1. GROWTH OUTLOOK FOR MSMES IN INDIA Credit Rating for MSMEs

2. MSME in India FinMen Consultancy  The MSME sector is a nursery of entrepreneurship, often driven by individual creativity and innovation.  Contributes 8.5 per cent of the country’s GDP, 45 per cent of the manufactured output and 40 per cent of its exports.  The MSMEs provide employment to about 60 million persons through 26 million enterprises.  The labour to capital ratio in MSMEs and the overall growth in the MSME sector is much higher than in the large industries.  The geographic distribution of the MSMEs is also more even. Thus, MSMEs are important for the national objectives of growth with equity and inclusion.

3. Challenges faced by MSME  Lack of adequate and timely credit  High cost of credit  Limited access to equity Capital  Limited access to global markets  Lack of trust or confidence among stakeholder  Low technology levels and lack of access to modern technology  Lack of skilled manpower for manufacturing, services, marketing, etc.  High Collateral requirement FinMen Consultancy

4. What is ‘Credit Rating’ ?? Credit rating is an independent third–party comprehensive assessment of the overall condition of an entity. It takes into account not only the financial condition of the entity but also several qualitative parameters that have bearing on its creditworthiness. FinMen Consultancy

5. Factors in MSME Rating  Look beyond financials i.e. qualitative parameters  Real world dynamics and characteristics of Industry  Management and ownership structure  Organization structure  Effectiveness of existing checks and controls  Key human resources  Business environment  Relationships with trade partners  Operational efficiency and capabilities  Performance in comparison to other similar sized entities in the same industry FinMen Consultancy

6. The Benefits FinMen Consultancy

7. For Rated Entities  Easy Access to Fund as most of Bank tie up with Agency  Facilitate quicker and less costly bank finance  Better financial terms from bank  Marketing Tool  Confidence while negotiation with financial institutions  Better market visibility of the company  Improve the comfort level with prospective/existing lenders  Reduce the time involved in obtaining loan approvals  Credibility and confidence building with business partners  Self Improvement Tool FinMen Consultancy

8. For Lenders:  Provide an objective, independent and reliable opinion on credit quality  Serve as an additional input in the credit decision making process  Assist in risk pricing and capital allocation  Determining the terms of lending – interest rate, collateral, tenure  Reduce time and cost in data analysis  Detailed rating rationale enhancing credit assessment of Client FinMen Consultancy

9. Government Initiatives - MSME Sector  Govt has appointed National Small Industrial Development Corporation (NSIC) as Nodal Agency to facilitates Credit Rating.  Subsidies by the government in the form concessions in Rating Agencies Fees upto 75%  75% of the exhibition fees held within the country or outside the country shall be borne by the NSIC.  While filling up the government tenders, the earnest amount shall not be applicable. So one can apply as many applications at a time. FinMen Consultancy

10. Definition of MSMEs in India Manufacturing Enterprises – Investment in Plant & Machinery DescriptionINR Whether Eligible for Subsidy from Government Micro EnterprisesUpto Rs. 25Lakhs YES Small Enterprisesabove Rs. 25 Lakhs & upto Rs. 5 Crores YES Medium Enterprisesabove Rs. 5 Crores & upto Rs. 10 Crores No Service Enterprises – Investment in Equipments DescriptionINR Whether Eligible for Subsidy from Government Micro EnterprisesUpto Rs. 10Lakhs YES Small Enterprisesabove Rs. 10 Lakhs & upto Rs. 2 Crores YES Medium Enterprisesabove Rs. 2 Crores & upto Rs. 5 Crores YES FinMen Consultancy

11. Rating Agency in India  CRISIL  ICRA  CARE  India Ratings (Fitch)  Brickwork Ratings  SMERA  ONICRA FinMen Consultancy

12. Rating Process Publication of Rating Acceptance of Rating by client Communication of Rating to client Rating Committee assigns rating Finalisation of analysis considering industry context and inputs from independent sources Site visit by CRA analyst and meeting and discussion with management as required Reciept of additional information from client, if required Review of information and documents Client submits application for rating along with requisite fees and information FinMen Consultancy

13. NSIC Rating Scale Performance Capability High Financial Strength Moderate Financial Strength Low Financial Strength Highest SE 1ASE 1BSE 1C High SE 2ASE 2BSE 2C Moderate SE 3ASE 3BSE 3C Weak SE 4ASE 4BSE 4C Poor SE 5ASE 5BSE 5C FinMen Consultancy

14. SME Rating Scale SME RatingDefinition SME 1Highest SME 2High SME 3Above Average SME 4Average SME 5Below Average SME 6Inadequate SME 7Poor SME 8Default FinMen Consultancy

15. Important Links  CRISIL Ratings  ICRA Ratings  CARE Ratings  India Ratings  Brickwork Rating  SMERA Ratings  ONICRA  MSME Ministry  NSIC  Devl Comm Secretary  AIMA  www.crisil.com www.crisil.com  www.icra.in www.icra.in  www.careratings.com www.careratings.com  www.indiaratings.com www.indiaratings.com  www.brickworkratings.com www.brickworkratings.com  www.smera.in www.smera.in  www.onicra.com www.onicra.com  www.msme.gov.in www.msme.gov.in  www.nsic.co.in www.nsic.co.in  www.dcmsme.gov.in www.dcmsme.gov.in  www.aima-msme.in www.aima-msme.in FinMen Consultancy

16. THANK YOU Disclaimer This document is only for educational purpose. For further information, please contact: Manish Jain AIMA – Co Chairman Banking & Finance Committee Managing Partner – FinMen Consultancy Phone No. +91 22 66348001 Email Id : manish.jain@finmen.inmanish.jain@finmen.in www.finmen.in FinMen Consultancy

17. Questions? ? ? FinMen Consultancy