agencies will be varying. The Rating Agencies will, however, be free to decide their rating fees which will be intimated to NSIC at the time of empanelment, so that fee is well known in advance to the applicant unit as well as NSIC. The rating fees may, however, be reviewed by Rating Agencies from time to time due to the competition and the number / size of clientele. Although, the rating fee of different Rating Agencies may vary but for the purpose of subsidizing the fee, a ceiling has been prescribed by the Government as per table give below under Sharing of Fees. The Small-Scale Units will have to pay their contribution towards the rating fee along with its application. The payment can be made by way of pay order / demand draft drawn in favour of the Rating Agency selected by the SSI unit. In the event of the request for Rating being treated as closed by the Rating Agency due to non-receipt of the complete information, 50% of the fees received from the SSI unit shall be refunded by the Rating Agency. However, if the SSI unit backs out from the rating process after the Rating Agency has carried out its inspection, no amount shall be refunded back.

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2. SHARING OF FEES The fee to be paid to the rating agencies shall be based on the turnover of the Small-Scale Units which has been categorized into three slabs. The slabs of the Turnover and the Share of Ministry of SSI towards the fee charged by the Rating Agency have been indicated in the table given below:Turnover Fee to be reimbursed by Ministry of SSI Up to Rs.50 lacs 75% of the fee charged by the rating agency subject to a ceiling of Rs.25,000/Above Rs.50 lacs to Rs.200 lacs 75% of the fee charged by the rating agency subject to a ceiling of Rs.30,000/Above Rs.200 lacs 75% of the fee charged by the rating agency subject to a ceiling of Rs.40,000/-

The balance amount towards the fee shall be borne by the Small-Scale Units. The portion of the fee to be subsidized by the Ministry shall be released through NSIC after submission of the Rating Report to NSIC by the Rating Agencies. 3. RATING SCALES While the criteria for evaluation would be left to each of the Rating Agencies, the symbols and their definition for indicating the risk score in the rating awarded has been evolved for uniform implementation by the Rating Agencies. The symbols along with their definition while assigning a Rating to Small-Scale Units are placed at Annexure-I. These symbols depict both the performance evaluation as well as the credit worthiness of the unit. The Rating to be awarded by each of the Rating Agencies shall be prefixed by the word NSIC. Thus Rating awarded by say ICRA shall be termed as 66

NSIC-ICRA Performance and Credit Rating

7. SHARING OF THE EVALUATION/RATING OF SSI UNITS The Rating Agencies shall share the Rating awarded to SSI units with NSIC. 8. PROMOTION OF THE SCHEME The scheme would be given wide publicity by NSIC, IBA and Credit Rating Agencies. The details of the scheme would also be available on the website of the Ministry of SSI, NSIC, IBA & its member banks, SSI Associations and the Rating Agencies shall also be used to promote the Rating Scheme. 9. APPLICATION FORM The application forms will be available at all the offices of NSIC and with the empanelled Rating Agencies. The forms will also be made available at the website of NSIC, IBA and the Rating Agencies. Interested Small Industries Associations will also be requested to make available the Application Form from their website. Any SSI unit wishing to apply for rating will have to fill up the prescribed application form and submit the same to NSIC or the rating agency chosen by it.

67

10. PROCESS FLOW OF APPLICATION The SSI unit will have to submit its application for rating in duplicate. It can be submitted to any of the offices/branches of NSIC or directly to the Rating Agency selected by the Small-Scale Unit. On receipt of Application, NSIC will forward the IInd copy along with the information and documents submitted by the unit to the Rating Agency along with their comments, if any. Alternatively, if the Application is submitted to the Rating Agency, one copy of the application shall be sent by Rating Agency to NSIC for their reference and comments. 11. INFORMATION REQUIRED FOR RATING SSI units applying for rating will have to submit the documents as per list placed as Annexure-I (B) along with the application 12. TIME FRAME FOR COMPLETION The Rating Agencies shall peruse the documents received and in case of any short fall, communicate the same to the unit for completion / rectification thereof within a period of 15 days. If the particulars are not received within the period mentioned the agency shall the reminder giving further 15 days time for submission. In the event of the unit not responding within 15 days from the date of 2nd communication to the unit, the case will be treated as closed. From the date of receipt of all information from the applicant unit, the rating agency shall complete the exercise of evaluation and award of Rating within one month thereof.

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Rating Scale of SEs on Performance and Credit Parameters under the NSIC Scheme of Rating of SEs . SE 1A: Highest Performance capability; High Financial strength. Prospects of performance are the highest and the entity has high capacity to meet its financial obligations. SE 1B: Highest Performance capability; Moderate Financial strength. Prospects of performance are the highest. However, the entity has moderate capacity to meet its financial obligations. SE 1C: Highest Performance capability; Low Financial strength. Prospects of performance are the highest. However, the entity has low capacity to meet its financial obligations. SE 2A: High Performance capability; High Financial strength. Prospects of performance are high and the entity has high capacity to meet its financial obligations. SE 2B: High Performance capability; Moderate Financial strength. Prospects of performance are high. However, the entity has moderate capacity to meet its financial obligations. SE 2C: High Performance capability; Low Financial strength. Prospects of performance are high. However, the entity has low capacity to meet its financial obligations. SE 3A: Moderate Performance capability; High Financial strength. Prospects of performance are moderate. However, the entity has high capacity to meet its financial obligations. SE 3B: Moderate Performance capability; Moderate Financial strength. Prospects of performance are moderate and the entity has moderate capacity to meet its financial obligations. SE 3C: Moderate Performance capability; Low Financial strength. Prospects of performance are moderate. However, the entity has low capacity to meet its financial obligations.

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SE 4A: Weak Performance capability; High Financial strength. Prospects of performance are weak. However, the entity has high capacity to meet its financial obligations. SE 4B: Weak Performance capability; Moderate Financial strength. Prospects of performance are weak. However, the entity has moderate capacity to meet its financial obligations. SE 4C: Weak Performance capability; Low Financial strength. Prospects of performance are weak and the entity has low capacity to meet its financial obligations. SE 5A: Poor Performance capability; High Financial strength. Prospects of performance are poor. However, the entity has high capacity to meet its financial obligations. SE 5B: Poor Performance capability; Moderate Financial strength. Prospects of performance are poor. However, the entity has moderate capacity to meet its financial obligations. SE 5C: Poor Performance capability; Low Financial strength. Prospects of performance are poor and the entity has low capacity to meet its financial obligations.

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Chapter-5 Profile of the companies taken under the study Penny wise solutions pvt.ltd.
PennyWise Solutions is a provider of custom software development solutions for small and medium businesses across the globe. We pride ourselves in offering the widest gamut of technology services at cost-effective prices. PennyWise assists its clients to implement technology solutions for their business by offering custom solutions which are affordable, delivered on time and with a quality that matches the time line and budget of the clients. We are not a company that would tell our clients long tales on our quality process or infrastructure, as we understand todays ever changing, rapidly increasing and highly sophisticated requirements of our clients, and we adapt to the needs of every clients requirements. As technology products and services become more available and affordable for small and midsize businesses, it is increasingly important to ensure that key needs of the business are met and our clients can focus on their actual business and not be bogged down in dayto-day IT issues, and contribute more to their firms bottom line. To this effect we become a partner to our clients and we build an association which is much beyond being just a client vendor relationship. We become Technology Implementation Partner for our clients.

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Our objective as a Technology Implementation Partner is to maximize the value that our clients derive from their IT investment through the deployment of market leading technology and trusted technical expertise that combine to deliver a dependable computing environment. We support clients in providing services that may be as minimal as a single design of a home page for a web site or as sophisticated, vast and varied as developing a full suite of products to manage the entire business of the client. Without clients, we do not exist. Without happy clients, we do not last long, and without delighted clients, we are not leaders. We believe it is easier to service an existing client than to find a new one. We also believe that every success story speaks more clearly than any other forms of advertising. And that is why our team is made up of talented, focused, dedicated and savvy technologists who enjoy what they do. When we're not servicing our clients, you'll find us on our computers, trying to figure out for the client dards, Quality standards and infrastructure are flexible and based on the clients needs and budgets

Canflex engineering pvt ltd

Canflex Engineering Pvt Ltd. (Canflex) based at Hyderabad, India is a company with more than 20 years of experience in the design and manufacture of packaging machines for flexible pouches. It offers a wide range of machines to produce flat pouches, gusseted pouches and stand up pouches for markets such as food and beverages, pharmaceuticals, cosmetics, chemicals etc. The machines are easy-to-operate due to the simplicity of the mechanism. In addition to its exceptional performance Canflex also offers benefits in terms of reduction of floor space, operating costs and ancillary equipment.

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Our design engineers and machinery builders have direct hands-on experience with the production process and thoroughly understand the unique demands of the form/fill/seal operation. The work we do is always in response to a customer request, to help research, analyze and develop a better solution for their packaging problems, whether large or small producing.

Product quality
The best on-line packaging systems share several qualities. Most importantly, they should be compact, requiring a minimum amount of floor space. To keep pace with the production line, they also must be fast and efficient. Finally, reliability is critical. Canflex's machines are considered to be the most versatile and production efficient machines of their kind on the market. Every machine leaving our facility undergoes a thorough Quality Assurance Testing and check-off procedures to ensure that your packing solutions match your needs.

Application
The pouches can be made in a variety of sizes, shapes and configurations from low cost elementary design to a more costly high end design for increased product freshness, enhanced presentation and merchandising appeal that find their way into a variety of applications in major markets. The pouches made can be used in Automotive, Bakery, Beverage, Candy/Confectionary, Chemical, Construction/Home Improvement, Cosmetics/Personal Care, Dairy, Electronics, Food, Fruit/Vegetables, Grain/Mill/Cereal, Hardware/Tools, Household, Industrial, Lawn/Garden, Meat/Poultry/Seafood, Media/Software, Medical, Paper/Printing, Pharmaceutical, Snack Foods, Textiles, Tobacco, Toys/Sports/Crafts industry.

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Balance sheet of penny wise solutions pvt ltd

Mar ' 06 Mar ' 05

Net sales
Less: cost of sales Gross profit Less: operating expenses

120000
80000 40000 36000 4000 7600 30000 40000 2400 80000 150000

100000
55000 45000 37000 8000 17000 20000 30000 3000 70000 76000

Net profit
Cash in bank debtors stock Prepaid expenses Total current asset Plant and equipment

Total assets liabilities

Creditors Provision for income tax debenture Equity share capital P&l account 74

230000
78000 2000 50000 80000

146000
48500 1500 80000

20000

16000

Total liabilities

230000

146000

Balance sheet of canflex engineering pvt. Ltd

Mar ' 05

Mar ' 06

Net sales
Less: cost of sales Gross profit Less: operating expenses

100000
70000 30000 20000 10000 5000 4000 40000 15000 56000

150000
110000 40000 25000 15000 8000 2000 25000 10000 65000

Net profit
Cash in hand Cash at bank debtors Stock at cost Fixed assets (net)

Total asset Liabilities

Bills payable Creditors Mortage loan Equity share capital Reserves & surplus

120000
2000 36000 10000 60000 12000

110000
1000 12000 20000 70000 7000

Total liabilities

120000

110000

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Comparing and grading the performance of the companies under study

Penny wise solutions Particulars pvt ltd. Ratios Rating Canflex engineering pvt ltd Ratios Rating

Liquidity ratios a) Current ratio b) quick ratio Activity ratios a)inventory turnover ratio b) debtors turn over ratio Solvency ratio a)debt equity ratio b)equity ratio Profitability ratio a) gross profit ratio b) net profit ratio 33.33 3.33 SE2B SE2B 26.67 10 SE2B SE2B 2 0.34 SE2B SE2B 0.42 0.7 SE2A SE2A 2.285 4.8 SE1B SE1B 11 4.61 SE1A SE1A 1 0.47 SE2B SE2B 3.46 2.69 SE2A SE2A

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P ar tic

10

15

20

25

30

35

a) a) in ve nt o ry tu rn o ve rr at io ti o ra ra t io nc y ol ve ui ty at io S nt r C ur re

ul ar s

Graphical representation of above table

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P b) l ne ity ra tp ti o ro fit ra t io ro fit a bi

b) eq

Canflex engineering pvt ltd

Penny wise solutions pvt ltd.

Findings and suggestions: A thorough discussion and study on the credit rating agencies and their rating process
in India is done through this project.

Tthe companies taken under the study are rated by NSIC with reference to Dun &
Bradstreet rating process Credit Rating is awarded to the companies mainly based on four ratios i.e. Solvency ratio, Liquidity ratio, Profitability ratio, Activity ratio. Dun & Brad street Co. is considering Financial and also Non Financial parameters in the process of credit rating. Diffrenet Credit Rating agencies are following different methods of rating the performance of the companies. Although almost all agencies follow same parameters for rating, there is a slight difference in the grading systems and symbols used.

The profitability ratio of penny wise solutions pvt ltd is more compared to canflex
engineering pvt ltd Net profit ratio of canflex engineering pvt ltd is comparatively high compared to penny wise solutions pvt ltd Inventory turnover ratio of penny wise solutions is low compared to canflex engineering pvt ltd

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 Companies which have been rated by the agancies are found to have many advantages in various activities of business. Credit Rating of a firm is useful not only to gain financial credit worthiness but also helpful in other non financial activities of business. Credit Rating sysytem is finding its increasing importance in India these days.

SUGGESSTIONS NSIC has to focus more on the small scale industries for credit rating sysytem. Promotional activities about Credit Rating Sysytem for MSMEs have to be increased. NSIC should conduct more awareness and training programmes to MSMEs about Creti Rating System. NSIC should consider other facilities in combination with Credit Rating to the MSMEs for increased benefits.

Table1. Showing the SMES who are aware of credit rating scheme in NSIC?

yes no

8 2

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Source: Source: Data is taken from the responses collected through questionnaire

Response: The SMEs which I have visited have responded among 10 SMEs , 8 of them are aware of NSIC scheme and remaining 2 SMEs are not aware of credit rating scheme in NSIC

Table 2.Showing the SMEs who are registered with credit rating scheme of NSIC? Ans. yes no 80 6 4

Source: Source: Data is taken from the responses collected through questionnaire

Response: The 10 SMEs which I have visited have responded that, 6 of them have got registered with credit rating scheme of NSIC and remaining 2 SMEs are not registered with credit rating scheme of NSIC.

Table 3. Showing the SMEs who are benefited with credit rating scheme of NSIC? Ans. yes no 7 3

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Source: Source: Data is taken from the responses collected through questionnaire

Response: The 10 SMEs which I have visited have responded that, 7 of the SMEs have benefited with credit rating scheme of NSIC and remaining 3 SMEs are not benefited with credit rating scheme of NSIC. Table 4.Showing is credit rating scheme of NSIC essential for the development of SMEs? yes no 8 2

Source: Source: Data is taken from the responses collected through questionnaire.

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Response: The 10 SMEs which I have visited have responded that, 8 of the SMEs have developed by getting loans with low interest rate of credit rating scheme in NSIC and remaining 2 SMEs are not developed by credit rating scheme of NSIC.

Table 5. showing the number of SSIs which got financial assistance because of credit rating identity with NSIC? Ans yes no 8 2

Source: Source: Data is taken from the responses collected through questionnaire

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Response: The 10 SMEs which I have visited have responded that, 8 of the SMEs have got 75% of financial assistance under credit rating scheme in NSIC and remaining 2 SMEs have not got any financial assistance under credit rating scheme of NSIC.

Table 6.Showing the SMEs that are certified by NSIC credit rating grade( symbol) ?

yes no

6 4

Source: Source: Data is taken from the responses collected through questionnaire

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Response: The 10 SMEs which I have visited have responded that, 6 of the SMEs have got certified under credit rating scheme of NSIC and remaining 2 SMEs have not certified under credit rating scheme of NSIC.

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Table 8. Showing the present schemes of NSIC are sufficient or they (SMEs)are looking for any other further schemes of NSIC? Ans. \ yes 7 no 3

Source: Source: Data is taken from the responses collected through questionnaire

Response: The 10 SMEs which I have visited have responded that, 7 of the SMEs have got certified under credit rating scheme of NSIC and remaining 3 SMEs have not certified under credit rating scheme of NSIC

QUESTIONAIRE

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1.Are you aware of nsic sheme of credit rating ? 2.A re you registered with credit rating scheme of nsic or if any? 3.A re you benifited with credit rating scheme? 4.Is credit rating is essentail for the development of MSMES? 5.what kind of financial asistance do you get from credit rating sheme of NSIC? 7.Are you certified with credit rating grade(in symbol) ? 8.IS this present schemes are sufficent or are you loking for any few other shemes ?

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BIBLOGRAPHY Khan M.Y.khan.,2006,Financial services,3rd edition,TMH,New Delhi 8. Rajeda.G.e.,ew2002,principles of risk management and insurance,7th edition, Pearson education. Mishikin. f.s., and Eakins.S.G.,2006, Financial markets and Institutions,5th edition, Pearson education. Gordon and Natarajan,2006,Financail markets and services,3rd Edition, Himalaya publishing House, Mumbai. Website www.nsic.co.in www.google.co.in www.icra.com

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TABLE SHOWING LIST OF COMPANIES VISITED S no

1 2 3 4 5 6 7

Name of the unit

Tico machines pvt.ltd Ideal detonators pvt ltd Quality ice-cream Nirmala industries Indus water solution Savvy spechems pvt ltd Fantasy foods pvt.ltd.

state
Hyd.A.P Hyd.A.P Hyd.A.P Hyd.A.P Hyd.A.P Quthbullapur,A.P Secunderabad,A.P

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CONTENT CAHPTER-1 CHAPTER-2 CHAPTER-3 CHAPTER-4 INTRODUCTION REVIEW OF LITRATURE ORGANISATION PROFILE DATA ANALYSIS &INTERPRETATION

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CHAPTER-5

FINDINGS &SUGGESTIONS BIBLIOGRAPHY

LIST OF TABLES S.NO 1 TITLE PG. NO

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92