PRESENTED BY GROUP NO.

• ANIRUDDHA SAHSARABUDDHE - 41
• SUSINA KUVACHERRY - 28
• ASHISH KANOJIA - 21
• VAIBHAV KAMTEKAR - 20
• VINOD JAISWAR - 46
SME Rating Agency of India Ltd
SMERA – An Introduction

• Only rating agency dedicated to the SME segment offering

qualitative services at competitive prices.

• 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 2300 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 3

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

Minimise lending risk thru ratings 4

SME Expectations for growth

Minimise lending risk thru ratings 5

SMERA Contribution & Challenges

 SMERA undertakes risk profiling of SME clusters as an

ongoing activity.
 Participated / organized more than 250 seminars /
workshops / customers meets, etc.
 Published Emerging SMEs in India in association with D&B -
auto components, textiles, food processing, pharmaceutical,
engineering and chemicals segments.

To provide information on SMEs

To demonstrate advantages of rating to SMEs and lenders

Minimise lending risk thru ratings 6

Highlights of SMERA Ratings

 Provides ratings that are :

 Independent Neutral Risk Assessment

 Comprehensive Conducts an exhaustive due diligence process

 Transparent Rating Rationale discussed with rated entities

 Enables better understanding of SMEs by lenders while taking credit

decisions.

Minimise lending risk thru ratings 7

Rating Process Flow

Request for
Rating Request SMERA Site visit Interview and Enterprise
site visit
Conducts site
visit and
interviews
Questionnaire Management

Industry
Assessment
ROC and Cluster
Information data

Rating SMERA Documents,

Site Visit
Model Database audited results
Assessment
& certified
Report
projections
Third Party
Data – e.g. Documents Obtained
Litigation
Information
External Data Rating Analyst

Peer Review Final Rating

Entity Rating

Minimise lending risk thru ratings 8

SMERA Rating Scale

Minimise lending risk thru ratings 9

Factors considered while rating

Parameters of Rating

Financial Non-Financial
Management Quality
Solvency Liquidity Profitability Activity Location Advantage
Ratios Ratios Ratios Ratio
Marketing Network
e.g. Debt-Equity Current Ratio RONW Asset- Legal Issues
turnover
Industry and Macro-
Economic Assessment

Minimise lending risk thru ratings 10

Non-Financial Parameters
E m p lo y e eC o u n t&q u a lity
Y e a rsinE x is te n c e
Le g a lS ta tu s
M a inP re m is eO w n e rs h ip
M a n a g e m e n tQ u a lific a tio n
M a n a g e m e n tE x p e rie n c e
S ta tu to ryC o m p lia n ce
R a w M a te ria l
B u y e r/S u p p lie rB a s e
E n e rg yP la n
C a p a c ityU tiliz a tio n%
S a le s -D O M &E x p o rts
N a tu reo fIn d u s try
P ro d u c tL in e
S a le s /P u rc h a s e sfro m S isterC on
cern
s
M a rk e tin gN e tw o rk
R e s e a rc h&D e v e lo p m e n t
Ins u ra n c eC o v e ra g e
Litig a tio n
A c c o u n tsa u d ite d /c e rtifie d
A w a rd s&Q u a lita tiv eC e rtific
atio
n
Lo c a tio n a la d v a n ta g e
S iteV is itO b s e rv a tio n
B a n k in gF a c ilitie s
A c h ie v a b ilityo fF in a n c ia ls
A n a ly s tE v a lu a tio n

Minimise lending risk thru ratings 11

NSIC - D&B - SMERA Rating Fee

Category Fees Service Tax Total

Turnover Rs. Rs. Rs.
< 50 Lacs 7,500 7,73 8273
50 to 200 Lacs 9,000 927 9,927
> 200 Lacs 12,000 1,236 13236

Above fees is inclusive of service tax @ 10.30%

Minimise lending risk thru ratings 12

 SMERA Rating Fee

Category Fees Service Tax Total

Turnover Rs. Rs. Rs.

< 50 Lacs 30,000 3,090 33,090

50 to 200 Lacs 36,000 3,708 39,708

> 200 Lacs 48,000 4,944 52,944

Minimise lending risk thru ratings 13

Why SMERA?
 SME focus – independent, transparent, comprehensive rating

Systematic and scientific basis for industry specific rating models

 Partnership with banks spanning the Indian Banking Space

 D&B as knowledge partner with global rating experience and expertise

Minimise lending risk thru ratings 14

 Advantage – External Rating

External Risk Rating Models Enterprise Rating by SMERA

Rating beyond financials

Emphasis mainly on pst relationship
& financial aspects
Robust industry benchmarking and
Industry benchmarking – nil or limited also linked to size

Consideration to parameters specific

Generalization of SMEs across
geographic boundaries
Banks are involved as financiers;
to a geographic location
Ratings are neutral; credit
enhancement measures are not
reckoned

Looking to the past

Minimise lending risk thru ratings 15

 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.

Minimise lending risk thru ratings 16

 SMERA Milestones

 SMERA has been sanctioned technical assistance under the World

Bank led multi-lateral SME Financing & Development Programme.

 Adjudged as Best SME Development Project in Asia-Pacific region

 Offices at - Ahmedabad, Bangalore, Chandigarh, Chennai,

Coimbatore, Delhi, Hyderabad, Jamshedpur, Kolkata, Ludhiana,
Mumbai, Nagpur, Nasik, Surat, Rajkot Surat & Pune.

 SMERA rated clients receive preferential treatment from lenders

Minimise lending risk thru ratings 17

 OU
G Y
K IN
A N
TH