42674.onicra Performance and Credit Ratings PDF

P E R F OR MA NC E A ND C R E DI T R AT I NGS
G I V I N G I N D I A N MS ME S A C U T T I N G - E D G E T O C O MP E T E
TABLE OF
CONTENTS
6
EXECUTI VE
SUMMARY
MSME BUSI NESS ENVI RONMENT I N I NDI A
PERFORMANCE AND CREDI T RATI NG SCHEME
Defning the sector
Introduction to the
MSME Sector
By Area
Impact of the
Scheme
Size of the MSME sector
Performance and
Credit Rating
Importance of
the Scheme
Distribution by
Number of Registered
Enterprises
Success Stories
Forward-looking
Analysis and
Recommendations
Diversity in the sector
By Ownership
MSME Economic
Performance
Rating Defnition
Importance of
Ratings in MSME sector
Benefts of Performance
and Credit Rating
Scheme
Penetration of Ratings
Impact of Performance
and Credit Ratings
About the Scheme
Key Features
Of the Scheme
Reimbursement
of rating fee
Rating Scale
Importance of
the MSME sector
Contribution to
the Economy
11- 17
18-29
11
07
14
09
14
09
10
17
17
11
07
08
13
14
18
21
21
22
23
24
25
26
27
29
30
FORWARD LOOKI NG ANALYSI S
ABOUT ONI CRA
52
CONCLUSI ON
SUCCE SS
ST ORI E S
CRE AT I NG A ROBUST
E COSYST E M F OR MSME S
Ease of Starting &
Managing Business
Enhance Financial
Inclusion
Improving the
Performance of
Training & Skill
Development Institutes
Utilizing Ratings as
a tool for promoting
technology up-gradation
Geographic Presence
Profle of ONICRA
Rated Entities
Industry wise
distribution
MOU with Banks
Contact us
Increasing penetration
of Ratings in North
Eastern States & J&K
Incentivizing the Rating
Renewals & Monitoring
Mechanism
Greater Market Access
and Marketing support
42-51
54-62
42
42
46
44
47
50
45
56
58
60
61
62
40
INDIAN MSME
SECTOR PRODUCES OVER
6,000 PRODUCTS RANGING FROM
TRADITIONAL TO HIGH-TECH ITEMS IN
ADDITION TO PROVIDING A WIDE
RANGE OF SERVICES
THE INDIAN MSME SECTOR EMPLOYS 8 CRORE PEOPLE, CONTRIBUTES 37.54% TO THE GDP
(SERVICE SECTOR CONTRIBUTION OF 30.5% AND MANUFACTURING SECTOR CONTRUBUTION OF
7.04%) AND ACCOUNTS FOR 42% OF THE TOTAL INDIAN EXPORTS.
EXECUTIVE SUMMARY 06
The Indian MSME sector produces
over 6,000 products ranging from
traditional to high-tech items in
addition to providing a wide range
of services. There units employ more
than 8 Crore people, contribute 38%
to the GDP and account for 42% of all
exports.
MSMEs are considered the engine of
economic growth and a major source
of employment in non-urban areas
at a lower capital cost. They reduce
the burden of developing an urban
infrastructure, help in industrialisation
of rural and backward areas, minimise
regional imbalances and ensure
equitable distribution of national
income and wealth.
But they have been sufering from
multiple problems like unavailability
of adequate and timely fnance,
high cost of credit, lack of support
in technology upgradation and
unavailability of skilled labour. This
has resulted in many incidences of
sickness and closures.
The rating serves as a trusted third-
party opinion on the MSME units
capabilities and credit worthiness.
One of the fagship schemes launched
with the objective of assisting MSMEs
in obtaining performance-cum-credit
rating in 2005 is the performance
and credit rating scheme for Micro
and Small Enterprises. The scheme
is being implemented by National
Small Industries Corporation Ltd as
the nodal agency in conjunction with
empanelled credit rating agencies,
Indian Bankers Association (IBA) and
Small Industry Associations (SIAs).
The fee to be paid by a MSME for the
rating is subsidised. The government
pays 75% of rating fee and a MSME
the remaning 25%.
The rating serves as a trusted third-
party opinion on the MSME units
capabilities and credit worthiness. The
ratings are valid for one year. A good
rating enhances the acceptability
of the rated unit in the market and
allows it to access credit easily and
at cheaper interest rates. Many
PERFORMANCE
AND CREDIT
RATING
The government has introduced
various schemes through its
institutional infrastructure to
support MSMEs.
INTRODUCTION
TO THE MSME
SECTOR
MSMEs are considered the
engine of economic growth and
a major source of employment
in non-urban areas at a lower
capital cost.
EXECUTIVE SUMMARY
India has more than four
crore Micro Small and Medium
Enterprises (MSMEs), the
second largest in the world,
compared to about fve crore
in China.
07
banking and fnancial instituions have
accepeted ratings and provide upto one
per cent reduction on interest rates.
Over the years, the NISC Performance
and Credit Rating Scheme has become
popular among MSMEs.
Under the scheme, a total of 91,030
units were rated till March 2014. The
number of units rated has consistently
grown at a CAGR of 38.5% since 2007-
08. This growth has been achieved
due to the persistent eforts of rating
agencies in creating infrastructure and
reach across the country.
The scheme has helped MSMEs access
fnance at a lower cost of borrowing,
thus improving opportunities for
greater fnancial inclusion. The rated
enterprises have also indicated
reduction in the loan processing time.
The ratings have today extended their
reach to small businesses operating in
Tier II and Tier III cities.
This has enabled small enterrpises to
avail of the benefts. The savings on the
interest expenses and improvements
suggested during the rating exercise
have helped the rated MSMEs improve
their operational efciency and achieve
higher returns. Also, a large number
of rated entities have shown positive
growth in their turnover post ratings.
Ratings are also being utilised by
MSMEs for various non-fnancial
benefts. Many small business
enterpises use the ratings as a
marketing and branding tool, with
the rating logo on their products and
advertising content. The independent
risk evaluation of a MSME by an
unbiased third party lends credibility
IMPORTANCE OF
THE SCHEME
The NSIC performance and
credit rating scheme has
proved to be a successful tool to
reduce information asymmetry
and enhance credibility in the
MSME sector.
Studies conducted on rated enterprises
indicate that a majority of them were
keen on renewals as they had achieved
higher growth and better margins.
More than half of the rated enterprises
have beneftted in terms of customer
acceptability and recognition.
MSMEs have also indicated that good
ratings induced improvements in
systems and policies, helped them
incorporate better governance and
control practices, motivated them
to improve record maintanence and
achieve transparency in operations.
Onicra estimates the total number of
ratings done since the inception of the
NSIC performance and credit ratings
till March 2014 to be nearly 91,030,
resulting in about Rs 39,143 crore
increase in disbursed loan to these
units, more than 10 lakh new jobs and
Rs 196 crore savings on interest for the
sector.
The rating process in itself acts as a
self-improvement exercise and helps
conscious MSME to evolve based
on changing regulations, business
requirements and evolving business
and economic developments.
SUCCESS STORIES
The study presents the experiences
of several small business owners by
highlighting how ratings helped them
solve many problems. Over the years,
ratings have reached small businesses
in Tier II and Tier III cities, women
entrepreneurs, economically-weaker
sections like Scheduled Caste / Schedule
Tribe entrepreneurs, micro-enterprises
from the Northeast to enterprises
operating in Jammu and Kashmir.
EXECUTIVE SUMMARY
IMPACT OF THE
SCHEME
With nearly a two-fold increase
in the number of participating
MSMEs in the rating process
over the past couple of years, the
performance and credit rating
scheme has attained popularity,
recognition, relevance and
acceptance across states.
09
to the enterprises and opens doors for
them while dealing with multinational
corporations and public sector units.
The eforts of rating agencies and the
NSIC (as a nodal agency) have resulted
in widespred accaptibility of the ratings
among almost all banking and fnancial
institutions in the country.
FORWARD-
LOOKING
ANALYSIS AND
RECOMMENDATIONS
Small enterprises are working
in a competitive environment
and requisite support from the
government must be delivered in
the simplest manner possible to
create a robust eco-system which
can foster growth and enhance
competitiveness.
In many cases, the underlying cause
for not getting requisite support
from stakeholders is failure on
the part of MSME to prove their
credibility, stakeholders are often
not able to take a complete view of
the capability of the enterprise.
Over the past couple of years,
ratings have been accepted as a
robust mechanism for disseminating
relevant business information
about small enterprises. Thus,
ratings can be utilised to link the
rated enterprise to a number of
government schemes and also as a
decision-support tool to assess the
qualifcation of such enterprises to
avail the benefts of schemes.
The report also recommends
various initiatives that can be taken
to foster growth in the sector. The
frst step is to make the process
of starting a business easier by
making the registration process
less cumbersome and increasing
the acceptability and reach of
CGTMSE scheme by using greenfeld
ratings. The report suggests
leveraging the penetration and
widespread acceptability of ratings
for popularising schemes related to
technology upgradation and equity
fnancing.
It also presents views on
rehabilitation of sick units by
introducing a debt restructuring
mechanism (similar to CDR in
corporate space). Incentivising
rating agencies operating in regions
with difcult geographical terrain
to increase the number of rated-
enterprises will be a step towards
achieving the goal of nurturing
equitable growth of MSMEs
throughout the country.
The reports also recommends
helping skill development institutes
upgrade the quality of training. It
also mentions some initiatives that
can help MSMEs build credibility
online and in the process market
their products to international
buyers. The ratings mechanism
has the merit of qualifying as a
common evaluation tool linking
various schemes and thus delivering
the benefts to small enterprises.
It is thus important that the rating
mechanism is strengthened and
more impetus is given to enable
proliferation of ratings in the SME
sector.
MSME BUSINESS
ENVIRONMENT IN
INDIA
Defining the
sector
The term MSME is widely used
to describe small businesses in
the private sector.
MSME BUSINESS ENVIRONMENT IN INDIA
Regulators and fnancial institutions
across the world use parameters such
as employee strength, annual sales,
value of fxed assets,and loan size
proxies to defne the sector in the
context of fnance.The Micro, Small
and Medium Enterprise Development
Act 2006 (MSMED Act) provides the
defnition of the MSME sector. An
extension of the erstwhile defnition
of Small Scale Industry (SSI), this
classifcation uses the investment
metric to defne MSMEs because
investment in plant and machinery can
be measured and verifed. The MSMED
Act broadly segments the MSME sector
in the following manner:
Category/Enterprise Size Micro Small Medium
Manufacturing < 2.5 2.5 50 50 - 100
Services < 1.0 1 20 20 - 50

Source: MSMED Act- 2006
SIZE OF THE MSME SECTOR
According to projections by the Ministry of MSMEs, the number
of working enterprises increased from 3.6 crore in 2006-07 to
4.4 crore in 2011-12. The number grew at a CAGR of 28.02% as
compared to the third all India census of SSI during the period
2000-01 to 2006-07.
CATEGORY/ENTERPRISE SIZE
INITIAL INVESTEMNT IN PLANT AND MACHINERY
(IN INR MILLION)
M
i
c
r
o
S
m
a
l
l
M
e
d
i
u
m
WORKING ENTERPRISES IN MSME SECTOR
Total Working Enterprises
(in lakhs)
Employment
(in lakhs)
Source: Ministry of MSME - Annual Report, 2012-13
11
3rd Census - 2001-02
4th Census - 2006-07
249.33 105.21
805.23 361.76
Projected - 2011-12
1012.59 447.73
MSME Census
Employment increased at a
CAGR of 26.42% between the
third and the fourth census.
Projected employment in the
sector was 10.12 crore in 2011-
12 as compared to 8.05 crore in
2006-07.
The MSME sector has grown at a rate
of nearly four per cent annually from
2007 to 2012 and constituted 4.4
crore units of the organised sector
in 2012. The unorganised sector still
remains larger than the organised
sector and the number of registered
MSME units is still miniscule. To
increase the registered units, the
MSME ministry has simplifed the
registration process by replacing the
earlier two stages with just one step
fling of memorandum.
2
0
0
7

-

0
8
2
0
0
8
-

0
9
2
0
0
9

-

1
0
2
0
1
0

-

1
1
2
0
1
1

-

1
2
2
0
0
6

-

0
7
3.6
3.7
3.9
4.1
4.2
4.4
GROWTH OF WORKING
ENTERPRISES IN MSME SECTOR
2
0
0
7

-

0
8
2
0
0
8
-

0
9
2
0
0
9

-

1
0
2
0
1
0

-

1
1
2
0
1
1

-

1
2
2
0
0
6

-

0
7
8.05
8.42
8.81
9.22
9.65
10.12
EMPLOYMENT IN MSME SECTOR
12
DIVERSITY IN
THE SECTOR
There are over 6,000 products
ranging from traditional to
high-tech items, which are being
manufactured by the MSME
sector in addition to providing a
wide range of services.
The MSME sector has a huge number of services units constituting 68.21 per
cent of the working enterprises. But the majority of output comes from the
manufacturing sector
Leading Industries: SME Sector (in %)
Retail Trade, 39.85%
Manufacture of Wearing
Apparel, 8.75%
Manufacture of Food Products
& Beverages, 6.94%
Hotels &
Restaurants, 3.64%
Sales, Maintenance
and Repairs of Motor
Vehicles, 3.57%
Manufacture of
furnitures, 3.21%
Manufacture of
Textiles, 2.33%
Manufacture of
Fabricated Metal
Products, 2.33%
Others, 29.37%
13
BY OWNERSHIP
Ownership determines the
capital structure of the unit and
has a signifcant efect on the
performance and growth potential
of the unit. Most enterprises in the
MSME sector are proprietorship
and cannot have equity from
external sources, thus limiting the
growth potential of an enterprise
throughout its lifetime.
BY AREA
MSMEs are present both in rural
and urban areas of the country.
Rural areas account for 55 per cent
of the total working enterprises in
MSME sector but contribute only
34 per cent to the gross output.
Urban areas on the other hand
account for 45 per cent of the pie
but contribute 66 per cent of the
gross output.
100
X
Y
75
50
25
0
55% 34% 45% 66%
Rural
Urban
Working Enterprises Gross Output
20 40 60 80 100
10
10%
0%
Y
Source: Ministry of MSME Annual Report 2012-13
20%
30%
40%
50%
60%
70%
80%
90%
100%
20 30 40 50 60 70 80 90 100
PARTNERSHI P
PVT. COMPANY
COOPERATI VE
OTHERS
NOT RECORDED
94. 41%
1. 18%
0. 14%
0. 33%
2. 24%
1. 70%
PROPRI TORYSHI P
14
Source: Fourth All India MSME Census, MSME Annual Report 2012-13 Number of Enterprises
Jammu and Kashmir 15000
Himachal Pradesh 12000
Uttarakhand 24000
Haryana 33000
Delhi 4000
Rajasthan 55000
Gujarat 203000
Madhya Pradesh 107000
Maharashtra 87000
Andhra Pradesh 46000
Goa 3000
Karnataka 136000
Kerala 105000
Tamil Nadu 234000
Puducherry 1000
Andaman and Nicobar Islands 1000
Chhattisgarh 23000
Jharkhand 18000
West Bengal 43000
Odisha 2000
Uttar Pradesh 188000
Bihar 5000
Assam 2000
Meghalaya 3000
Tripura 1000
Mizoram 4000
Manipur 4000
Nagaland 1000
Punjab 48000
Chandigarh 1000
All India Statistics
Registered MSMEs 15.64 (lakhs)
Employment Registered MSMEs 93.09 (lakhs)
Employment Registered + Unregistered 805.24 (lakhs)
DISTRIBUTION BY NUMBER OF REGISTERED ENTERPRISES
MSME BUSINESS ENVIRONMENT IN INDIA 15
OVER THE YEARS, THE PERFORMANCE AND CREDIT
RATING SCHEME HAS BECOME INCREASINGLY POPULAR
AMONG THE MSMES IN THE COUNTRY. UNDER THE SCHEME
91,030 UNITS HAVE BEEN RATED TILL MARCH 2014. THE NUMBER
OF UNITS RATED UNDER THE SCHEME HAS CONSISTENTLY GROWN
AT A CAGR OF 38.5% SINCE 2007-08. THIS GROWTH HAS BEEN
ACHIEVED DUE TO THE PERSISTENT EFFORTS AND INVESTMENT
BY THE RATING AGENCIES IN CREATING INFRASTRUCTURE
AND REACH ACROSS TIER II AND TIER III CITIES
16
IMPORTANCE
OF THE MSME
SECTOR
MSMEs are important for the
development of any economy,
given their role in job
creation and ability to foster
entrepreneurship.
In addition to helping catalyse
economic growth, MSMEs feed
large local and international value
chains, local consumer markets like
suppliers, manufacturers, contractors,
distributors, retailers and service
providers.
They contribute signifcantly to
manufacturing output, employment
generation and exports out of
India. It is estimated that the sector
accounts for about 45 per cent of the
manufacturing output and 42% of total
exports from the country. With nearly
38% contribution to the GDP, MSMEs
are the second largest employer for
rural and urban population.
CONTRIBUTION TO THE ECONOMY
MSMEs are also an effective vehicle for employment generation
The cities have been bearing growing
population due to large-scale
migration from rural areas. The urban
infrastructure is stretched and policy
makers are seeking solutions to
mitigate issues arising from migrant
population growth.
Rural MSMEs and those based outside
large cities ofer a viable alternative
for employment to local labour, hence
presenting an opportunity for people
to participate in productive, non-farm
activities without needing to migrate to
urban areas. With adequate fnancial
and non-fnancial resources as well
as capacity-building, the MSME sector
can grow and contribute to economic
development considerably higher than
it is doing currently.
Key Metrics
45% Industrial output
42% Exports (in value)
38% Gross Domestic Product (GDP)
80 million people employed
95% Industrial units
17
IMPACT OF PERFORMANCE AND CREDIT RATING SCHEME
Small and medium
Enterprises can be rightly
called the backbone of
Indias GDP.
MSME
ECONOMIC
PERFORMANCE
6.2
%
8.4
%
8.0
%
6.3
%
6.2
%
6.6
%
M
S
M
E
G
D
P
2009 - 10 2010 - 11 2011 - 12
8%
9%
7%
6%
5%
4%
3%
2%
1%
0%
Closed enterprises
at national level:
22%
X
Y
Closed enterprises +
non traceable
enterprises at
national level:
30%
18
The MSME sector in India is growing
at a steady rate of more than six per
cent every year for more than three
years now. In 2011-12, it grew at a rate
of 6.6% which is greater than the GDP
growth of 6.2% in that year. Current
estimates of MSME contribution to
GDP do not take into consideration
the contribution made by unorganised
private enterprises for which asset and
sales data is not tracked by government
agencies.
The MSME sector has consistently
registered a higher growth rate (6.5%
on gross output for fnancial year
2012-13) compared to the rest of
the industrial sector. In the current
economic scenario with a potential
double digit growth percentage, Indias
MSME sector can revolutionise Indias
economic growth trajectory. With
most of the sectors not performing
as desired, the MSME sector is being
looked upon as a major growth engine
for the economy. However, the rate at
which enterprises are getting closed
clearly indicates lack of conducive
atmosphere to support young
entreprenures.
In the current
economic scenario
with a potential
double digit growth
percentage, Indias
MSME sector can
revolutionise Indias
economic growth
trajectory.
19 IMPACT OF PERFORMANCE AND CREDIT RATING SCHEME
OVER THE PAST COUPLE OF YEARS
RATINGS HAVE BEEN ACCEPTED AS A ROBUST
MECHANISM FOR DISSEMINATING RELEVANT BUSINESS
INFORMATION ABOUT THE SMALL ENTERPRISES. THUS
RATINGS CAN BE UTILIZED TO LINK THE RATED ENTERPRISE
TO A NUMBER OF GOVERNMENT SCHEMES AND ALSO
AS A DECISION SUPPORT TOOL FOR ASSESSING THE
QUALIFICATION OF SUCH ENTERPRISES TO AVAIL THE
BENEFITS OF THE SCHEMES
ABOUT THE
SCHEME
The National Small Industries Corporation (NSIC) in
consultation with credit rating agencies and Indian Banks
Association has formulated a performance and credit rating
scheme for micro and small enterprises.
NSIC has been appointed as a nodal
agency by the Ministry of Micro, Small
and Medium Enterprises to implement
the scheme.
NSIC empanelled the leading credit
rating agencies like Onicra, CARE,
CRISIL, Dun and Bradstreet, FITCH,
ICRA, BRICKWORK and SME Rating
Agency of India Ltd (SMERA) conduct
the rating of MSMEs under the scheme.
While the criteria for fnalisation is
left to individual rating agencies, the
symbols and defnitions for indicating
the risk score has been evolved on
uniform basis for implementation.
The scheme was launched on April
7, 2005 by the fnance and MSME
ministers.
The validity of a rating is one year
from the date of issuing the rating
letter.
The rating agencies have diferent
fee structures. They will devise a
separate fee structure for SSI units
under this scheme.
Although the fee of diferent rating
agencies may vary for the purpose
of subsidising the fee, a ceiling has
been prescribed by the government.
Small scale units will have to pay their
contribution towards the rating fee
along with the application.
The fee to be paid to rating agencies
will be based on turnover of small-
scale units which have been
categorised into three slabs. Rating
to be awarded by each of the
agencies will be prefaced by the
word NSIC. Thus rating awarded by
Onicra, for example, will be termed
NSIC-ONICRA Performance and
Credit Rating.
KEY FEATURES
OF THE SCHEME
The rating fee for performance
and credit rating is subsidised
by NSIC. A rated enterprise
needs to pay only 25% of the
total fee. The rest is paid by
NSIC to rating comapanies.
The rating process is undertaken in the following manner:
RATING PROCESS
RATING REQUEST
SUBMIT APPLICATION
FORM, RELEVANT
DOCUMENT & FEES
SITE VISIT &
MANAGEMENT
INTERVIEW
RATING
DISSEMINATION
RATING COMMITTEE/
RATING DECISION
RATING
ASSESSMENT
PROCESS
22
REIMBURSEMENT
OF RATING FEE
Turnover (` Lakh)
Rating Fees
Service Tax @12.36% (`)
Total Fees (`)
Subsidy from NSIC (`)
Amount Payable by SSI (`)
Concessional Fees (`)
40,000
4,544
44,944
25,000
19,944
8,333
45,000
5,562
50,562
30,000
20,562
10,000
55,000
6,798
61,798
40,000
21,798
13,334
<50 50-200 >200
NSIC - Onicra Rating Scale
Performance
Capability
Highest
High
Moderate
Weak
Poor
SE 1A
SE 2A
SE 3A
SE 4A
SE 5A
SE 1B
SE 2B
SE 3B
SE 4B
SE 5B
SE 1C
SE 2C
SE 3C
SE 4C
SE 5C
Financial Strength
High Moderate Low
While the criteria for evaluation is
set by a rating agency, the symbols
and their defnition for indicating
the risk score in the rating awarded
has been evolved for uniform
implementation. These symbols
depict both the performance
evaluation as well as the credit
worthiness of a unit.
RATING SCALE
RATING DEFINITION
While the criteria for evaluation is set by a rating agency, the symbols and their defnition for indicating the risk score in the
rating awarded has been evolved for uniform implementation. These symbols depict both the performance evaluation as
well as the credit worthiness of a unit.
SE 1A HIGHEST PERFORMANCE CAPABILITY AND HIGH FINANCIAL STRENGTH
SE 1B HIGHEST PERFORMANCE CAPABILITY AND MODERATE FINANCIAL STRENGTH
SE 1C HIGHEST PERFORMANCE CAPABILITY AND LOW FINANCIAL STRENGTH
SE 2A HIGH PERFORMANCE CAPABILITY AND HIGH FINANCIAL STRENGTH
SE 2B HIGH PERFORMANCE CAPABILITY AND MODERATE FINANCIAL STRENGTH
SE 2C HIGH PERFORMANCE CAPABILITY AND LOW FINANCIAL STRENGTH
SE 3A MODERATE PERFORMANCE CAPABILITY AND HIGH FINANCIAL STRENGTH
SE 3B MODERATE PERFORMANCE CAPABILITY AND MODERATE FINANCIAL STRENGTH
SE 3C MODERATE PERFORMANCE CAPABILITY AND LOW FINANCIAL STRENGTH
SE 4A WEAK PERFORMANCE CAPABILITY AND HIGH FINANCIAL STRENGTH
SE 4B WEAK PERFORMANCE CAPABILITY AND MODERATE FINANCIAL STRENGTH
SE 4C WEAK PERFORMANCE CAPABILITY AND LOW FINANCIAL STRENGTH
SE 5A POOR PERFORMANCE CAPABILITY AND HIGH FINANCIAL STRENGTH
SE 5B POOR PERFORMANCE CAPABILITY AND MODERATE FINANCIAL STRENGTH
SE 5C POOR PERFORMANCE CAPABILITY AND LOW FINANCIAL STRENGTH
Ratings help small enterprises obtain
fnance for working capital investment
or leasing purposes at cheaper
interest rates. NSIC and credit rating
agencies have
promoted the
scheme to such
an extent that
today ratings
are accepted
by almost
all banking
institutions.
Widespread acceptability of ratings
as an indicator of the fnancial and
performance capability of a small
business has directly benefted the
small business borrowers across the
country. With increasing focus on
inclusive growth, MSME ratings have
emerged as a prominent tool for
disbursement of fnancial support to
MSME located especially in smaller
cities and towns.
The feedback by rating agencies has
helped small businesses improve
their efciency. Various studies have
also cited improvement in turnover
and profts post-ratings. Given the
current economic developments,
banking institutions are cautious
while approving a loan application.
credit rating is a good option for small
businesses given the problems they
face on the ground.
Rating agencies assess a frms
fnancial viability and capability to
honour business obligations, provide
an insight into its sales, operational
and fnancial composition, thereby
assessing the risk element, and
highlights the overall health of the
enterprise. They also benchmark its
performance within the industry.
In the Indian context, especially in the
MSME sector, there is a huge gap of
credible business information. The
credit rating reports are now bridging
this gap. Ratings and renewals is
slowly, but steadily, building the
necessary trust and confdence
among lending institutions and
other stakeholders by bringing more
transparency into the sector.
Rating scheme objectives have
been efectively achieved in terms
of making enterprises competitive,
process-oriented, fnancially strong
and technologically advanced. The
rating mechanism ofers an apt
opportunity for close examination of
operational and fnancial capabilities,
which empowers enterprises for
great extent. Last, but not the
least, the performance and credit
ratings Scheme is an inclusive and
consultative process that provides
feedback on inadequacies and
strengths which helps enterprises
improve their fnancial bottom lines.
IMPORTANCE OF
RATINGS IN MSME
SECTOR
Credit and performance ratings
have enabled small firms to
access formal credit and also
improve the terms of lending.
BENEFITS OF PERFORMANCE AND
CREDIT RATING SCHEME
Source: Onicra Study of Rated Enterprises
Financial Benefits
Non-Financial Benefits
26
Insttutonal funding of MSME units rated by Onicra has increased by 43% afer the ratng
was assigned to these units. This indicates that more MSMEs are going to insttutonal
nancing post ratng.
Despite an increase in the insttutonal nancing, the cost of borrowings for MSMEs has
decreased post ratng to 11% from 13%. This has been a result of the good ratngs scored
by MSMEs. Most of them are wary of ratngs due to the rigour of the process and fear of
low ratng score. A lower ratng score may not be the result of a weak nancial strength,
but could be atributed to various other reasons. The Onicra reports highlight these areas
and any interested MSME can take the feedback positvely and try to improvise on these
areas.
Onicra has signed MoUs with 19 banks and nancial insttutons which oer interest rate
reducton to MSMEs based on ratngs assigned to MSMEs. The benet ranges to 0.25%
from 1.5% to our top-rated customers. Onicra estmates that its clients saved Rs 7.22
crore as a part of their interest expenses due to ratngs assigned.
With interest expenses saved and an improvement in the business model, there will be
beter margins and returns for companies. The net prot of MSMEs has increased by a
whopping 27% while the returns have increased to 10% from 11%. MSMEs have found
signicant benets in the ratng exercise and hence many of them come back for renewal
ratngs.
The turnover of MSME has improved by 18% post ratng assigned. This is the result of a
32% increase in the total capital employed (debt plus equity) in MSMEs, driven by
increase in debt fund. Post-ratng assigned, the equity nancing increased by 24% while
the debt nancing increased by 43%.
Greater access to
nance
Lower cost of
borrowing
Concessional
funding
Interest expenses
saved
Beter margins and
returns
Higher turnover
Growth
The loan processing tme for rated enterprises has reduced from 90 to 82 days. Also the loan
applicaton process has become easier for most of the rated enttes due to systematc compilaton
of informaton.
The independent risk evaluaton of MSMEs by an unbiased third party lends credibility and opens
doors for them while dealing with MNCs and corporates. Many small enterprises today are using
the ratngs on their marketng material and advertsements. A number of them are using the ratngs
as a tool for marketng and branding purposes.
Reducton in loan
processing tme
Use of ratngs for
marketng and
branding
PENETRATION OF RATINGS
The universe
of MSMEs still
remains an
unexplored
territory
Ratings have shown an impressive
growth over the years with more than
91,030 units rated till March 2014 under
the performance and credit ratings
scheme.
Source: Based on sample study conducted on ONICRA rated MSME entities
3815 5011 7531 10327 13547 19676
Number of Units Awarded Rating Under the Scheme
31093
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014
Increase in
net profts
Increase in sales
Reduction in cost
of borrowing
New jobs created
Increase in
institutional
funding
1 SME Ratng Leads to
43%
27%
18%
11
1.5%
IMPACT OF PERFORMANCE AND
CREDIT RATING SCHEME
Source:
Total number of ratings done under NSIC performance and credit ratings scheme till March 2014
Based on sample study conducted on ONICRA rated MSME entities
-Rs 1 crore bank credit per unit; 43% increase in bank credit per unit
-0.5 % savings on loan amount
28
Additional jobs created
by the rated MSMEs
1,001,330
Number of MSMEs
rated under
the scheme
91,030
Units
Rs crore
Saved in
interest for
the sector
196
Rs crore
Amount of loans
disbursed to the
MSME sector
39,143
Source: 2012 Study of the Performance & Credit Rating Scheme for Micro & Small Enterprises
29
Near two-fold increase in the number of partcipatng MSMEs in the ratng process over the past three
years (5,000 in 2008-09 to 10,000 in 2010-11). This suggests that the quantum jump is an outcome of
popularity, recogniton, relevance and growing acceptance of the ratng scheme among enterprises
across states
As many as 89% of banks indicated that enterprises approached for credit assistance, especially in the
category of one crore and above, were either rated or were fully aware of the NSIC scheme. Again 67%
of banks stated that enterprises having lesser credit requirements had comprehensive knowledge of
the NSIC ratng scheme and were positvely inclined to get their unit rated
About 62% of the contacted enterprises showed willingness for renewal in the coming year, indicatng
that enterprises are serious about the ratng process and view their partcipaton with specic
purpose
An increase of four per cent in the highest category of ratng (SE1 A) in the past three years points
towards the success of the ratng process. Of the 32% enterprises that renewed their ratngs in the
past three nancial years, 67% achieved higher ratng in subsequent years and 53% improved their
nancial performance
As many as 61% of rated enterprises termed ratng to be highly signicant for credit approval and 10%
of the enterprises indicated ratng as an important parameter in credit processing
A total of 44 per cent of enterprises who approached for credit beneted in terms of reduced rate of
interest and 22% gained in terms of rebate in loan processing fee including folio charges
About 57 per cent of enterprises indicated that they have gained in terms of customer acceptability
and recogniton. Out of the enterprises, who deal in exports, 53% reported benets in securing export
orders afer getng rated
Nearly 58 per cent of enterprises said ratng impacted proper maintenance of nancial records and
audit reports
That the ratng mechanism is a helping instrument in achieving positve growth in the sector can be
gauged from the fact that there has been a consistency of ratng in the moderately-performing
category of 3 B in the past three years and decrease in number of poorly-rated units during the same
period
A good ratng helps to lower the default rates of borrowers and contributes to making the nancial
market stronger. It helps in bringing symmetry in informaton so that users of the ratng score
informaton can compare the rated enttes on similar parameters. Onicra has successfully completed
its rst default study in FY13 and our default rate of 2.47% indicated a low default rate in MSMEs. Also,
Onicras gini-coecient is only 0.54 which reects the robustness of its ratng model
About 31 per cent of enterprises contacted indicated that good ratng induced improvement in system
and policies. 29% said it has an impact in terms of incorporatng checks, control and governance
practces. 23% achieved transparency in operatons and 25% registered impact on product quality
Number of
partcipatng MSE
Popularity
Renewal
Improvement in
performance
Credit
Approval
Interest rate
Reducton
Acceptability
Maintenance of
records
Positve growth
Low default rate
Not merely an
Instrument to Help
Credit Access
SUCCESS STORIES
Thousands of frst-generation entrepreneurs in Kolkata are creating jobs for many others. Deepak Jaiswal is one such
entrepreneur who is successfully running his packaging business by availing benefts of NSIC-Onicra Credit and Performance
Rating. Deepak wishes more SMEs will understand and avail the benefts of the scheme.
I was not getting my loan sanctioned. I couldnt understand what the issue was. Ratings made it easy. I wish more companies
like ours understand the benefts of ratings and avail them to expand business and employ more people.
HELPING ENTREPRENEUR EXPAND BUSINESS AND
CREATE EMPLOYMENT
DEEPAK JAISWAL
30
SUCCESS STORIES
Amrutbhai Patel believes in on-time delivery and best quality products. Shreenathji Brass Products acts as an indispensable
part of the automotive, infrastructure, industrial and many other sectors. The company considers ratings as a tool that gives
the brand a unique space in the minds of its consumers.
I display my ratings everywhere -- on my advertising material and even the hoardings at my head ofce. It builds confdence
among my customers. Among many others in this region our hoarding is diferent. I am now a part of a global supply chain.
Multinational clients understand the rating symbols.
BECOMING PART OF THE GLOBAL VALUE CHAIN
AMRUTBHAI PATEL
31
SUCCESS STORIES
Ms. Loukrakpam Ibetombi Devi runs M/S Chinglairembi Embroidery, a small enterprise manufacturing embroidered fabric.
She was fnding it difcult to get institutional fnance and expand her business in Imphal, West district of Manipur. Ratings
made it easier for her to avail credit facility and expand her reach.
HELPING ENTREPRENEUR FROM NORTH EASTERN
STATES EXPAND BUSINESS OPPORTUNITIES
MS. LOUKRAKPAM IBETOMBI DEVI
32
SUCCESS STORIES
Ms Mayna Dhar manufactures jam, pickle, tomato sauce, chili sauce and juices. Her company Indira Home Products is trying
to make a mark in the highly competitive home products market dominated by big brands.
Ratings lend me credibility. I tell my customers my unit is rated and that changes their outlook about my products. In case
of new customers, it helps a lot.
HELPING WOMEN ENTREPRENEURS
MS. MAYNA DHAR
33
SUCCESS STORIES
Sukhant Behera has been engaged in manufacturing of cement products used in construction. He has got a loan for his
company Baba Lokeshwar Cement Products located at Jaisapatna, P.O. Govindpur, Pipili, District Puri, Odisha. Getting a
loan is like a dream come true.
SUPPORTING GROWTH OF ENTREPRENEURS FROM
WEAKER ECONOMIC BACKGROUNDS
SUKHANT BEHERA
34
SUCCESS STORIES
Onicra is reaching Tier-II and Tier-III city entrepreneurs. Take N. Palanichamy, owner of SS Vermi Compost Industry, who
has reached out to farmers by providing them with manure and fertilisers along with agricultural consultancy and analysis.
N. Palanichamy established his company in 2003 and has grown it to 300 tonnes/month of compost from 30 tonnes/month.
He considers a credit rating report a tool that has helped him build his credibility among bankers and customers.
REACHING TIER-II AND TIER-III CITIES FOR
FINANCIAL INCLUSION
AMRUTBHAI PATEL
35
SUCCESS STORIES
M/s Round-Tech Engineering Company, Ahmedabad, Gujarat (Company Brochure)
36
M/s FRN Engineers and Constuctors Pvt. Ltd., Thane, Maharshtra (Company Website)
SUCCESS STORIES 37
SUCCESS STORIES
MANY MORE STORIES FROM VARIOUS
PARTS OF THE COUNTRY
I appreciate the rating process of your company. I would
also wish and recommend MSMEs to get the credit rating
done from NSIC-Onicra Credit Rating Agency of India Ltd.
Kundu
Novelty
Centre,
Kolkata
This rating process is methodical and systematic. It
has highlighted certain facts that have made us better
informed. We are getting favourable responses from our
bankers.
Technica
Engineers,
Noida
I got a 0.50% concession on interest rate. I
appreciate the rating process and services from
your company.
Bhatts Adhesive
& Chemical
Products,
Howrah
We got a 0.50% interest rate concession. I appreciate
the rating process of your company. I believe that all
MSMEs should avail of the benefts of NSIC-Onicra
rating.
Datatech,
Ahmedabad
38
SUCCESS STORIES
I have received interest rate concession of one per
cent from my banker. This rating was useful for my CC
enhancement and term Loan.
Supreme
Pharmacy,
Hubli
I got a rating done for my frm by Onicra Credit Rating
Agency of India Ltd in 2013. It helped me get a loan. I am
satisfed and happy with this rating agency.
Pilodiya
Industries,
Jaipur
We have got 0.75% interest rate concession. I appreciate
the rating process and services from your company.
Decency
Furniture Roy
Company,
Kolkata
After getting rated from Onicra in 2013-14 I received
an interest rate concession of 0.25% from my banker
for which I would like to thank Onicra.
New Mysore
Ghee Stores,
Bangalore
39
CREATING A ROBUST ECOSYSTEM FOR MSMES
IN MANY CASES,
MSMES FAIL TO PROVE THEIR
CREDIBILITY AND STAKEHOLDERS
ARE OFTEN NOT ABLE TO TAKE A
HOLISTIC VIEW OF
THEIR CAPABILITIES
40
CREATING A ROBUST ECOSYSTEM FOR MSMES
Despite an elaborate and
dynamic policy framework,
MSMEs continue to face
constraints at various stages
of growth. They operate in a
competitive environment and
require a conducive ecosystem
to sustain growth. The key
issues of MSME are related to
institutional fnance, technology
upgradation, skill development
and building market linkages. In
many cases, MSMEs fail to prove
their credibility and stakeholders
are often not able to take a
holistic view of their capability.
Over the past couple of years, ratings have been accepted
as a robust mechanism for disseminating relevant business
information about small enterprises. The rating report details
the fnancial, operational and performance aspects of the
business and provides an opinion on the creditworthiness
of a business enterprise. if additional information areas are
included this report can be used for technology upgradation
and enhancing funding limits of small enterprises. Ratings
can also be utilised as decision support tool for assessing
the qualifcation of small enterprises for various government
schemes.
FINANCE
Providing collateral free loans up to Rs 1 crore
CLCSS for tech boost facilitating tech
advancement by providing 15%
upfront capital subsidy
Marketing and Branding helps MSMEs
gain credibility in the market
Linking MSMEs to public procurement.
All central ministries and public sector units
to purchase at least 20% of their total annual
purchases from the MSME sector
MARKET LINKAGES
MARKETING
TECHNOLOGY
UPGRADATION
RATINGS
AS A TOOL TO REACH OUT TO MSMES
ACROSS THE COUNTRY
CREDIBLE BUSINESS INFORMATION
CREATING: TRANSPARENCY, INCLUSIVE GROWTH AND
BETTER GOVERNANCE
SME Unit SME Unit SME Unit SME Unit SME Unit SME Unit
SME Unit SME Unit SME Unit SME Unit SME Unit SME Unit
Rating mechanism has
evolved into a robust
system for collection
of relevant business
information. Thus it can
be utilised for linking
various other schemes.
41
FORWARD LOOKING ANALYSIS
FORWARD
LOOKING
ANALYSIS
EASE OF STARTING &
MANAGING BUSINESS
Making business registration
easier
As cited by various studies, only 6% of
MSMEs in the country are registered
thus a majority of small enterprises
fall under a category where to get
even basic information about them
is very difcult. When we take a
closer look at the reasons for non-
registration of units, various studies
have cited lack of awareness as the
key reason, while many are either not
interested or assume registration to be
a complicated procedure. The need of
the hour is to simplify the registration
process and create awareness about it.
Increasing penetration of
ratings by including the
un-registered segment
Currently only those MSMEs who have
a SSI certifcate can avail credit ratings.
Given the fact that only 6% on MSMEs
in the country are registered thus a
simpler process for qualifying SMEs
to avail the benefts of ratings should
be developed. The challenge can be
addressed by allowing supplementary
documentation like certifcate of
incorporation, sales tax receipt etc. to
qualify SMEs for credit ratings.
ENHANCE FINANCIAL
INCLUSION
42
Increasing the acceptability
of ratings among banking
institutions
Although many nationalized and
private banks feel that credit ratings
given by the rating agencies coincide
with their internal risk evaluation
mechanism and has earned the
position of an important benchmark
while disbursement of a credit facility.
Still many banking institutions do not
accept ratings. The need of the hour
is to get more and more banks and
fnancial institutions to accept the
ratings and help support the MSME
sector.
Enhancing the acceptability
of CGTMSE Scheme through
Greenfield Ratings
The intent of introducing credit
ratings under the CGTMSE scheme is
to get more MSMEs (specifcally the
new ones) included under the ambit
of the scheme. There are a number
of credit viable (having lower risk)
but not bankable projects that are
rejected by the bankers even under
the CGTMSE scheme. These are largely
frst generation entrepreneurs who
are unable to prove their credibility
and thus are considered non-bankable
by the banking institutions. A green
feld rating and credit limit fxation
43
by a credible third party agency that
focuses on the viability of the proposed
business proposition is a tool that can
help the entrepreneur get the desired
backing for the project and produce a
case in front of the banking institutions.
This will not only help the entrepreneur
present his case better but also make
him aware of the various risks involved
at the very start of the project further
reducing the chances of business
failure. On the other hand banks will
be able to understand the proposals
better through an independent third
party view thus will be more likely to
extend the facility to the entrepreneur
Utilizing Ratings as a tool
for providing Equity & Debt
Financing
Equity Financing
The performance and credit rating
report covers a large portion of business
and promoter related information with
addition of some more information
areas the rating reports can be well
utilized to assess the viability of equity
funding in a MSME unit.
Recommendation
Schemes like SIDBIs MSME growth
fund (venture capital fund structured
as a unit scheme to make primarily
equity or equity-related investments in
the growth oriented businesses having
signifcant business activity in India)
can leverage the widespread reach
of MSME ratings to promote equity
funding in the sector.
Debt Restructuring for Sick
Units
Revitalization of Sick units by
Introduction of debt restructuring
mechanism (similar to CDR in corporate
space) and utilizing performance and
credit ratings to act as a yard stick for
identifcation of eligible units Debt
Restructuring (CDR) mechanism for
SMEs similar to mechanisms like CDR
(Corporate Debt Restructuring) that
are used by large corporate can be
a tool for revitalizing the sick units.
Performance and credit ratings
analysis of applicant enterprise can be
used as a yard stick for identifcation of
sick units and decision on approval of
such restructuring proposals.
44
UTILIZING RATINGS
AS A TOOL FOR
PROMOTING TECHNOLOGY
UP-GRADATION
Linking the Credit Linked Capital
Subsidy Scheme for technology
up-gradation to the NSIC
performance and credit rating
scheme
Under the NSIC performance and credit
rating scheme the rated enterprise is
evaluated on fnancial and performance
parameters additionally the analysis takes
into account various operations related
parameters. With addition of relevant
information areas the need for technology
up-gradation for the SME enterprise
can be assessed easily. Thus the rating
report can also be used as a tool for
disbursement of the capital liked subsidy.
This measure will not only help increase
the reach of the scheme but also help the
fnancing institution take better judgment
on the credit worthiness of the small
enterprise. If the ratings fall under the
top four categories then shorten the turn-
around time and must have a provision for
reduction in interest rates also.
GREATER MARKET ACCESS
AND MARKETING SUPPORT
Utilizing rating mechanism to
help MSMEs build credibility and
trust among online buyers
The e-commerce revolution is now
spreading in the Asia Pacifc. India, with a
growing internet base of more than 121
PROVIDING A
CERTIFICATION ON THE LINES
OF RATINGS CAN HELP SMALL
BUSINESSES GAIN RECOGNITION AND
CREDIBILITY IN THE ONLINE SPACE BOTH
IN DOMESTIC AND INTERNATIONAL
MARKETS
45
million users, is one of the economies
at the forefront of this wave. However,
despite having made signifcant strides
in both the Business-to-Consumer
(B2C) and Business-to-Business (B2B)
segments, the industry has been unable
to attract sufcient participation from
the MSME segment. This is in contrast
to the neighboring Chinese economy,
where higher MSME involvement
in creating online business models
has enabled the country to register
impressive growth rates.
Apart from disparities with respect
to available infrastructure and cost
efciency of products in the case
of China, a major constraint for
Indian MSME units in establishing a
stronghold in the online space is the
lack of credibility or trust, which stems
from buyer uncertainty due to lack
of credible sources of information
about the business in question. This
information would pertain not only
to the actual existence of such MSME
units but also their capability and
capacity to manufacture or develop
products of requisite quality and supply
them in a cost efective and efcient
manner through a reliable supply
chain network. In a nutshell, global
buyers are unable to fully understand
the capability of the small business for
production and delivery thus hesitates
in transacting with them.
Providing a certifcation on the lines
of ratings can help small businesses
gain recognition and credibility in the
online space both the domestic and
international market. Presently, the
eforts in this direction have been
restricted to merely providing the
buyer with basic information about the
existence of the business, his business
contacts, and other details like location
of facilities etc. However, to further
build the trust of customers in these
MSME units, a more informative
certifcation process should be put
in place which enables the buyer
to visualize the entire transaction
including the supply chain and logistical
arrangements while simultaneously
providing assurance regarding the
safety of their payments. This would
not only help make MSME businesses
more trustworthy but also encourage
small business units to come forward
and embrace the e-commerce platform
to grow their business
IMPROVING THE
PERFORMANCE OF
TRAINING & SKILL
DEVELOPMENT
INSTITUTES
Indian SMEs have moved up the
value chain from manufacturing of
simple goods to manufacturing of
sophisticated products like electronic
control systems, medical equipment
and microwave components in
recent years. In line with the overall
growth in Indian economy, SMEs have
46
entered the services sector as well.
This proliferation in various domains
has created a need for manpower
equipped with wide variety of high end
skills. Although India has the advantage
of a large pool of human resources, the
industry continues to face defcit of
high quality training institutes which
can equip the students with skill-set
required for manufacturing, marketing,
servicing, etc. to improve the quality of
training imparted by the training and
development institutes. Grading of
training institutes can be conducted
to identify the gaps and shortcomings
which hinder the institutes to provide
best in class technical education to
its students. It must provides 360
feedback from parents, students and
college faculty for improvement of the
institute. Outcome of the rating will be
to improve the quality of education,
and thus help reduce the dearth of
skilled manpower for the SMEs of the
region.
INCREASING
PENETRATION OF
RATINGS IN NORTH
EASTERN STATES
AND J&K
The seven sister states of North East
region i.e. the North-Eastern States
(NES) account for 3.4 percent of MSMEs
in the country. The industry majorly
consists of micro and small units in
the handloom and crafts industry.
This is evident from the fact that only
20 percent of the enterprises in the
region belong to the manufacturing
category. The difcult terrains in these
regions have been acting as barricades
to the reach of schemes run by the
Government to the MSMEs. Lesser
penetration of credit related schemes
is hitting them the most. The credit
rating agencies have a network in
these regions which is being utilized
for generating awareness amongst the
MSMEs to go for cheaper credit and
subsidized raw material through the
NSIC Performance and Credit Rating
Scheme. Incentivizing rating agencies
to spread network in these regions will
act as vehicle for faster penetration of
the government initiatives and serving
the larger goal of equitable growth of
the sector across India.
47
Salient features of the MSME sector in
North Eastern India:
Accounts for 2.6% of Indias total GDP, suggesting
that the level of industrialisation in the region is
considerably low
The region has abundance of natural resources
and hence the MSME units are involved in
handicrafts and handlooms utilising these
resources
Demand for working capital is lesser because of
usage of natural resources as raw material
Bank fnance requirements are majorly from
agriculture and allied activities
48
The SMEs in North Eastern States and J&K are not
able to grow at par with rest of the nation. Primarily
due to intrinsic socio economic issues and the difcult
geographic conditions even rating agencies fnd it
difcult to track the terrain and reach out to the SMEs
in these regions. Thus its important to incentivize
the agencies working in these regions to conduct
maximum number of ratings and help the SMEs avail
the benefts of ratings.
FORWARD LOOKING ANALYSIS 49
INCENTIVIZING
THE RATING
RENEWALS &
MONITORING
MECHANISM
A regular renewal of ratings
not only helps improve a frms
performance but also builds
confdence within the lender
fraternity and trading channel.
Incentivizing the rating renewals
mechanism can prove to be
the corner stone for creating
more transparency in the
sector and thus attract more
institutional support for the
SMEs. The renewals appraise
the MSME not only on its current
fnancial and performance
position but also help the MSME
continuously evolve based on the
changing regulations, business
requirements and economic
scenario. We have also observed
that enterprise that fail to renew
their ratings end up loosing the
interest rate concession and
other benefts. Therefore, its
important for the rating culture
to be set in the MSME sector, a
subsidy should be provided in
the subsequent years of example
Yr 1-75%, Yr 2-50%. This will go a
long way in ensuring sustainable
growth for the sector.
NAME OF THE UNIT: CNP
PUMPS INDIA PRIVATE
LIMITED
Entity Profle
Year of Establishment: 2005
SSI No. / EM No.: 27/021/12/05939
Industry Sector: Machinery & Equipment
Registered Ofce: 103, Kasturi Tower,
238/A, LBS Road, Naupada, Thane (W),
Maharashtra
Promoters/ Partners/Directors:
Mr. Sunil Joshi
Mrs. Bhagyashree Joshi
Telephone No.: +(91) - 22 - 25818400 /
9167226971
E- mail: ramesh@cnpindia.com
Operations Profle
Service/ Product Profle: Manufacturing
of centrifugal water pumps
No. of Employees: 90
Key Customers:
Thermax Limited
Ion Exchange India Limited
Auditors: D.A. Oak & Co., Thane
Bankers: Thane Janata Sahakari Bank
Limited, Thane
Benefts Derived from the Rating
Access to Credit was facilitated by the
rating
0.50% concession on rate of interest
Financial Profle (` In Lac)
Particulars 2010-11 2011-12 2012-13
Turnover 1916.45 2142.75 3305.58
Proft 300.88 379.64 493.40
Net Worth 584.16 931.74 1402.46
Bank Loan 137.12 32.65 225.13
Year 2011-12 2012-13 2013-14
Rating Assigned SE 1A SE 1A SE 1A
Report Date 31st January 2012 31st December 2012 16th December 2013
Name of the Rating Agency: Onicra Credit Rating Agency of India Limited
50
M/s CNP Pumps India Private Limited, Thane, Maharashtra
51
CONCLUSION
Stimulate the Rating ecosystem to help
foster sustainable growth for MSME
sector in the country to build speed,
skill, scale, and create employment
The MSME sector, considered the backbone of
the Indian economy, is a major employment
provider and its well established that its role
in the economic and social development of
the country is vital. For India to have a desired
growth rate of 8-10% the growth of MSMEs
also needs to be accelerated by nurturing
entrepreneurship.
The objective is to create a performance rating
culture for small businesses. To stimulate the
rating ecosystem we need to reach out to a
critical mass of over 1 million SMEs over the
next three years.
Over the past couple of years ratings have been
accepted as an instrument of disseminating
relevant business information about the small
enterprises. The rating report details the
fnancial, operational and performance aspects
of the business and provides an opinion on the
creditworthiness of the business enterprise.
This is one tool that is allowing small
businesses to grow quicker and faster as
it gives them a health check on a yearly
basis.
Performance rating has proved to be a tool
to enable SMEs to adopt good business
and borrowing practices, including
transparency in fnancial reporting and
help them achieve sustainable growth.
Many small business enterprises also
utilize ratings as a marketing and
branding tool by using the rating logo on
their products and advertising content.
The independent risk evaluation of a MSME by
an unbiased third party lends credibility to them
and opens doors for them while dealing with
multinational corporations and public sector units.
Ratings can be utilized as decision making tool for
assessing the qualifcation of small enterprises
for various government schemes; helping the
enterprises qualify for multiple benefts by getting
rated.
With additional information areas included, this
report can very well be used for accessing various
government schemes and policies which will help
SMEs build scale. For eg. Public procurement
policy can be linked with capacity ratings to create
a pool of rated SMEs that can supply to large
companies. This will help them to attain scale and
competiveness.
Stimulating the rating ecosystem can help reduce
the key issues of MSMEs related to institutional
fnance, technology up-gradation, marketing and
developing market linkages.
This measure can go a long way in helping fostering
sustainable growth for MSME in the country.
52
CONCLUSION
THE FOREMOST
ISSUE WHILE STARTING A
BUSINESS IS REGISTRATION
OF THE BUSINESS ENTITY
Ratings can be used as a decision-making tool for
assessing the qualification of small enterprises for
various government schemes, helping the enterprise
qualify for multiple benefits by getting them rated.
53
ABOUT ONICRA
ABOUT ONICRA
Leading Credit and Performance rating company
Afiiated with 20+ Nationalized Banks
Presence in 150+ locations across India
Experience of over 30,000 MSME Rating
Highly Skilled Analysts and Industry Experts
Rating & Grading expertise in Micro Small and Medium Enterprises (MSME),
Healthcare, Education and Agriculture sector
Registered with National Small Scale Industry Corporation (NSIC)
Empanelled with Ministry of Renewable Energy for Solar Energy Grading
Onicra is empanelled with Small Industries Development Bank of India (SIDBI) under loan syndication services,
Agriculture Finance Corporation of India Ltd. (AFCL) and Development Environergy Services Ltd.
(DESL) for undertaking rating assignments.
Empanelled with Niesbud- National Institute for Entreprenuership
& Small Business Development
54
ABOUT ONICRA
Onicra Credit Rating Agency is one of the leading credit and
performance rating agencies in India. It provides ratings, risk
assessment and analytical solutions to individuals, MSMEs
and corporates. Third party credit and performance rating
and assessment helps to create trust between players in
markets that underpins transactions.
Onicra plays a central and critical role in collecting and
analysing a variety of fnancial, operational, industry and
market information, then synthesising that information, and
providing autonomous, reliable assessments of the entity,
thereby providing stakeholders with an important input for
their decision-making process.
To realise our goal we have committed ourselves to providing
the stakeholders with objective, timely, independent and
forward-looking credit and performance opinions. The
foundation of that dedication is embedded in several core
principles objectivity, quality, independence, integrity and
transparency.
55
Kangra
Delhi, Noida, Gurgaon Rating, Gurgaon,
Sanipat Ghaziabad, Faridabad
Bhilwara, Bikaner
Kota, Jaipur
Beawar
Rajkot
Surat
Jammu
Amritsar
Bathinda
Hissar, Rohtak
Ludhiana
Udaipur, Ajmer
Bhiwara
Mumbai, Ahmadnagar,
Nagpur, Nashik, Pune
Mangalore, Shimoga, Banglore, Kolar, Kottyam,
Belgaum, Mysore, Hubli, Raichur, Bijapur
Ujjain, Katni, Indore,
Jabalpur, Gwalior
Kottayam, Kochi, Negercoil
Chennai, Vellore, Krishnagiri, Tiruvannamalai, Cuddalore, Erode,
Coimbatore, Karur, Trichy, Pondicherry, Cuddalore, Dhrampuri,
Dindulgul Madurai Mettupalayam, Nagercoil, Rasipuram, Salem,
Sivakasi, Tanjavur, Theni, Tirupur, Udumalapet Villupuram
Hyderabad, Rajahmundry, Viza Vishakhapatnam,
Rajahmundry, Vijayawada, Eluru, Guntur, Nellore
Nellore, Tirupati, Ramnad, Vellore, Nellore, Nalgonda
Raipur, Keonjhar(Od.) Korba, Sambalpur
Jharsuguda Bhubaneswar, Cuttok,
Jajpur, Junagarh Midnapur,
Kolkatta, Bankura, Howrah,
Durgapur, Haldia, Asansol, Hubli
Agartala
Patna, Sharif, Nalanda
Samastipur, Darbhanga,
Begusarai
Rudrapur
Varanasi
Haridwar
Panipat
Etawah
Agra
Meerut
Faizabad
Barabanki Kashipur
Lucknow Allahabad
Chandigarh
Patiala
Dehradun
Roorkee
Saharanpur
Auraiya
Jorhat, Bongaigaon,
Guwahati, Tezpur
Bokaro
Tinsukia, Dibrugarh, Shilong
Jorhat, Silchar, Begusarai,
Agartala, Imphal, Nagaone,
Silchar (Assam.)
ABOUT ONICRA
GEOGRAPHIC PRESENCE
Presence in 150 + Locations
700+ Manpower Strength
56
Kangra
Bhilwara, Bikaner
Kota, Jaipur
Beawar
Rajkot
Surat
Jammu
Amritsar
Bathinda
Hissar, Rohtak
Ludhiana
Udaipur, Ajmer
Bhiwara
Mumbai, Ahmadnagar,
Jabalpur, Gwalior
Agartala
Begusarai
Rudrapur
Varanasi
Haridwar
Panipat
Etawah
Agra
Meerut
Faizabad
Barabanki Kashipur
Lucknow Allahabad
Chandigarh
Patiala
Dehradun
Roorkee
Saharanpur
Auraiya
Jorhat, Bongaigaon,
Guwahati, Tezpur
Bokaro
Silchar (Assam.)
GEOGRAPHIC PRESENCE
ABOUT ONICRA
Over Vision
To be the fountain head of
information exchange and
solutions to enable our customers
to manage financial risk and build
successful, lasting relationships
57
Kangra
Bhilwara, Bikaner
Kota, Jaipur
Beawar
Rajkot
Surat
Jammu
Amritsar
Bathinda
Hissar, Rohtak
Ludhiana
Udaipur, Ajmer
Bhiwara
Mumbai, Ahmadnagar,
Jabalpur, Gwalior
Agartala
Begusarai
Rudrapur
Varanasi
Haridwar
Panipat
Etawah
Agra
Meerut
Faizabad
Barabanki Kashipur
Lucknow Allahabad
Chandigarh
Patiala
Dehradun
Roorkee
Saharanpur
Auraiya
Jorhat, Bongaigaon,
Guwahati, Tezpur
Bokaro
Silchar (Assam.)
ABOUT ONICRA
PROFILE OF ONICRA
RATED ENTITIES
Number of MSME units rated by Onicra
Turnover wise distribution
12000
10000
8000
6000
4000
2000
0
FY09 FY10 FY11
Onicra Rated Entities
N
o
.

o
f

u
n
i
t
s
Year
FY12 FY13 FY14
Turnover Wise Break up of Rated Entities
Above ` 200 Lakhs
Above ` 50 Lakhs to
` 200 Lakhs
Upto ` 50 Lakhs
2013 - 14
47%
30%
23%
58
ABOUT ONICRA
Statewise distribution
Statewise Distribution of Rated Entities 2013 - 14
RAJASTHAN - 6%
NE & ASSAM - 7%
WEST BENGAL - 15%
UP - 14%
OTHERS - 24%
MAHARASHTRA - 5%
ANDHRA PRADESH - 8%
KARNATAKA - 9%
TAMIL NADU - 12%
Rating wise distribution
Rating Wise Distribution (2013 - 14)
30
25
20
15
10
5
0
1A 1B 1C 2A 2B 2C 3A 3B 3C 4A 4B 4C

%
a
g
e

o
f

R
a
t
e
d

E
n
t
t
e
s
Ratng
59
ABOUT ONICRA
Industry wise distribution
TEXTILE 8.99
AGRICULTURE & ALLIED PRODUCTS 8.56
MACHINERY &EQUIPMENTS 8.21
CONSTRUCTION MATERIALS 6.04
CONSTRUCTION & ENGINEERING 5.68
FOOD PRODUCTS 5.15
SERVICES 4.75
ELECTRICAL COMPONENTS &EQUIPMENTS 4.11
RETAILING 4.06
IRON AND STEEL 3.80
HOUSEHOLD & PERSONAL PRODUCTS 3.03
METAL & METAL PRODUCTS 3.02
CONTAINERS & PACKAGING 2.98
PLASTIC & PLASTIC PRODUCTS 2.87
AUTO & AUTO COMPONENTS 2.59
MEDIA & PRINTING 2.44
CONSUMER DURABLES 2.41
CHEMICALS 2.35
PAPER & FOREST PRODUCTS 2.00
JEWELLERY 1.76
PHARMACEUTICALS 1.60
INFORMATION TECHNOLOGY & TELECOMMUNICATIONS 1.28
POWER & ENERGY 1.26
EDUCATIONAL SERVICES 1.01
HEALTH CARE 0.99
HOSPITALITY 0.73
TRANSPORTATION 0.48
OTHERS 7.84
INDUSTRY NAME % OF CUMULATIVE RATINGS
60
ABOUT ONICRA
MOUs with Banks
S.No Name of Bank Interest Rate Concession
1 Assam Gramin Vikas Bank 0.25 to 0.50%
2 Andhra Bank -
3 Bank of India 0.25 to 0.50%
4 Canara Bank 0.25 to .05%
5 Central Bank of India 0.25%
6 Corporaton Bank 0.25 to 0.50%
7 Federal Bank -
8 Jammu & Kashmir Bank 0.50%
9 Karnataka State Financial Corporaton 0.50 to 1.00%
10 Meghalaya Rural Bank 0.25 to 0.75%
11 Punjab Natonal Bank 0.25 to 0.50%
12 Punjab and Sind Bank 0.25%
13 State Bank of Bikaner and Jaipur 0.25%
14 State Bank of Hyderabad 0.25%
15 State Bank of India -
16 State Bank of Mysore 0.25%
17 State Bank of Patala -
18 State Bank of Travancore -
19 Tamil Nadu Mercantle Bank 0.50%
61
HARYANA
Gurgaon
Corporate Oce & Rating Oce
5th Floor, Plot No, 21-22,
Udyog Vihar Phase-1V
Gurgaon-122015
ANDHRA PRADESH
Hyderabad
H. No. 6-3-652/C/D/13
First Floor, Flat No. 1C & 1D,
Dhruvtara Apartment,
Somajiguda,
Hyderabad - 500082
GUJARAT
Ahmedabad
603, Aniket, Above MetroShowroom,
Opp. Jain Derasar, C G Road,
Navrang Pura,
Ahmedabad-380009
UTTAR PRADESH
Noida
B10, Sector - 59
Noida 201301
Lucknow
Aman Palace, Purani
Chungi, Kanpur Road
Lucknow
MADHYA PRADESH
Bhopal
Plot No. 66-C, IInd Floor
Sai Sumiran Near
Hotel Shree Vatika
MP Nagar Zone-1, Bhopal
KARNATAKA
Bangalore
N-705, 7th Floor, North Block,
Manipal Centre 47, Dickenson
Road, Bangalore 560042
WEST BENGAL
3 DNF, 3rd Floor, Jindal Tower,
Block A, 21/1A/3, Darga Road,
Kolkata 700017 India
TAMIL NADU
Chennai
Mercury, #25 Flowers Road,
Level 2, Kilpauk,
Chennai 600084
MAHARASHTRA
Mumbai
520, 5th Floor
Nirmal Corporate Centre,
LBS Marg, Mulund (West)
Mumbai 400080
Disclaimer
Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as
comprehensive nor sufcient for making decisions, nor should be used in place of professional advice. Onicra Credit Rating Agency of
India Limited accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material.
CONTACT US
References
Fourth All India MSME Census, MSME Annual Report 2012-13
Report -2012: Study of the Performance & Credit Rating Scheme for Micro & Small Enterprises
A research study on needs, gaps and wayforward (November 2012); International Finance Corporation, World Bank Group
NSIC Annual Reports
Analysis based on Compounded Annual Growth Rate of MSME Gross Output and Index of Industrial Production for the period
from 2004-05 to 2011-12. IIP data from Ministry of Commerce and Industry; MSME Ministry Gross Output data from Annual Report
2012-13
Press Information Bureau, Government of India, Ministry of Micro, Small & Medium Enterprises Contribution Of MSMEs To GDP,
Exports and Employment; link: http://pib.nic.in/newsite/PrintRelease.aspx?relid=107201

42674.onicra Performance and Credit Ratings PDF

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

42674.onicra Performance and Credit Ratings PDF

Uploaded by

Copyright:

Available Formats

P E R F OR MA NC E A ND C R E DI T R AT I NGS

You might also like