intro to crisil
TRANSCRIPT
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public policy. CRISILs 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. CRISILs clients depend upon
it to constantly deliver objective opinions and the most workable solutions. Through a sustainedtheme 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 CRISILs 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. CRISILs news services
(CRISIL Market wire CMW) are Indias leading provider of real time news and analysis on
India debt markets.
Credit Ratings
A CRISIL rating reflects CRISIL's current opinion on the relative likelihood of timely payment of interest and
principal on the rated obligation. It is an unbiased, objective, and independent opinion as to the issuer's capacity tomeet its financial obligations.
So far, CRISIL has rated 30,000 debt instruments, covering the entire debt market.
The debt obligations rated by CRISIL include:
Non-convertible debentures/bonds/preference shares
Commercial papers/certificates of deposits/short-term debt
Fixed deposits
Loans
Structured debt
CRISIL Ratings' clientele includes all the industry majors - 23 of the BSE Sensex constituent companies and 39 of
the NSE Nifty constituent companies, accounting for 80 per cent of the equity market capitalisation, are CRISIL's
clients.
CRISIL's credit ratings are
An opinion on probability of default on the rated obligation
Forward looking
Specific to the obligation being rated
But they are not
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A comment on the issuer's general performance
An indication of the potential price of the issuers' bonds or equity shares
Indicative of the suitability of the issue to the investor
A recommendation to buy/sell/hold a particular security
A statutory or non-statutory audit of the issuer
An opinion on the associates, affiliates, or group companies, or the promoters, directors, or officers of the
issuer
CRISIL ratings are based on a robust and clearly articulated analytical framework, which ensures
comprehensiveness, standardisation, comparability, and effective communication of the ratings assigned and of
every timely rating action. The assessment is based on the highest standards of independence and analytical
rigour.
CRISIL rates a wide range of entities, including:
Industrial companies
Banks
Non-banking financial companies (NBFCs) Infrastructure entities
Microfinance institutions
Insurance companies
Mutual funds
State governments
Urban local bodies
CRISIL SME RATING
CRISIL pioneered the concept of ratings for the SME sector in India, and, presently, within a span of just five years,has the largest number of ratings on the SME sector in the world. As on March 31, 2012, we had more than 17,251
ratings (including over 7,974 SMEs) outstanding. CRISIL's SME ratings are affordable and tailor-made services
designed for SMEs.
Credit evaluation in the SME sector needs a specialised approach, as the issues and drivers of credit quality are
different from those applicable for large companies. Understanding this distinction, CRISIL introduced the concept of
SME credit ratings in India, designed exclusively for small enterprises, in 2005. Today CRISIL provides the widest
coverage of SME rating in India.
Under SME Ratings, CRISIL has five distinct offerings:
CRISIL SME Ratings
NSIC-CRISIL Performance and Credit Ratings for Small Scale Industries (SSIs)
CRISIL 360 degree
CRISIL Verified
CRISIL Solar Energy Gradings New!
CRISIL SME Rating indicates the SME's performance capability and financial strength. CRISIL SME Ratings are
entity-specific ratings, unlike credit ratings, which are debt-obligation-specific.
CRISIL SME Rating reflects the level of creditworthiness of the SME, adjudged in relation to other SMEs.
Following are the key features of CRISIL SME Ratings:
http://crisil.com/ratings/crisil-sme-ratings.htmlhttp://crisil.com/ratings/nsic-crisil-credit-rating-scheme.htmlhttp://crisil.com/ratings/crisil-360.htmlhttp://crisil.com/ratings/crisil-verified.htmlhttp://crisil.com/ratings/solar-energy-gradings.htmlhttp://crisil.com/ratings/solar-energy-gradings.htmlhttp://crisil.com/ratings/crisil-verified.htmlhttp://crisil.com/ratings/crisil-360.htmlhttp://crisil.com/ratings/nsic-crisil-credit-rating-scheme.htmlhttp://crisil.com/ratings/crisil-sme-ratings.html -
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Entity rating: SME Ratings are entity specific
Eligibility: All types of business enterprises, including public and private limited companies, cooperative
societies, partnership firms, and sole proprietorships, are eligible for CRISIL SME Ratings. Registration as
a micro and small enterprise is not required, as subsidy support from the government is not available for
these ratings.
Surveillance based on specific requirement: A CRISIL SME rating is valid for one year from the date of
the SME report issued by CRISIL, provided no significant changes/events occur during this period that
could materially affect the business or financial parameters of the organisation. SMEs are encouraged to
obtain rating reviews periodically, and CRISIL carries out reviews whenever requested by the SME or the
lender.
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
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 CRISILs opinion on companys performance capability
and financial strength. Rating is assigned on following rating scale.
NSIC rating scale TABLE NO .1
Financial Strength
High Moderate Low
Performance
Capability
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
rated 'SE4C'.
B. SME RATING
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CRISIL SME Ratings will reflect the level of creditworthiness of an SME, adjudged in relation to
other SMEs. CRISIL SME Ratings will be assigned with the following rating definition:
"The rating indicates that the level of creditworthiness of an SME, adjudged in relation toother SMEs is " (as per table below)
TABLE NO .2
CRISIL SME Rating Definition
SME 1 Highest
SME 2 High
SME 3 Above Average
SME 4 Average
SME 5 Below Average
SME 6 Inadequate
SME 7 Poor
SME 8 Default
CRISIL SME Rating Fees
Companies under operation
Turnover (Rs Crore)
< 10 10-25 25-50 50-75 >75
Rating Fees (Rs.) 60,000 65,000 70,000 85,000 110,000
Service Tax @ 12.36 per
cent(Rs.)
7,416 8,034 8,652 10,506 13,596
Total Fees (Rs.) * 67,416 73,034 78,652 95,506 123,596
How CRISIL SME/SSI ratings can be useful Banks
Creates a strong platform for well rated SMEs to obtain CRISIL ratings under Basel IIover a period of time
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An independent assessment of the SME portfolio will help in improving asset quality
Client retention : Bank will be able to retain its good customers by providing interest rateconcessions to highly rated entities
Ratings could be used for all green-field projects where CRISILs appraisal skills will beuseful in evaluating the unique project risks
Mapping of the banks internal rating scale with CRISIL rating will reduce the appraisalprocess 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 CRISILs ratingexercise. 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 ANDBUSINESS ASSOCIATES -:
An SME rating from CRISIL, increases the credibility of the rated unit, indomestic 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 organizations strengthsand 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 CRISILs website and on CRISILs monthlypublications, the CRISIL SME CONNECT. This serves as a good source of
publicity for the rated entity and further enhances the credibility of the unit, awide variety of banks, financial institutions and, foreign counterparties use the
CRISIL PUBLICATION and website, to identify and research companies in
greater detail.
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5. SUPPORT FOR EXPORT INITIATIVES -:
For exporters, CRISILs International Linkage offers an additional advantage:-STANDARD & POORs, a globally respected rated agency, is the majorityshareholder 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. CRISILbelieves, it will make same difference to the SME Sector, with its SME sector ratings.
CRISIL SME Ratings :List of documents required
Documents required
Preliminary Information required
Additional information required
Documents required:-
Authority letter to sign the application.
Documents supporting registration (memorandum and articles of associations, partnership agreements,
registration documents). (if applicable).
Documents supporting name change and legal structure. Brief write-up on history of the firm / company.
Documents supporting changes in capital (if any).
Copy of income tax, sales tax, excise and wealth tax returns, if filed
Copy of the audited accounts for the last three years (where accounts for the last year have not been
audited, provisional accounts duly certified by a Chartered Accountant, along with two years audited
accounts, are to be submitted).
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Copy of insurance policies of assets.
Certified net worth statements of all directors/ partners/proprietor.
In case of new project/expansion, copy of the project report containing a brief project profile, cost of
project, source/means of finance.
Details of subsidy and tax concession available, if any.
Quality certificates, export awards won, membership of any associations, etc.
Any other information that would enable us to understand your business better.
Preliminary Information required:
1. Name of the applicant unit and address:
a.Address of Registered Office
b.Address of Factory
c.Address for Communication
d.Name, Designation and details (tel. no& mobile no) of contact person
(all the above addresses to include
District, State, Pin Code, Telephone
No./Fax No. and email address)
6. Details of Associate Concerns:
a.Name
b.Nature of Business
c.Sales, Networth and Debt as on March 31 of the last
FY
2. Constitution:
Proprietorship/ Partnership/ Private
Limited Co./ Limited Co./ Co-op. Society.
7. Details of existing borrowing / banking arrangements:
a.Name of Financial Instt./ Bank/ Lenders
b.Nature of assistance/ loan/ limit availed
c.Amount (Rs lakh)
d.Self declaration regarding conduct of the account
3. Date of establishment/ incorporation 8. Production capacity:a.Name of Productb.Unitsc.Installed Capacityd.Actual Production
4. Industry Information
a.Industry segment
b.Sub-segment of industry
c.Products
9. Customers' Reference: (please list 5 top customers ofyour firm/ company)a.Name of the customerb.Percentage in total salesc.Locationd.Name and details (tel. no./ mobile no.) of contactperson of customers
5. Details of Promoters:
a.Name(s) of Proprietor/ Partners/
Directors
b.Age
c.Father Husband's Name
d.Share holding (percentage) in Firm/
Company
e.Residential Address
f.Networth in Rs lakh along with CA
certified statement
g.Qualification
h.Nature of Experience with No of years
i.Responsibilities in Firm/ Company:
j.Responsibilities in other Businesses
10. Suppliers' Reference: (please list 5 top suppliers of yourfirm/ company)a.Name of the supplierb.Percentage in total purchasesc.Locationd.a.Name and details (tel. no./ mobile no.) of contactperson of suppliers
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CRISIL Rating Process
CRISIL's ratings process is designed to ensure that all ratings are based on the highest standards of independenceand analytical rigour.
From the initial meeting with the management to the assignment of the rating, the rating process normally takes
three to four weeks. However, CRISIL has sometimes arrived at rating decisions in shorter timeframes, to meet
urgent requirements. The process of rating starts with a rating request from the issuer, and the signing of a rating
agreement. CRISIL employs a multi-layered, decision-making process in assigning a rating.
A detailed flow chart of CRISIL's rating process is as below:
(Passport size photos of all the
promoters to be enclosed)
Additional information required:
11. Details of present orders in hand 13. Specific information from the promoters:
12. Percentage of total imports and exports
in the business
14. Vision of top managementa.Future plans for expansion/ diversificationb.Marketing arrangementsc.Details litigation against the company/ firm, if any
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CRISIL VERIFIED
CRISIL offers SMEs value added services in the form of an independent verification which helps SMEs establish
their credentials. An organisation authenticated and verified by CRISIL will be provided a CRISIL VERIFIED ID,
which is a unique 12-digit code. A CRISIL VERIFIED ID affirms that the organisation's credentials have been
verified and validated. If an organisation has an online presence, its website will display an electronic "CRISIL
VERIFIED" logo to let potential customers, suppliers and other business associates know that the organisation has
been verified by CRISIL.
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Key Benefits of CRISIL VERIFIED
Positions an organisation as a reliable and credible business partner
Helps an organisation gain vital advantage by setting it apart from its competitors
Attracts global customers, thereby enhancing an organisation's business growth
Lets organisations without websites tap new business opportunities in the online space
Lets an organisation leverage on the 'CRISIL' brand
Revision of Rating Symbols and Definitions (PDF print out)
Conclusion
A credit rating is a useful tool not only for the investor, but also for the entities looking for
investors. An investment grade rating can put a security, company or country on the global
radar, attracting foreign money and boosting a nation's economy. Indeed, for emerging
market economies, the credit rating is key to showing their worthiness of money from
foreign investors. (To read more, seeWhat Is An Emerging Market Economy?) And because
the credit rating acts to facilitate investments, many countries and companies will strive to
maintain and improve their ratings, hence ensuring a stable political environment and a
more transparent capital market.
Investors may utilize information from a single agency or from multiple rating agencies.
Investors expect credit rating agencies to provide objective information based on sound
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analytical methods and accurate statistical measurements. Investors also expect issuers of
securities to comply with rules and regulations set forth by governing bodies, in the same
respect that credit rating agencies comply with reporting procedures developed by securities
industry governing agencies. Understanding the history and evolution of ratings agencies
gives investors insight on the methodology that agencies use, as well as the quality of
ratings from each agency. The analyses and assessments provided by various credit rating
agencies provide investors with information and insight that facilitates their ability to
examine and understand the risks and opportunities associated with various investment
environments. With this insight, investors can make informed decisions as to the countries,
industries and classes of securities in which they choose to invest.