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7/28/2019 Project Credit Rating
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. 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, ratingSSIs, 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.
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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.
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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
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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 companywhich 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
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*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 toissuers 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.
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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
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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 inthe 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
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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
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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
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Procedure for Inspection/investigation
The SEBI is empowered to appoint inspecting officers to undertakeinspection/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 penaltyregulations,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 USD654.985 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 NSIC-
CRISIL 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 The Federal Bank Ltd State Bank of Indore
Andhra Bank HDFC Bank Ltd State Bank of Mysore
Bank of Baroda ICICI Bank Ltd State Bank of Saurashtra
Bank of India Indian Bank
State Bank of
Travancore
Bank of Maharashtra Indian Overseas Bank Syndicate Bank
Canara Bank Kerala Financial Corporation UCO Bank
Central Bank of India Punjab National Bank Union Bank of India
Corporation Bank
State Bank of Bikaner &
Jaipur United Bank of India
Dena Bank State Bank of Hyderabad Vijaya Bank
The Dhanalakshmi Bank Ltd State Bank of India
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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'sstrengths 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 alsofeature 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 in2008-09 (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 ScaleIn 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
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
AA
(Double A) High
Safety
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.
A
Adequate Safety
Instruments rated 'A' are judged to offer an adequate degree of
safety with regard to timely payment of financial obligations.
However, changes in circumstances can adversely affect suchissues more than those in the higher rating categories.
BBB
(Triple B) Moderate
Safety
Instruments rated 'BBB' are judged to offer moderate safety with
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 withregard 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.
B
High Risk
Instruments rated 'B' are judged to have high likelihood of default;
while currently financial obligations are met, adverse business or
economic conditions would lead to lack of ability or willingness to
pay interest or principal.
C
Substantial Risk
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.
D
Default
Instruments rated 'D' are in default or are expected to default on
scheduled payment dates.
NM
Not Meaningful
Instruments rated 'NM' have factors present in them, which 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 etc.
Credit Rating Symbols for Fixed DepositsFAAA
("F Triple A")
Highest Safety
This rating indicates that the degree of safety regarding timely
payment of interest and principal is very strong.
FAA 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.
FA
Adequate Safety
This rating indicates that the degree of safety regarding timely payment of interest and principal is satisfactory. Changes in
circumstances can affect such issues more than those in the
higher rated categories.
FB
Inadequate Safety
This rating indicates inadequate safety of timely payment of
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 inadequatecapacity to make timely interest and principal payments.
FC
High Risk
This rating indicates that the degree of safety regarding timely
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.
FDDefault
This rating indicates that the fixed deposits are either in default or are expected to be in default upon maturity.
NM
Not Meaningful
Instruments rated 'NM' have factors present in them, which
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.
P2
This rating indicates that the degree of safety regarding timely
payment on the instrument is strong; however, the relative degree
of safety is lower than that for instruments rated 'P1'.
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P3
This rating indicates that the degree of safety regarding timely
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.
P4
This rating indicates that the degree of safety regarding timely
payment on the instrument is minimal and it is likely to be
adversely affected by short-term adversity or less favourable
conditions.
P5This rating indicates that the instrument is expected to be in default
on maturity or is in default.
NM
Not Meaningful
Instruments rated 'NM' have factors present in them, which render 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
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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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Credit Rating it undertakes credit rating of all types of debt instruments, both shortterm 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 6647
Total Volume of Debt Rated Rs.20,988 bn
Total Issuers Rated 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 moderatecredit 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 CAREThe 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 theRating Committee.
FREQUENCY OF RATING ACTIONS : The rating assigned is communicated to the
client along with a detailed rationale.
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.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 MSM
Eligibility
A Registered MSME Unit in India is eligible to avail the benefit of the rating scheme. A proof of registr
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Rating Scale
The rating scale is based on parameters of Performance and Credit assessments in 5 X 3 matrix methodo
highest to poor performance. A, B, C for high, moderate, low financial strength.
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
31
Performance
capability
Financial StrengthHigh Moderate Low
Highest SE 1A SE 1B SE 1CHigh SE 2A SE 2B SE 2CModerate SE 3A SE 3B SE 3CWeak SE 4A SE 4B SE 4CPoor SE 5A SE 5B SE 5C
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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 Moderate Low
Performance Capability
Highest SE1A SE1B SE1C
High SE2A SE2B SE2C
Moderate SE3A SE3B SE3C
Weak SE4A SE4B SE4C
Poor SE5A SE5B SE5C
1
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.
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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
Schema of Rating Factors of D & B
Rating Factor Schema
Financial Parameters Non-Financial Parameters
Solvency Ratios
Liquidity Ratios
Activity Ratios
Profitability Ratios
Management Quality
Location Advantage
Marketing Network
Legal Issues
Industry and Macro-Economic Assessment
Trend Analysis
An exhaustive list of qualitative and quantitative factorsconsidered for rating.
Each financial parameter is benchmarked within itsindustry-size peer group
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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 buyer-
seller meets to enrich SSI unit?s knowledge regarding terms and conditions, quality
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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
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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.
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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 therequisite 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 workingconditions.
Small Enterprise Establishment Programme(SEEP)
This programme facilitates setting up of new enterprises all over the country by creating
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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 cooperationand 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- specificexhibitions 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 servicesfor 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
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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
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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
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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.
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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
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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.
Eligible Items Scale of Assistance
1. Space rent
(Built up stall)
For General Category Entrepreneurs:
Micro Enterprises : 75% of the actual charges
Small Enterprises : 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
charges for the
goods
transported to
the events.
Actuals subject to maximum of 25000/- (Rs. 37500/- for Latin
American countries), each way per entrepreneur.
3. Air fare : 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 representative
from one enterprise).
For the Enterprises belonging to NE Region/ Women/ SC/ST
entrepreneurs:
Micro Enterprises: 95% of the economy class return fare
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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.
No.
Eligible Items Scale of Assistance
1. Space rent (Built
up stall)
For General Category Enterprises:
Micro Enterprises : 75% of the actual charges
Small Enterprises : 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 : 95% of the actual charges
Small Enterprises : 85% of the actual charges
Medium Enterprises: 50% of the actual charges
2. Freight charges
for the goods
transported to the
events
Actuals subject to maximum of Rs.15000/- (Rs. 20000/- for Latin
American countries) per entrepreneur.
3. Air fare : For General Category Enterprises:
Micro Enterprises :
-85% of the economy class return fare (for one representative
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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 representative
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
fare (for one representative from one enterprise).4. Maximum
amount of
Assistance
towards air fare,
space rental &
shipping /
transportation
charges:
General Category
Latin America Other countriesMicro
Enterprises
Rs. 1.75 lakh Rs. 1.50 lakh
Small Enterprises Rs. 1.50 lakh Rs. 1.25 lakhMedium
Enterprises
Rs. 1.00 lakh Rs. 0.75 lakh
Enterprises belonging to NE Region/ Women / SC/ST
category
Latin America Other countries
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Micro
Enterprises
Rs. 2.00 lakh Rs. 1.75 lakh
Small Enterprises Rs. 1.75 lakh Rs. 1.50 lakhMedium
Enterprises
Rs. 1.25 lakh Rs. 1.00 lakh
5. Advertisement,
publicity and
theme pavilion,
etc.
20% of the total subsidy admissible under the above four sub-
heads subject to a maximum of Rs. 5 lakhs.
(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 approvalof 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 : 75%
Small Enterprises : 60%
Medium Enterprises: 25%
Enterprises belonging to NE Region/ Women / SC/ST category
Micro Enterprises : 95%
Small Enterprises : 85%
Medium Enterprises: 50%
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The budget for organising the Domestic exhibition/trade fair would depend upon thevarious 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 : 95%
Small Enterprises : 85%
Medium Enterprises: 50%
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 co-
sponsoring 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 -
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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:-
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Micro Enterprises : 95%
Small Enterprises : 85%
Medium Enterprises: 50%
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 Buyer-
Seller 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 Comm