SME Rating Agency of India Ltd

SME Expectations for growth

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Challenges faced by lenders

Numerous SMEs

Limited skills in
understanding & evaluating Geographically Dispersed

Lending Institutions

Multiple segment Multiple Needs

Lack of Reliable Information

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Relevance for a rating Agency dedicated for SMEs

Focused approach towards SMEs

Strong data & knowledge-base about SMEs

Different evaluation approach based on size and industry Ability to analyze in limited and lesser reliable information Emphasis on non-financial parameters

TO BRIDGE THE GAP BETWEEN FINANCIERS AND SMEs

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SMERA An Introduction
Only rating agency dedicated to the SME qualitative services at competitive prices. segment offering

Joint initiative of SIDBI, Dun & Bradstreet and 11 leading banks operating in SME segment. Launched on the 5th September 2005 by the Hon. Finance Minister, Shri P Chidambaram. Completed around 4800 ratings till date. Greater acceptability in banks (MOU with 22 leading banks). 14 Banks offer interest rate and security concessions for well rated SMERA customers.

Minimise lending risk thru ratings

Highlights of SMERA Ratings

Provides ratings that are :

Independent
Comprehensive Transparent Neutral Risk Assessment Conducts an exhaustive due diligence process Rating Rationale discussed with rated entities

Enables better understanding of SMEs by lenders while taking credit decisions.

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Rating Scales

NSIC SMERA

NSIC Rating Scale

RATING INDICATOR Financial Strength

High
Highest High Performance Capability Moderate Weak Poor SE1A SE2A SE3A SE4A SE5A

Moderate
SE1B SE2B SE3B SE4B SE5B

Low
SE1C SE2C SE3C SE4C SE5C

SMERA Rating Scale

The purpose of using a two part rating is to ensure peer-topeer comparison and to rate a company within its own size category.

Composite Appraisal Indicator reflects a companys health, stability and overall condition

Size Indicator reflects the tangible net worth of a company.

Rating Process Flow

Rating Request
SMERA Site visit
Request for Interview and site visit

Enterprise
Conducts site visit and interviews Management

Questionnaire Industry Assessment and Cluster data

ROC Information

Rating Model
Third Party Data e.g. Litigation Information External Data

SMERA Database

Documents, Site Visit audited results Assessment & certified Report projections Documents Obtained

Rating Analyst

Entity Rating

Peer Review

Final Rating

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Factors considered while rating

Parameters of Rating
Financial
Solvency Ratios Liquidity Ratios Profitability Activity Ratios Ratio
Assetturnover

Non-Financial
Management Quality Location Advantage Marketing Network Legal Issues Industry and MacroEconomic Assessment

e.g. Debt-Equity Current Ratio RONW

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Non-Financial Parameters

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Benefits of SMERA Rating

Third party credit rating helps in extending additional comfort for internal decision making. Validation of the internal ratings. Intrinsic Strengths of SME units captured as model also considers qualitative parameters in addition to financial results.

Strengthening of Credit Portfolio thru rating/review ratings early warning signals.

Impact of industry related cyclical trend considered in rating. Cluster centric approach.

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NSIC - D&B - SMERA Rating Fee

Category

Fees

Service Tax

Total

Turnover
< 50 Lacs 50 to 200 Lacs > 200 Lacs

Rs.
7,500 9,000 12,000

Rs.
772.5 927 1,236

Rs.
8,272 9927 13,236

Above fees is inclusive of service tax @ 10.3%

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SMERA Rating Fee

Category Turnover < 50 Lacs 50 to 200 Lacs > 200 Lacs

Fees Rs. 30,000 36,000 48,000

Service Tax Rs. 3,090 3708 4,944

Total Rs. 33,090 39,708 52,944

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Thank You Contact Details Virendra Goyal-National Sales Manager Cell-99300-74009.Email-virendra.goyal@smera.in