Intro to Crisil

7/31/2019 Intro to Crisil

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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:
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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.

Intro to Crisil

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