LOVELY PROFESSIONAL UNIVERSITY DEPARTMENT OF MANAGEMENT Report on Summer Training "AWARENESS AND IMPLEMENTATION OF CRlSIL SME RATINGS AMONG EMERGING SME'S" Submitted to Lovely Professional University In partial fulfillment of the Requirements for the award of Degree of Master of Business Administration Submitted by: Roopendra Singh Chandel RS1904A57 DEPARTMENT OF MANAGEMENT ------------------------------------------------------------------- ------------------------------------------Page no. 1
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LOVELY PROFESSIONAL UNIVERSITYDEPARTMENT OF MANAGEMENT
Report on Summer Training
"AWARENESS AND IMPLEMENTATION OF CRlSILSME RATINGS AMONG EMERGING SME'S"
Submitted to Lovely Professional University
In partial fulfillment of theRequirements for the award of Degree of
Master of Business Administration
Submitted by:Roopendra Singh Chandel
RS1904A57
DEPARTMENT OF MANAGEMENTLOVELY PROFESSIONAL UNIVERSITY
I would like to express my sincere thanks to CRISIL Ltd., Ludhiana for giving me the
opportunity to carry out the Summer Internship Program in their organization. The whole period
spent with the organization has been of immense learning experience about the SME Ratings.
Preparing a project of such a kind is not an easy task in itself and I am sincerely thankful to all
those people who help me lot, in preparing and completing this project.
I am grateful to CRISIL Ltd. who has given me this opportunity to carry out the project “AWARENESS AND IMPLEMENTATION OF CRlSIL SME RATINGS AMONG EMERGING SME'S”A study on investor’s perception their behavior about equities.
I sincerely thank to Mrs. Sarita Gupta (Trainning Co-ordinator,CRISIL Ltd., Ludhiana) for
providing me this valuable learning opportunity.
I would also like to thank Mr. Ashwani Panesar – Faculty Guide, Lovely Professional
University, Phagwara for her valuable guidance and insight amidst his busy schedule.
Finally I would like to thank Mr. Jatin Gupta (Relationship Manager) my project supervisor
without his help and guidance the completion of this project would have become difficult task.
CRISIL started with the rating of corporate dept and other the years extended its scope of
activities. Its range of services one includes rating services, advisory services and investment
research related services.
1.2 CRISIL Business and Services
CRISIL Limited is India’s leading Ratings, Financial News, Risk & Policy Advisory Company.
CRISIL helps clients manage and mitigate business and financial risk, enables markets to
function better through benchmarks and best practices and provides workable inputs in shaping
public policy. CRISIL’s services and products span the entire value chain starting from data
collection and management to providing opinions and integrated solutions. These products and
services are backed by highest standards of integrity, independence and analytical rigor, making
CRISIL the most credible provider of these services in the market. CRISIL’s clients depend
upon it to constantly deliver objective opinions and the most workable solutions. Through a
sustained theme of innovation and thought leadership, CRISIL has led the markets with new
thoughts, new analytical frameworks and new approaches, placing it in its leading position in
the Indian market place. to all participants in the financial markets. CRISIL Infrastructure
Advisory Group provides workable policy and transaction level solution to Central and State
governments, public sector and private sector entities, that help them make the difference.
CRISIL Investment and Risk Management Group (part of CRISIL’s advisory services) and
Global Data Services India Ltd (GDSIL), both CRISIL subsidiaries. CRISIL Ltd provides
business knowledge through research on industries, companies and the economy, GDSIL
provides analytical data base to support CRISIL as well as external clients in there research and
analysis. CRISIL’s news services (CRISIL Market wire – CMW) are India’s leading provider of
real time news and analysis on India debt markets.
1.2.a CRISIL’SME RATING SERVICES
CRISIL commenced its SME (small & medium enterprises) rating services in April 2005.
CRISIL has two products for rating small scale industries SSIs and SMEs viz. NSIC-CRISIL -------------------------------------------------------------------------------------------------------------Page no.
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performance and credit rating for SSI and SME rating respectively CRISIL rates SSI and SMEs
on two separate rating scales as given below:
A. NSIC-CRISIL performance and credit rating for SSIs CRISIL signed an MOU with NATIONAL SMALL INDUSTRIES CORPORATION (NSIC) to
rate SSIs in India at a subsidized cost.
An NSIC – CRISIL RATING reflects CRISIL’s opinion on company’s performance capability
and financial strength. Rating is assigned on following rating scale.
NSIC rating scale TABLE NO .1
Financial Strength
High Moderate Low
PerformanceCapability
Highest SE 1A SE 1B SE 1C
High SE 2A SE 2B SE 2C
Moderate SE 3A SE 3B SE 3C
Weak SE 4A SE 4B SE 4C
Poor SE 5A SE 5B SE 5C
For example, a company with high Performance Capability and high Financial Strength will be
rated 'SE2A', while one with weak Performance Capability and low Financial Strength will be
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.
AAdequate 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 such issues 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 with regard to timely payment of financial obligations; they are less likely to default in the immediate future than instruments in lower rating categories, but an adverse change in circumstances could lead to inadequate capacity to make payment on financial obligations.
BHigh 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.
CSubstantial 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.
DDefault
Instruments rated 'D' are in default or are expected to default on scheduled payment dates.
NMNot 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.
RATING FEESNSIC-CRSIL PERFORMANCE AND CREDIT RATING FOR SSI’s
Turnover (Rs . Lakh) < 50
Turnover (Rs. Lakh) 50-200
Turnover (Rs. Lakh) > 200
Rating fees (Rs.) 40,000 45,000 60,000
Service tax @ 10.30% (Rs.)
4,120 4,635 6,180
Total fees (Rs.) 44,120 49,635 66,180
Subsidy from NSIC (Rs.)
25,000 30,000 40,000
Amount payable by SSIs (Rs.)
19,120 19,635 26,180
*Concessional Fees 7,456 9,927 13,236
*concessional fees are applicable for CRISIL’s partner MOU bank customers and industry association members. The fees mentioned above are inclusive of all expenses CRISIL will occur in connection with the exercise.
RATING FEES FOR CRISIL SME RATING-------------------------------------------------------------------------------------------------------------Page no.
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Companies under Operations
Turnover (Rs . Crore) < 10
Turnover (Rs. Crore) 10-25
Turnover (Rs. Crore) 25-50
Tunover (Rs. Crore)50-75
Turnover (Rs. Crore)>75
Rating fees (Rs.)
60,000 65,00070,000 85,000 110,000
Service tax 6,180 6,695 7,2108,755 11,330
Total fees (Rs.) 66,180 71,695 77,21093,755 121,330
CRISIL has partnered with 26 banks and two financial organisations to extend the special concessional rating fees to its customers.
The following partner banks and financial organisations are giving interest rate benefits to the customers rated by CRISIL.
1. National Small Industries Corporation2. Bank of India3. Canara Bank4. Central Bank of India5. Corporation Bank6. Punjab National Bank7. Syndicate Bank8. UCO Bank9. Union Bank of India10. United Bank of India11. Vijaya Bank12. Kerala Financial Corporation
In addition to the above banks, CRISIL has partnered with the following 16 banks to give special concessional fees to rate their customers.
1. Allahabad Bank2. Andhra Bank3. Bank of Baroda4. Bank of Maharashtra5. Dena Bank6. The Federal Bank Limited7. HDFC Bank Limited8. Indian Bank9. Indian Overseas Bank10. State Bank of Bikaner & Jaipur11. State Bank of Hyderabad12. State Bank of India13. State Bank of Indore14. State Bank of Mysore15. State Bank of Saurashtra16. State Bank of Travancore
It is in discussion with other banks to enter into similar tie-ups. CRISIL rating provide banks a
ready reliable third party credit opinion and facilitate lending decision by helping fix
1990-91 Establishes the Information Services Group
1991-92 Provides technical assistance and training to Rating Agency Malaysia Berhard and MAALOT, the Israeli Securities Rating Company Ltd.
1993-94 Makes public offering of 20,00,000 equity shares of Rs. 10 each at a premium of Rs. 40 per share. The offer is oversubscribed by 2.47 times
1994-95 › Mr. R Ravimohan takes over as Managing Director
› Sets up the Advisory Services Group
1995-96 Forges a strategic alliance with Standard & Poor's Ratings Group.
1996-97 Standard & Poors' acquires 9.68% shareholding in CRISIL
1997-98 Sets up IISL, a Joint Venture between CRISIL and National Stock Exchange for undertaking index business and related activities. The new Company enters into a Consultancy and License Agreement with Standard & Poors'
1998-99 › Develops a framework for rating debt obligations supported by credit enhancements based on overseas guarantees called Foreign Structured
› Develops a web presence, launches the official website
1999-2000
› Acquires the business of Information Products and Research Services (India) Pvt. Ltd. along with its brand INFAC
› Secures the Certificate of Registration under SEBI (Credit Rating Agencies) Regulations, 1999
2001-2002
› Launches CRISIL Market Wire, a real-time financial news service
› Launches Mutual Fund Composite Performance Rankings (CRISIL CPRs), Fund Risk Analytics Model and CRISIL Mutual Funds Portfolio Tracker
2003-2004
› Change of name of the company from "The Credit Rating Information Services of India Limited" to "CRISIL Limited"
› Rates the first CDO transaction of working capital facilities in the Asia Pacific
› Makes an equity investment in the Caribbean Information & Credit Rating Services Limited (CariCRIS), (click here for more details) the first regional rating agency in the world, covering 19 countries.
› Acquires Gas Strategies Group Limited (earlier known as EconoMatters Limited), a London-based company engaged in gas consulting, information and training/conferences
› AMFI mandates CRISIL to provide daily fund indices as benchmarking standards for the mutual fund industry
2004-2005
› S&P acquires 3,120,948 equity shares of CRISIL from CRISIL shareholders through an Open Offer taking S&P holding in CRISIL to 58.46%
› CRISIL Board approves proposal to acquire Irevna group of companies
2006
› CRISIL transfers assets and staff of CRISIL Market Wire to TV18
› CRISIL constitutes a new team to achieve greater integration with Standard & Poor's (S&P) in brand franchise, market development and sales efforts.
› Irevna ranked the top investment research outsourcing firm by buy-
side firms according to a recent survey by the Brown-Wilson Group; sets up second delivery centre in Buenos Aires
› Inter-company agreements signed between CRISIL and Standard & Poor's - CRISIL now known as a Standard & Poor's Company
2007 › CRISIL transfers its advisory business (CRISIL Infrastructure Advisory and CRISIL Investment & Risk Management Services) into a 100% subsidiary CRISIL Risk and Infrastructure Solutions Limited.
› CRISIL's subsidiaries CRISIL Research & Information Services Limited (CRIS), Global Data Services of India Limited, CRISIL Properties Limited and Irevna Research Services Limited merged into CRISIL Limited (CRISIL).
› Ms. Roopa Kudva takes over as Managing Director & CEO of CRISIL following Mr. R. Ravimohan's appointment as Managing Director & Region Head of Standard & Poor's South Asia
2008 › CRISIL announces sale of shareholding in Gas Strategies Group Ltd.
› CRISIL launches its formal sustainable development programmed for Corporate Social Responsibility
› Launches the CRISIL Complexity Levels Service - an initiative aimed at strengthening Indian capital markets through greater transparent for investors
1.5 MILESTONES OF THE COMPANY
CRISIL is 23. At this important milestone, we reflect on our journey thus far and look into the horizon beyond. We began our journey as India's first rating agency. Today, we are a diversified global analytical platform with leadership positions in the ratings, research and advisory domains. Along the way, our growth has been closely intertwined with India's development milestones.-------------------------------------------------------------------------------------------------------------Page no.
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We started in 1987 as a credit rating agency , at a time when lending rates in India were fixed, and there was, therefore, little demand for credit ratings. We firmly established ourselves as the country's leading rating agency, respected for our fiercely independent, highly credible, and analytically rigorous views. Shouldering the mantle of a pioneer and a market leader, we facilitated the development of India's credit market and built investor confidence in our risk assessment capabilities.
India's transformation into a market-led economy greatly increased its need for capital, and required extensive reforms and institution building. Accordingly, we diversified into the infrastructure advisory and business research domains, and quickly built up a reputation for independent, reliable and incisive information, research, models and advisory services. Today, our services are key inputs in informed decision-making and the shaping of public policy in India.
With increasing globalization, we also focused on making our income streams more global. We acquired Irevna, a pioneer in the investment research outsourcing space; Irevna has since been voted No.1 in high-end investment research and analytics outsourcing by the US-based Brown and Wilson Group two years in a row in 2006 and 2007. We have a thriving business that meets increasing global demand for better understanding of the Indian business environment, through the services offered by our research and advisory groups.
Guided by our core values of integrity, independence, innovation, analytical rigor and commitment, we are proud to have built a globally-acknowledged institution of repute over these 20 years. We have facilitated the setting up of credit rating agencies in several countries around the world. Our association and integration with Standard & Poor's has further enhanced our capabilities and opened up newer vistas of opportunity, for our businesses and people.
The macro environment trends, both in India and globally, present myriad business opportunities. At a youthful 20, we are ideally positioned to service the needs of our expanding client base by maintaining our focus on our mission:
» Making markets function better.
» Helping clients manage and mitigate business and financial risks.
» Shaping public policy.
1.6 PRODUCT OF THE COMPANY
Ratings
CRISIL RatingsCRISIL Ratings is the only ratings agency in India to operate on the
basis of sectoral specialization. It reflects our sharpness of analysis, the responsiveness of the process and the large-scale dissemination of opinion.
CRISIL Ratings plays a leading role in the development of the debt markets in India.The Rating Criteria & Product Development Centre, responsible for policy research, new product development and ratings' quality assurance, has developed new ratings methodologies for debt instruments and innovative structures across sectors.
CRISIL Ratings provides technical know-how to clients worldwide. We have helped set up ratings agencies in Malaysia (RAM), Israel (MAALOT) and in the Caribbean.
• Mapping of the banks internal rating scale with CRISIL rating will reduce the appraisal process significantly for the branch managers and enable them to undertake quick and accurate decisions
BENEFITS OF CRISIL SME RATING
1. FASTER AND EASIER AVAILABILITY OF LOANS -:
Banks appreciate the independence and analysis involved in CRISIL’s rating exercise. More than 31 banks have entered into a formal agreement with CRISIL SME ratings, under which, they extend favorable terms and conditions, to CRISIL rated units, including lower rate of interest.
2. INCREASED CREDIBILITY WITH BANKERS, CUSTOMERS AND BUSINESS ASSOCIATES -:
An SME rating from CRISIL, increases the credibility of the rated unit, in domestic and international markets, by providing the bank, customers, and business, associates with credible information about the company.This increases their confidence in the unit and helps in increasing business and building better relationships.
3. DETAILED RATING REPORT -:
Each CRISIL rated SME receives a rating report which provides comprehensive details about the rated unit, its functioning, as well as the organization’s strengths and weaknesses.This rating report can be used by the unit in dissemination of credible information about their company to a wide variety of business associates, including, collaborators, joint venture partners and other market participants. Besides, the rating report also serves as a guide to focus on areas of improvement and enables the SME to benchmark against competition.
4. INCREASED PUBLICITY -:
CRISIL SME ratings are listed on CRISIL’s website and on CRISIL’s monthly publications, the CRISIL SME CONNECT. This serves as a good source of publicity for the rated entity and further enhances the credibility of the unit, a wide variety of banks, financial institutions and, foreign counterparties use the CRISIL PUBLICATION and website, to identify and research companies in greater detail.
For exporters, CRISIL’s International Linkage offers an additional advantage:- STANDARD & POOR’s, a globally respected rated agency, is the majority shareholder in CRISIL, therefore, a CRISIL rating will help establish the credentials with international customers.
6. A TOOL FOR SELF IMPROVEMENT -:
Along with its ratings, CRISIL provides detailed analytical reports on the Strengths and Weaknesses of rated entities. Based on CRISIL reports, one can take steps to strengthen their operations and become more efficient.Each repots provides reliable and independent feedback from customers, suppliers and, banks.
7. AFFORDABLE -:
CRISIL SME rating services, while being highly credible, are also very much affordable. CRISIL offers an attractive concession in the rating fee for small enterprises. Also, NSIC Ltd., which is a corporation under the ministry of MSME, GOVT, OF INDIA, provides 75% subsidy in rating fee for small enterprises.Thus, the rating fee payable by the small enterprises ranges from Rs.7456 to Rs.13236. for enterprises not registered as small enterprises, the fee is higher, as the subsidy is not available from NSIC.
CRISIL, with its reliability, width, and its depth of experience in rating services made a world of difference to the corporate sector, when it pioneered the concept of rating in India. CRISIL believes, it will make same difference to the SME Sector, with its SME sector ratings.
HOW RATING DONE
Step 1: Collect and process preliminary information
After collecting data we found that the awareness of CRISIL SME credit rating is very less among the industrialist of BATALA. Industries which are being rated are satisfied but they are also not aware about all the benefits which they can get from it so if we make them aware about benefits it will be just like customer delight.
MOU banks have high market share specially SBI and CBI which have very strong hold over the market so there are more chances for company to catch the customer. The support from NSIC also very good as they are providing more than 60% subsidy for the rating.
The marketing team of city is working very hard but still lot of effort is required by the company to show commanding presence in the market.
a) Highly supportive b) Somewhat supportive c) Not supportive
15. Which media do you think will be most effective to make these schemes better known among the MSMEs?a) Radiob) TVc) Newspaperd) Websitee) Any other suggestions ………………………………………………………………….
16. Do you have any suggestions for the government to address