1.

Introduction to CRISIL

An increased range of borrowers, increasingly complex financial transactions and large quantum of debt borrowed in India warranted the need of provider of objective, accurate and timely information of credit quality. To fulfill this objective, CRISIL was incorporated in 1987 as public limited company. Today CRISIL is Indias largest and most respected rating agency. CRISILs majority share holder is standard $ Poors the worlds foremost provider of independent credit rating, indices, risk evaluation, investment research and data. Leading corporation worldwide are rated by S&P. S&Ps credit risk tracer (CRT) has analyzed about 10 lakh SMEs in Europe

Established in 1987, CRISIL has been promoted by leading Indian financial institutions like The Industrial Credit and Investment Corporation of India Limited (ICICI), Unit Trust of India (UTI) and Housing Development Finance Corporation Limited. The major shareholders include Standard & Poor's, ICICI, UTI, Life Insurance Corporation, General Insurance Corporation and a host of nationalized and foreign banks. CRISIL became a public limited company in November 1993 and is presently a quoted company on the Bombay Stock Exchange and the National Stock Exchange . Crisil pioneered the concept of credit rating in India and developed the framework and methodology for rating debt in the context of the India financial, monetary and regulatory system. CRISIL today has attained a pre-eminent position in the rating industry. It is the largest rating agency in the South East Asia region and is amongst the four largest ratings agencies in the world. In February 1996, CRISIL entered into a strategic alliance with Standard and Poors .The relationship got strengthened with S&P with CRISILs working credibility, competence and management. The relationship got further strengthened with S&P taking up a majority stake in CRISIL.

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 Indias 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. 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 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 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 to meet 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

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:

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 SE 1A SE 1B SE 2A SE 2B SE 3A SE 3B SE 4A SE 4B SE 5A SE 5B Low SE 1C SE 2C SE 3C SE 4C SE 5C

Performance Capability

Highest High Moderate Weak Poor

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

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 to other SMEs is " (as per table below)

TABLE NO .2
CRISIL SME Rating SME 1 SME 2 SME 3 SME 4 SME 5 SME 6 SME 7 SME 8 Definition Highest High Above Average Average Below Average Inadequate Poor Default

CRISIL SME Rating Fees

Companies under operation

Turnover (Rs Crore) < 10 Rating Fees (Rs.) 60,000 10-25 65,000 8,034 25-50 70,000 8,652 50-75 85,000 10,506 >75 110,000 13,596

Service Tax @ 12.36 per 7,416 cent(Rs.) 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 II over a period of time

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 rate concessions to highly rated entities Ratings could be used for all green-field projects where CRISILs appraisal skills will be useful in evaluating the unique project risks 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 CRISILs 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 BUSINESS ASSOCIATES -: WITH BANKERS, CUSTOMERS AND

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 organizations 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 CRISILs website and on CRISILs 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.

5. SUPPORT FOR EXPORT INITIATIVES -: For exporters, CRISILs International Linkage offers an additional advantage:STANDARD & POORs, 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.
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).

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. Top Preliminary Information required: 1. Name of the applicant unit and address: 6. 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) 2. Constitution: Proprietorship/ 7. Partnership/ Private Details of existing borrowing / banking arrangements: a.Name of Financial Instt./ Bank/ Lenders b.Nature c.Amount of assistance/ loan/ (Rs limit availed lakh) Details a.Name b.Nature FY of Associate of Concerns: Business

c.Sales, Networth and Debt as on March 31 of the last

Limited Co./ Limited Co./ Co-op. Society.

d.Self declaration regarding conduct of the account 3. Date of establishment/ incorporation 8. Production a.Name b.Units c.Installed d.Actual Production of capacity: Product Capacity

4.

Industry a.Industry b.Sub-segment c.Products

of

Information 9. segment industry

Customers' Reference: (please list 5 top customers of your firm/ company) a.Name of the customer b.Percentage in total sales c.Location d.Name and details (tel. no./ mobile no.) of contact person of customers Suppliers' Reference: (please list 5 top suppliers of your firm/ company) a.Name of the supplier b.Percentage in total purchases c.Location d.a.Name and details (tel. no./ mobile no.) of contact person of suppliers

5.

Details a.Name(s) Directors b.Age c.Father

of Promoters: 10. of Proprietor/ Partners/

Husband's

Name

d.Share holding (percentage) in Firm/ Company e.Residential Address f.Networth in Rs lakh along with CA certified g.Qualification statement

h.Nature of Experience with No of years i.Responsibilities in Firm/ Company: j.Responsibilities in other Businesses

(Passport size photos of promoters to be enclosed) Additional information required: 11. 12. Details of present orders in hand

all

the

13.

Specific information from the promoters: Vision of top management a.Future plans for expansion/ diversification b.Marketing arrangements c.Details litigation against the company/ firm, if any

Percentage of total imports and exports 14. in the business

Top

CRISIL Rating Process

CRISIL's ratings process is designed to ensure that all ratings are based on the highest standards of independence and 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:

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.

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, see What 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

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.