Project Credit Rating

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. Chapter-1

NEED FOR THE STUDY

In the process of globalization, economic growth, organization of large, medium and

small size are being posed with a large number of challenges. At this junction, the

economic growth and sustainability of any country is equally or largely depended on the

process and development of small size industries.

In a country like India which is showing substantial growth, the part pledged by small

scale industry is very significant. There is a great need for the encouraging and

supporting and assisting these small scale industries and many agencies in India are

playing a major role in this process.

This study aims at understanding and analyzing the role played by NSIC, one of the

government agencies in the development and assistance of small scale industries.

The NSIC does small scale industries in various ways like export development, ratingSSIs, leasing, financing etc., however my project is restricted to the study of credit rating

system followed by NSIC. It also aims at finding out the importance of credit rating, its

role, benefits and pried is briefly understood the issues involved in credit rating.

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OBJECTIVES OF THE STUDY

The primary objective of the study is to find out the credit rating system followed

by NSIC for SMEs (small medium enterprises)

To study the importance and advantages of credit rating for SMEs with reference to

NSIC

To study the grading system and procedure followed by NSIC in credit rating

To study the profile of credit rating system followed by various agencies in India

To briefly identify the differences in procedures followed by different credit rating

agencies

To study credit rating method and process of NSIC by taking two companies

financial statement details.

To study the methodology by comparing the two companies financial details.

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RESEARCH METHODOLOGY

Primary collection method

This method includes the data collected from the personal discussion with the

authorized clerks of the organization

Secondary collection method

Secondary collection method includes data collected from recommended books,

companies website, companies annual report

LIMITATIONS OF THE STUDY

The major limitations of the research study are as follows

The study has been conducted only based on two companies with two rating

agencies

Major source of information being only through secondary data i.e.companies

annual reports. Websites etc

The people concerned for the data were not able to provide the requisite feedback

Detailed study of the topic was not possible due to limited size of the project.

There was a constraint with regards to time allocation for the research study i.e. for

a period of two months

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Chapter 2

REVIEW OF LITERATURE: CREDIT RATING

Introduction ;

Credit rating is an assessment of the capacity of an issuer of debt security, by an

independent agency, to pay interest and repay the principal as per the terms of issue of

debt

A rating agency collects the qualitative as well as quantitative data from a companywhich has to be rated and assesses the relative strength and capacity of company to honor

its obligation contained in the debt instrument throughout the duration of the instrument

In other words, credit rating provides a simple system of graduation by which the relative

capacities of companies (borrower) to make timely repayment of interest and principal on

a particular type of debt/financial instrument can be noted

* These ratings are expressed in code number which can be easily comprehended even by the lay investors. The ratings are the quickest way of understanding a companys

financial standing without going into complicated financial reports

* Credit rating is only a guidance to the investors and not a recommendation to a

particular debt instrument

* No rating agency tells that it is an indicator of the financial status of the company. All

that a rating agency claims is that the capacity of the company to honour the terms of

contract of a debt instrument

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*A credit rating is not a one time evaluation of credit risk, which can be regarded as valid

for entire life of the security. It is an on going appraisal.

Definitions of CREDIT RATING:

Ratings are designed exclusively for the purpose of grading bonds according to their

investment qualities

- Moodys

According to CRISIL, Credit rating is an unbiased and independent opinion as toissuers capacity to meet its financial obligations. It does not constitute a

recommendation to buy/sell or hold a particular security

CREDIT RATING IN INDIA

The capital market has witnessed a tremendous growth in past few years. Companies are

relying on capital markets for financing existing operations as well as for new projects

rather than on institution.

As the number of companies borrowings directly from capital markets increase, investors

find that the companys size or name is no longer a sufficient assurance of the timely

payment of interest and principal. Default by large and well known companies recently in

payment of interest on fixed deposits or debentures has reinforced this belief among

investors

They felt the need for an independent and credible agency which judges the quality of

debt obligation of different companies and assist individual and institutional investors in

making investments decisions.

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FRAME WORK OF CREDIT RATING AGENCIES;

Credit rating agencies are regulated by the SEBI. The main elements of its Credit Rating

Agencies Regulations are

Their registration

Their general obligation

Restriction on the rating of security

Procedure for inspection and investigation

Action in case of default

Their Registration

Regulations with RBI is mandatory for carrying on the rating business

The application for the grant of registration by SEBI should be submitted in and

accompanied by non-refundable fee of Rs.50000

Promoters of credit rating agency

A credit rating agency can be promoted by

Public financial institution

Scheduled bank

Foreign bank operating in India with RBI approval .

Foreign credit rating agency, having atleast 5yrs of rating experience

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General Obligations

A credit rating agency should

Make all the efforts to protect the interest of investors

Fulfil its obligation in a prompt, ethical and professional manner

At all times exercise due diligence, ensure proper care and exercise independent

professional judgement in order to achieve and maintain objectivity and independence inthe rating process

Have a reasonable and adequate basis for performing rating evaluation, with the support

of appropriate and in depth rating research. It should also maintain records to support its

decision

Do not

indulge in any unfair competition

Keep track record of all important changes relating to client companies and develop

efficient and responsive system to yield timely and accurate ratings

Develop its rating methodology to clients, users and the public.

Maintain an appropriate level of knowledge and competence and abide by the provision

of the SEBI Act, regulations and circular, which may be applicable and relevant to the

activities carried on by it.

Not to render, directly or indirectly any investment advice about any security in the

public accessible media

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Ensure that any change in registration status/any panel action taken by SEBI or any

material changes in financials which may adversely affect the interest of clients/investors

is promptly informed to the clients and any business remaining outstanding is transferred

to another registered person in accordance with any instruction of the affected

clients/investors.

Maintain an arms length relationship between its credit rating activity and any other

activity,

Ensure that there is no misuse of any privileged information including prior knowledge

of rating decisions or changes.

Provide adequate freedom and powers to its compliance officer for the effective

discharge of his duties.

Ensure that good corporate policies and corporate governance are in place.

Ensure that the senior management, particularly decision maker have access to all

relevant information about the business on a timely basis

Restrictions on Rating of Security

Restrictions on rating by CRAs relate to securities issued by

promoters

certain other entities

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Securities issued by promoters

A CRA is prohibited from rating securities issued by its promoters, who hold 10%, or more, of its shares. If the promoter is a lending institution, its chairman / director /

employee cannot hold a similar position in the CRA or its rating committee .How ever a

CRA may rate a security issued by its associate having a common independent director

(i.e. a directors who apart from receiving remuneration as a director does not have any

other material pecuniary relationship / transaction with the company / its promoters / its

management / its subsidiaries which in the judgment of the board of the company may

affect the independence, of the judgment of such director) with it or rating company if

the independent director does not participate in the discussion in the rating decision

the CRA makes a disclosure in the rating announcement of such associate (about the

existence of common independent director)on its board of the company

Securities Issued by Certain Entities

The securities of an entity cannot be rated by a CRA if it is

(a) a borrower of its promoter

(b) a subsidiary of its promoter

(c) an associate (i.e. a person holding at least 10% of the share capital ) of its

promoter, when there are common

chairman/directors

employees common to the CRA and these entities

there are common chairman/director/employees on the rating committee

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Procedure for Inspection/investigation

The SEBI is empowered to appoint inspecting officers to undertakeinspection/investigation of the books of account/records/documents of the CRAs

to ascertain whether they are being maintained properly

to ascertain whether the provisions of SEBI act/ these regulations are being complied

with

to investigate into complaints from investors/clients , whose securities are rated by

another person, regarding any matter having a bearing on in the activities of the CRA

in the interest of the securities market/investors in the interest of the securities

market/investors in the interest of the securities market/investors

Action in Case of Default

The CRAs that

(a) fail to comply with any condition, subject to which certificate of registration had

been granted

(b) contravene any of the provisions of the SEBI act / these regulations/any other

regulation under the SEBI act ,would be dealt with the manner provided under the

SEBT procedure for holding enquiry by enquiry officer and imposing penaltyregulations,2002.

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CREDIT RATING AGENCIES IN INDIA

This session provides a brief profile of the credit rating agencies in the country

namely

CRISIL Ltd

ICRA Ltd

CARE Ltd

ONICRA Ltd

SMERA Ltd

* CREDIT RATING INFORMATION SERVICE LTD (CRISIL)

First credit rating agency in India, CRISIL was promoted in 1987 jointly by the ICICI Ltd

and the Unit Trust of India. Other shareholders include the Asian Development Bank,

Life Insurance Corporation of India, HDFC Ltd, General Insurance Corporation of India

and several foreign and Indian banks. It commenced operation on January 1, 1988.

CRISIL Ratings is India's largest rating agency, having rated more than 24,541 debt

instruments, of more than USD 655 billion (Rs.30,714,59 crores), issued by over 7938

companies. CRISIL Ratings has a 70 per cent penetration in the domestic debt market.

CRISIL Ratings rates virtually every kind of organisation, including industrial

companies, banks, SMEs, non-banking financial institutions, insurance providers, mutual

funds, infrastructure entities, state governments, and urban local bodies. It also rates

securitised paper.

CRISIL is India's leading rating agency, and is the fourth largest in the world.

With over a 70% share of the Indian Ratings market, CRISIL Ratings is the agency of

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choice for issuers and investors .

CRISIL Ratings is a full service rating agency that offers a comprehensive range of rating

services. CRISIL Ratings provides the most reliable opinions on risk by combining its

understanding of risk and the science of building risk frameworks, with a contextual

understanding of business.

CRISIL is the only rating agency to operate on the basis of a sectoral specialisation,

which underpins the sharpness of analysis, responsiveness of the process and large-scale

dissemination of opinion pieces.

CRISIL has rated over 24,541 debt instruments worth Rs.30.71 trillion (over USD654.985 billion) * issued by over 7,938 debt issuers, including manufacturing companies,

banks, financial institutions (FIs), state governments and municipal corporations.

OBJECTIVES

To assist both individual and institutional investors in making investment decision in

fixed interest securities

To enable companies to mobilize funds in large amounts from a wide investor base, at

fair cost

To enable intermediaries to place debt instruments with investors by providing them

with an effective marketing tool

To provide regulators with a market driven system for bringing about discipline and a

healthy growth of capital markets.

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BENEFITS

A Trusted Third Party Opinion:A rating from CRISIL is a stamp of quality from the most renowned rating agency in

India.

Access to Funding:

A good rating from CRISIL carries weight with lenders, and can help you get faster

and cheaper credit. The Indian Banks' Association (IBA) has endorsed the NSIC-

CRISIL rating, and informed its member banks of the same. CRISIL has working

arrangement with 29 banks and financial organisations and extends concessional

pricing to their borrowers.

Allahabad Bank The Federal Bank Ltd State Bank of Indore

Andhra Bank HDFC Bank Ltd State Bank of Mysore

Bank of Baroda ICICI Bank Ltd State Bank of Saurashtra

Bank of India Indian Bank

State Bank of

Travancore

Bank of Maharashtra Indian Overseas Bank Syndicate Bank

Canara Bank Kerala Financial Corporation UCO Bank

Central Bank of India Punjab National Bank Union Bank of India

Corporation Bank

State Bank of Bikaner &

Jaipur United Bank of India

Dena Bank State Bank of Hyderabad Vijaya Bank

The Dhanalakshmi Bank Ltd State Bank of India

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Credit Rating is an indicator of your performance capability and financial strength. A

good rating gives comfort to

New Customers Foreign Partners

Suppliers

Collaborations for Joint Ventures

Added advantage while bidding and tenders filings

Self-improvement tool:

With its rating, CRISIL gives you a detailed analytical report on your company'sstrengths and weaknesses. The report will help you strengthen your operations and

improve the working of your company. This insightful, credible and independent

feedback is supported by the strongest industry and company research in India.

Improved Visibility:

With the CRISIL rating, your company will get a free listing in CRISIL's RatingScan, a

publication that is used as a reference for lending decisions by banks. We will alsofeature your company on CRISIL's website. In addition, your company name will also

feature in the monthly newsletter CRISIL SME Connect that is sent to more than

1800+ bankers and 3000+ companies across India.

RATING CRITERIA OF CRISIL

This section carries the research backing the 'rating criteria' adopted by CRISIL which

forms the basic framework for rating and helps in adopting a uniform and consistent

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approach in assigning the ratings. These rating criteria are regularly disseminated by

CRISIL in line with its stated policy of improving transparency in the rating process.

CRISIL's Criteria for Consolidation

A company may choose to conduct new businesses as undertakings of its own. Or it may,

for legal, tax, and regulatory considerations, choose to conduct these businesses as part of

a separate legal entity a subsidiary, a special purpose vehicle (SPV), or

associate/group company.

CRISIL's rating approach towards restructuring of bank loans

CRISIL has noticed a significant increase in the volume of loan restructuring, and the

applications filed for such restructuring, in the past few weeks. According to the available

data, banks have already restructured loans aggregating to more than Rs. 700 billion in2008-09 (refers to financial year, April 1 to March 31), most of them in the last quarter.

Single-loan sell-downs: down but not out

After recording phenomenal growth in 2007-08 (refers to financial year, April 1, to

March 31) and the first half of 2008-09, the corporate single-loan sell-down (SLSD)

market cooled off rapidly.

Clear default definition critical for reliable credit rating

The importance of reliable credit risk assessment in financial markets has increased over

the years. Credit rating agencies are the foremost providers of third-party credit risk

assessment; the efficacy of their performance can therefore have a profound impact on

credit markets.

Basel II - a catalyst in bond market deepening

CRISIL believes that Basel II has opened up wider avenues for investors in the Indian

debt market: the growing number of Bank Loan Ratings (BLRs) has reinforced the

acceptability of ratings in the mid-range, 'A' and 'BBB' categories.

CRISIL's Approach to Recognising Default

In most financial markets, bond investors prefer to have default recognised as soon as a

debt servicing payment is missed, in contrast to the relative forbearance that the loan

markets exhibit.

The Rating Process

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CRISIL's rating process is designed to ensure that all ratings are based on the highest

standards of independence and analytical rigour

Understanding CRISIL's Ratings and Rating Scales

A CRISIL credit rating indicates CRISIL's current opinion on the probability of default.

In other words, the credit rating indicates the probability of an investor in rated

instruments, or a lender to a rated entity, not receiving interest and principal payments

due on time and in accordance with the terms of the initial contract.

CRISIL's Approach to Financial Ratios

The analysis of a company's financial ratios is core to CRISIL's rating process. Hence,

users of CRISIL's ratings, including investors in corporate debt, need to understand

CRISIL's approach to financial ratios and the formulae employed in computing them.CRISIL's Treatment of Corporate Sector Hybrids in Credit Ratings

Hybrid instruments are securities that combine the characteristics of both debt and equity.

Such instruments have come in vogue as issuers, investors, regulators and other

stakeholders have begun to appreciate their ability to marry different interests.

Hybrid Capital: New Avenues for Banks

CRISIL's treatment of hybrids in its bank rating analyses coincides with the instruments'

regulatory treatment. One of the main parameters CRISIL examines is the instrument's

'loss absorption capacity'.

Rating Criteria for Hybrid Capital in Banks

The Reserve Bank of India (RBI) has allowed Indian banks to raise hybrid Tier I and Tier

II capital. Using these instruments, banks can augment their capital adequacy levels to

meet both current and upcoming requirements arising on account of market and

operational risks.

Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

CRISIL developed its comprehensive notch-up criteria for parent-supported ratings in

mid-1999. CRISIL notches up ratings for parent support on the hypothesis that an entity's

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creditworthiness is not only dependant on its own business and financial strengths but

also on its lineage and the relationship that it enjoys with its parent.

Criteria for Notching up Stand Alone Ratings of Companies based on Group Support

CRISIL developed its comprehensive notch-up criteria for group-supported ratings in

mid-1999. CRISIL notches up for group support when more than one entity belonging to

a single group has a significant shareholding in the entity to be rated.

Criteria for Notching up Stand Alone Ratings of Entities Based on Government Support

Just as CRISIL's ratings of private sector entities not only reflect the standalone credit

quality of an entity but also factor in the support that it may enjoy from its parent, in the

case of government-owned entities too, CRISIL factors in the likely support from the

government while assigning its ratings.

Translating Global Scale Ratings onto CRISIL's ScaleIn an increasingly globalised investment environment, one of the issues that Indian

investors frequently face is the correlation between the rating symbols of domestic and

global rating agencies.

Rating Criteria for Commercial Paper and Short-Term Debt

CRISIL has been assigning short-term ratings for over 15 years for commercial paper

(CP) and short-term debt (STD), and has rated issues made by more than 700 issuers.

CRISIL's Bank Loan Ratings

CRISIL assigns bank loan ratings to a variety of facilities provided by banks: these

include working capital demand loans, cash credit, project and general corporate loans,

and non-fund based facilities.

Criteria for Computing Short-Term Debt Limits for NBFCs

The attractiveness of raising relatively low-cost funds at the shorter end of the maturity

spectrum has, over time, spurred a number of non-banking finance companies (NBFCs)

to use this as a means of reducing their overall cost of funds.

Treatment of Securitization in CRISIL's Ratings of Finance Companies

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The effect of securitisation on the balance sheets of finance companies is fast becoming a

crucial credit quality consideration, given the interest that banks and finance companies

have shown for securitisation.

CRISIL RATING SYMBOLS

CRISIL Rating Symbols For Long Term Ratings

AAA

(Triple A) Highest

Safety

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.

A

Adequate 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 suchissues 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 withregard 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

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obligations.

B

High 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.

C

Substantial 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.

D

Default

Instruments rated 'D' are in default or are expected to default on

scheduled payment dates.

NM

Not 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.

Credit Rating Symbols for Fixed DepositsFAAA

("F Triple A")

Highest Safety

This rating indicates that the degree of safety regarding timely

payment of interest and principal is very strong.

FAA This rating indicates that the degree of safety regarding timely

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("F Double A")

High Safety

payment of interest and principal is strong. However, the relative

degree of safety is not as high as for fixed deposits with 'FAAA'

ratings.

FA

Adequate Safety

This rating indicates that the degree of safety regarding timely payment of interest and principal is satisfactory. Changes in

circumstances can affect such issues more than those in the

higher rated categories.

FB

Inadequate Safety

This rating indicates inadequate safety of timely payment of

interest and principal. Such issues are less susceptible to default

than fixed deposits rated below this category, but the

uncertainties that the issuer faces could lead to inadequatecapacity to make timely interest and principal payments.

FC

High Risk


payment of interest and principal is doubtful. Such issues have

factors at present that make them vulnerable to default; adverse

business or economic conditions would lead to lack of ability or

willingness to pay interest or principal.

FDDefault

This rating indicates that the fixed deposits are either in default or are expected to be in default upon maturity.

NM

Not 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

CRISIL Rating Symbols For Short Term Instruments

P1 This rating indicates that the degree of safety regarding timely payment on the instrument is very strong.

P2


payment on the instrument is strong; however, the relative degree

of safety is lower than that for instruments rated 'P1'.

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P3


payment on the instrument is adequate; however, the instrument is

more vulnerable to the adverse effects of changing circumstances

than an instrument rated in the two higher categories.

P4


payment on the instrument is minimal and it is likely to be

adversely affected by short-term adversity or less favourable

conditions.

P5This rating indicates that the instrument is expected to be in default

on maturity or is in default.

NM

Not Meaningful

Instruments rated 'NM' have factors present in them, which render the rating outstanding 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.

OBJECTIVES

The objectives of ICRA are same as in case of CRISIL

To assist both individual and institutional investors in making investment decision

in fixed interest securities

To enable companies to mobilize funds in large amounts from a wide investor base, at

fair cost

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To enable intermediaries to place debt instruments with investors by providing them

with an effective marketing tool

To provide regulators with a market driven system for bringing about discipline and a

healthy growth of capital markets.

RATING PROCESS AND METHODOLOGY

Rating Process

ICRAs Rating process is initiated on receipt of a formal request (or mandate)

from the prospective issuer. A Rating team, which usually consists of two

analysts with the expertise and skills required to evaluate the business of the

issuer, is involved with the Rating assignment. An issuer is provided a list of

information requirements and the broad framework for discussions. These

requirements are worked out on the basis of ICRAs understanding of the

issuers business, and broadly cover all aspects that may have a bearing on the

Rating. ICRA also draws on secondary sources of information, including its

own Research Division, while working on the Rating assignment. The Rating

involves assessment of a number of qualitative factors with a view to

estimating the future earnings of the issuer. This requires extensive

interactions with the issuers management, specifically on subjects relating to

plans, outlook, competitive position, and funding policies .

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In the case of manufacturing companies, plant visits are made to gain a better

understanding of the issuers production process, make an assessment of the

state of equipment and main facilities, evaluate the quality of technical

personnel, and form an opinion on the key variables that influence the level,

quality and cost of production. These visits also help in assessing the progress

of projects under implementation.

After completing the analysis, a Rating Report is prepared, which is then

presented to the ICRA Rating Committee. A presentation on the issuers

business and management is also made by the Rating Team. The Rating

Committee is the final authority for assigning Ratings. The assigned Rating,

along with the key issues, is communicated to the issuers top management for

acceptance. Non-accepted Ratings are not disclosed and complete

confidentiality is maintained on them unless such disclosure is required under

any laws/regulations.

If the issuer does not find the Rating acceptable, it has a right to appeal for a

review. Such reviews are usually taken up if the issuer provides certain fresh

inputs. During a review, the issuers response is presented to the Rating

Committee. If the inputs and/or fresh clarifications so warrant, the Rating

Committee would revise the initial Rating decision. As part of a mandatory

surveillance process, ICRA monitors all accepted Ratings over the tenure of

the Rated instruments. The Ratings are generally reviewed once every year,

unless the circumstances of the case warrant an earlier review. The Rating

outstanding may be retained or revised (that is, upgraded or downgraded) on

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Credit Rating it undertakes credit rating of all types of debt instruments, both shortterm and long term

Advisory Services CARE privides advisory services in the area of

securitization transactions

structuring financial instruments

financing of infra structure projects and

municipal finances

Information Services

The board objective of the information services is to make available information on any

company, industry or sector required by a business enterprise. The value addition,

through inclusive analysis enables the users of the services, like individuals, mutual

funds, investment companies, residents or non-residents, to make informed decisions

regarding investments.

Equity Research

Equity research involves an extensive study of the shares listed/to be listed in the major

stock exchange, and identification of the potential winners and losers among them

Rating Experience: (As at December 2009 )

Total Assignments Completed 7075

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Total Instruments Rated 6647

Total Volume of Debt Rated Rs.20,988 bn

Total Issuers Rated 2549

Credit Rating of Debt instruments

A. Long /Medium -term instruments (NCD/FD/CD/SO/CPS/RPS/L)

Symbols Rating Definition

CARE AAA Instruments with this rating are considered to be of the best credit quality,offering highest safety for timely servicing of debt obligations. Such

instruments carry minimal credit risk

.

CARE AA Instruments with this rating are considered to offer high safety for timely

servicing of debt obligations. Such instruments carry very low credit risk.

CARE A Instruments with this rating are considered to offer adequate safety for

timely servicing of debt obligations. Such instruments carry low credit

risk.

CARE BBB Instruments with this rating are considered to offer moderate safety for

timely servicing of debt obligations. Such instruments carry moderatecredit risk.

CARE BB Instruments with this rating are considered to offer inadequate safety for

timely servicing of debt obligations. Such instruments carry high credit

risk.

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CARE B Instruments with this rating are considered to offer low safety for timely

servicing of debt obligations and carry very high credit risk. Such

Instruments are susceptible to default.

CARE C Instruments with this rating are considered to be having very high

likelihood of default in the payment of interest and principal.

CARE D Instruments with this rating are of the lowest category. They are either in

default or are likely to be in default soon.

.B. Short term instruments

Symbols Rating Definition

PR1

Instruments with this rating would have strong capacity for timely

payment of short-term debt obligations and carry lowest credit risk.

Within this category, instruments with relatively better credit

characteristics are assigned PR1+ rating.

PR2

Instruments with this rating would have adequate capacity for timely

payment of short-term debt obligations and carry higher credit risk as

compared to instruments rated higher.

PR3

Instruments with this rating would have moderate capacity for timely

repayment of short term debt obligations at the time of rating and carry

higher credit risk as compared to instruments rated higher.

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PR4

Instruments with this rating would have inadequate capacity for timely

payment of short-term debt obligations and carry very high credit risk.

Such Instruments are susceptible to default.

PR5 The instrument is in default or is likely to be in default on maturity.

Rating process of CAREThe rating process takes about three to four weeks, depending on the complexity of the

assignment and the flow of information from the client. Rating decisions are made by theRating Committee.

FREQUENCY OF RATING ACTIONS : The rating assigned is communicated to the

client along with a detailed rationale.

The ratings accepted by the clients are published and then monitored on a

continuous basis over the life of the instrument.

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CARE has a comprehensive in-house data base which facilitates surveillance of

the various industries and companies operating in these industries. Each rating is reviewed formally at least once a year, when analysts meet the

issuer's management. A review can also be triggered by a major development in the company or in the

industry, which may have a significant bearing on the credit-worthiness of the

company. As a part of the review exercise, actual financial performance is analysed in the

light of the estimates made earlier and deviations are examined. CARE puts the rating under Credit Watch, when any event or deviation from the

expected trend has occurred or is expected and additional information is necessary

to take rating action.

ONICRA

Onicra credit rating is a path breaking innovative organization that analyses data and

provides rating solutions for individual and small and medium entreprisea(SMEs)

Over the years, Onicra has developed a long list of esteemed clients. This includes some

of India Inc's top 100 companies: Mahindra & Mahindra, Reliance, Volkswagen,

HDFC and Genpact.

Onicra has been acknowledged as pioneers in the field of credit rating by the Ministry of

Finance in the Economic Survey (1993-1994) . It is also recognized and empanelled by

the likes of NSIC (National Small Industries Corporation) for SSI (Small Scale

Industry) assessment. Our rating has also been accepted by the IBA ( Indian Banks

Association ).

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Rating Process

Submission of application by MSME unit

Application has to be accompanied by the list of documents and MSME share of rating fee (i.e.should be in the name of "Onicra Credit Rating Agency of India Ltd." payable at Delhi)

Collection of information from MSME unit

Conduct basic research

Site visit & meeting with MSME management

Research analysis and preparation of report approval by rating committee

Approval of rating by the Rating Committee

Communicate rational of Rating to MSME and NSIC

ONICRA will assign rating within a month after the receipt of all the documents from the MSM

Eligibility

A Registered MSME Unit in India is eligible to avail the benefit of the rating scheme. A proof of registr

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Rating Scale

The rating scale is based on parameters of Performance and Credit assessments in 5 X 3 matrix methodo

highest to poor performance. A, B, C for high, moderate, low financial strength.

SMERA

SME Rating Agency of India Limited (SMERA) is a joint initiative by SIDBI Dun &

Bradstreet Information Services India Private Limited (D&B) and several leading banks

in the country. SMERA is the country's first rating agency that focuses primarily on the

Indian SME segment. SMERA's primary objective is to provide ratings that are

comprehensive, transparent and reliable. This would facilitate greater and easier flow of credit from the banking sector to SMEs.

SMERA Rating is an independent third-party comprehensive assessment of the overall

condition of the SME, conducted by SME Rating Agency of India Limited

It takes into account the financial condition and several qualitative factors that have

bearing on creditworthiness of the SME

SMERA Rating consists of 2 parts,a Composite Appraisal/Condition indicator and

a size indicator

31

Performance

capability

Financial StrengthHigh Moderate Low

Highest SE 1A SE 1B SE 1CHigh SE 2A SE 2B SE 2CModerate SE 3A SE 3B SE 3CWeak SE 4A SE 4B SE 4CPoor SE 5A SE 5B SE 5C


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SMERA Rating categorises SMEs based on size, so as to enable fair evaluation of

each SME amongst its peers An SME unit having SMERA Rating would enhance its market standing amongst

trading partners and prospective customers

RATING SCALE OF SMERA

NSIC - D&B - SMERA Rating Scale

RATING INDICATOR

Financial Strength

High Moderate Low

Performance Capability

Highest SE1A SE1B SE1C

High SE2A SE2B SE2C

Moderate SE3A SE3B SE3C

Weak SE4A SE4B SE4C

Poor SE5A SE5B SE5C

1

SMERA Rating Model

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SMERA adopts a hybrid credit evaluation methodology that encompasses financial elements,

non-financial qualitative parameters and certain specific event triggers that have a material impact

on the company's rating. The choice of rating factors and the weighting schema is an

amalgamation of statistical analysis and expert judgment.

Dun & bradstreet

New York-based D&B is a specialist information service provider that during the second

half of last century encompassed US printing, audience research and broadcasting

interests.

As of 2002 its revenue was around US$1.4 billion, with approximately 9,000 employees

worldwide. In 2001 it spun off the Moodys financial data service.

History

D&B dates from 1841, with the establishment by Lewis Tappan (1788-1873) of a

commercial credit service, the Mercantile Agency.The rough and ready nature of

reporting was demonstrated in the landmark defamation action by John Beardsley,

commenced in 1848 and lasting for 23 years, that privileged reporting agencies and in the

words of critic Scott Sandage saw the US

RG Dun was incorporated by his grandson in 1859: employees included Abraham

Lincoln, Ulysses S Grant, Grover Cleveland and William McKinley. Its subscribers grew

from 7,000 in the 1870s to 40,000 in the 1880s. By 1900 its reports covered over a

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million US businesses. In 1933 Dun merged with The Bradstreet Companies (a

competitor founded in 1849). John Moody (1868-1958) established what became

Moody's Investors Service - acquired by Dun & Bradstreet in 1962 and spun off in 2000 -

when he published Moody's Manual of Industrial & Corporation Securities. There is an

account of the company in his autobiography The Long Road Home (1933) and Fast by

the Road (1942).

Dun & Bradstreet, like its competitors, acquired and shed a range of general and

specialist media interests during the 1980s and 1990s.It sold its television stations in 1984

and bought the ACNielsen audience measurement group (profiled here), founded in 1923.

Nielsen was spun off in 1996.

In 2001 Dun & Bradstreet rebadged itself as D&B. In 2002 it paid US$117 million for

the Hoovers information service.

Studies

There has been no major independent study of Dun & Bradstreet, regrettable given its

significance for the rise of the modern corporation and what has been

characterised as the information economy.

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CHAPTER 3 ORGANISATION PROFILE

NSIC profile

National Small Industries Corporation Ltd. (NSIC), an ISO 9001 certified company, since

its establishment in 1955, has been working to fulfill its mission of promoting, aiding and

fostering the growth of small scale industries and industry related small scale

Schema of Rating Factors of D & B

Rating Factor Schema

Financial Parameters Non-Financial Parameters

Solvency Ratios

Liquidity Ratios

Activity Ratios

Profitability Ratios

Management Quality

Location Advantage

Marketing Network

Legal Issues

Industry and Macro-Economic Assessment

Trend Analysis

An exhaustive list of qualitative and quantitative factorsconsidered for rating.

Each financial parameter is benchmarked within itsindustry-size peer group

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services/business enterprises in the country. Over a period of five decades of transition,

growth and development, NSIC has proved its strength within the country and abroad by

promoting modernization, upgradation of technology, quality consciousness,

strengthening linkages with large medium enterprises and enhancing exports - projects

and products from small industries.

NSIC operates through 9 Zonal Offices, 33 Branch Offices, 14 Sub Offices, 10 NSIC

Business Development Extension Offices, 5 Technical services Centres, 3 Extension

Centres and 2 Software Technology Parks supported by a team of over 500 professionals

spread across the country. To manage operations in African countries, NSIC operates

from its office in Johannesburg.

NSIC carries forward its mission to assist small enterprises with a set of specially tailored

schemes designed to put them in a competitive and advantageous position. The schemes

comprise of facilitating marketing support, credit support, technology support and other

support services.

NSIC carries forward its mission to assist small enterprises with a set of specially tailored

schemes designed to put them in a competitive and advantageous position. The schemes

comprise of facilitating marketing support, credit support, technology support and other support services.

Marketing

Marketing, a strategic tool for business development, is critical to the growth and survival

of small enterprises in today's intensely competitive market. NSIC acts as a facilitator to

promote small industries products and has devised a number of schemes to support small

enterprises in their marketing efforts, both in an outside the country. These schemes are

briefly described as under:

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Consortia and Tender Marketing: Small Enterprises in their individual capacity face

problems to procure & execute large orders, which inhibit and restrict their growth.

NSIC, accordingly adopts Consortia approach and forms consortia of units manufacturing

the same products, thereby easing out marketing problems of SSIs. The Corporation

explores the market and secures orders for bulk quantities. These orders are then

distributed to small units in tune with their production capacity. Testing facilities are also

provided to enable units to improve and maintain the quality of their products conforming

to the standard specifications.

Single point Registration for Government Purchase: NSIC operates a single Point

Registration Scheme under the Government Purchase Programme, wherein the registered

SSI units get purchase preference in Government purchase programme, exemption from payment of Earnest Money Deposit etc.

Issue of tender sets free of cost.

Advance intimation of tenders issued by DGS&D.

Exemption from payment of earnest money.

Waiver of security deposit up to the monetary limit for which the unit is

registered. Issue of competency certificate in case the value of an order exceeds the monetary

limit, after due verification.

Exhibitions and Technology Fairs: To showcase the competencies of Indian SSIs and

to capture market opportunities, NSIC participates in select International and National

Exhibitions and Trade Fairs every year. NSIC facilitates the participation of the small

enterprises by providing concessions in rental etc. Participation in these events exposes

SSI units to international practices and enhances their business prowess.

Buyer-Seller meets: Bulk and departmental buyers such as the Railways, Defence,

Communication departments and large companies are invited to participate in buyer-

seller meets to enrich SSI unit?s knowledge regarding terms and conditions, quality

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standards, etc required by the buyer. These programmes are aimed at vendor development

from SSI units for the bulk manufacturers.

Export of Products and Projects : NSIC is a recognized Export House and exporting

products and projects of small industries of India to other countries. The major areas of

operation are: Export of products such as handicrafts, leather items, hand tools, pipes/fittings,

builders? hardware etc. Supply of Small Industry projects on turnkey basis.

Credit Support :NSIC facilitates credit requirements of small enterprises in the following

areas

Financing for procurement of Raw Material (Short term)

NSIC?s Raw Material Assistance Scheme aims at helping Small Scale Industries/

Enterprises by way of financing the purchase of Raw Material (both indigenous &

imported). The salient features are

1. Financial Assistance for procurement of Raw Materials upto 90 days.

2. Bulk purchase of basic raw materials at competitive rates.3. NSIC facilitates import of scares raw materials.

4. NSIC takes care of all the procedures, documentation & issue of letter of credit in

case of imports.

Financing for Marketing Activities (Short term)

NSIC facilitates financing for marketing actives such as Internal Marketing, Exports and

Bill Discounting.

Finance through syndication with Banks

In order to ensure smooth credit flow to small enterprises, NSIC is entering into strategic

alliances with commercial banks to facilitate long term / working capital financing of the

small enterprises across the country. The arrangement envisages forwarding of loan

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applications of the interested small enterprises by NSIC to the banks and sharing the

processing fee.

Performance and Credit Rating Scheme for small industries

To enable small enterprises to ascertain the strengths and weaknesses of their existing

operations and take corrective measures to enhance their organizational strength. NSIC is

operating a Performance and Credit Rating Scheme through empanelled agencies like

ICRA, ONICRA, Duns & Bradstreet(D&B), CRISIL, FITCH, CARE and SMERA. Small

enterprise has the liberty to choose among any of the rating agencies empanelled with

NSIC. Rating agencies will charge the credit rating fee according to their policies. The

benefits to small enterprises are as follows: An independent, trusted third party opinion on capabilities and credit worthiness

of SSI units. Good rating to enhance the acceptability of the SSI units with Banks. FIs, SSI?s

customers and buyers. Facilitate prompter credit decisions from Banks on proposals of SSI units.

75% of the credit rating fee subject to a maximum of Rs. 25,000/- will be

reimbursed to the small enterprise having a turnover upto Rs.50 lakh by way of

grants. 75% of the credit rating fee subject to a maximum of Rs. 30,000/- will be

reimbursed to the small enterprise having a turnover above Rs.50 lakh to Rs.200

lakh by way of grants. 75% of the credit rating fee subject to a maximum of Rs. 40,000/- will be

reimbursed to the small enterprise having a turnover above Rs.200 lakh by way of

grants.

Technology Support

Technology is the key to enhancing a company?s competitive advantage in today?s

dynamic information age. Small enterprises need to develop and implement a technology

strategy in addition to financial, marketing and operational strategies and adopt the one

that helps integrate their operations with their environment, customers and suppliers.

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Access to a wide range of technologies from India and abroad.

Access to national and international business leads, JV opportunities and trade

information. Comprehensive information on Government policies, rules and regulations,

schemes and incentives. Access to industrial databases and members? directory.

Various value added, specialized services for Infomediary Service?s members.

Software Technology Parks

NSIC Software Technology Parks (STPs) facilitate small industries in setting up 100%

export-oriented units for software exports. They also act as nodal point to activate

software exports directly through NSIC. These STPs extend support in terms of therequisite infrastructure to the SSI units to start business operations with a minimum lead

time.The scheme is governed by STPI regulations of the Ministry of Information

Technology, Government of India. NSIC established the first STP at Okhla, New Delhi in

1995 and second in Chennai in 2001. Several small scale units have taken advantage of

these parks and contributed export earnings to the exchequer.

Technology Business Incubators

Enterprise development is one of the thrust areas for nurturing the development and

growth of micro and small enterprises in the country that is being facilitated by providing

handholding support to the micro and small enterprises in every field of business.

Incubation is one of the appropriate tools to achieve this goal, as it provides necessary

facilities for the prospective entrepreneurs and start-up companies to learn product

manufacturing processes coupled with technology development, business development

under one roof. In these incubators working

projects depicting appropriate technology for small enterprises are displayed in workingconditions.

Small Enterprise Establishment Programme(SEEP)

This programme facilitates setting up of new enterprises all over the country by creating

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self-employment opportunities for the unemployed persons. The objective of this scheme

is to facilitate establishment of new small enterprises by way of providing integrated

services in the areas of training for entrepreneurial skill development, selection of small

projects, preparation of project profiles/reports, identification and sourcing of plant,

machinery and equipments, facilitating sanction of credit facility and providing other

support services in order to boost the development of small enterprises in manufacturing

and services sectors.

International Cooperation

NSIC facilitates sustainable international partnerships. The emphasis is on sustainable

business relations rather than on one-way transactions. Since its inception, NSIC has

contributed to strengthening enterprise-to-enterprise cooperation, south south cooperationand sharing best practices and experiences with other developing countries, especially

those in the African, Asian and Pacific regions. The features of the scheme are: Exchange of Business/Technology missions with various countries.

Facilitating Enterprise to Enterprise cooperation, JVs, Technology Transfer &

other form of sustainable collaboration. Explore new markets & areas of cooperation:

Identification of new export markets by participating in sector- specificexhibitions all over the world.

Sharing of Indian experience with other developing countries

International Consultancy Services

For the last five decades, NSIC has acquired various skill sets in the development process

of small enterprises. The inherent skills are being networked to offer consultancy servicesfor other developing countries. This activity has been started during 2004-05 and is

expected to occupy a place in the future service profile of the Corporation. The areas of

consultancy are as listed below:

1. Capacity Building

2. Policy & Institutional Framework

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3. Entrepreneurship Development

4. Business Development Services

Insurance of Export Credit for Micro and Small Enterprises

NSIC is facilitating micro and small enterprises to insure their export credits by entering

into strategic alliance with Export Credit Guarantee Corporation of India Limited

(ECGC). MSEs would be helped in insuring their export credits through any office of the

Corporation, located all over the country. This arrangement is made to strengthen

promotion of exports from small enterprises.

Marketing assisstance

1. BACKGROUND

The Micro, Small and Medium Enterprises (MSMEs) sector has emerged as a

highly vibrant and dynamic sector of the Indian economy over the last five

decades. MSMEs not only play crucial role in providing large employment

opportunities at comparatively lower capital cost than large industries but also

help in industrialization of rural & backward areas, thereby, reducing regional

imbalances, assuring more equitable distribution of national income and wealth.

MSMEs are complementary to large industries as ancillary units and contribute

enormously to the socio-economic development of the country.

Fast changing global economic scenario has thrown up various opportunities and

challenges to the MSMEs in India. While on the one hand, many opportunities are

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opened up for this sector to enhance productivity and look for new markets at

national and international level, it has also, on the other hand, put an obligation to

upgrade their competencies to meet the competition as new products are launched

at an astonishing pace and are available world wide in short time. Micro, Small &

Medium Enterprises do not have any strategic tools / means for their business/

market development as available with large industries. In the present competitive

age, Marketing is one of the weakest areas wherein MSMEs face major problems.

2. MARKETING ASSISTANCE SCHEME

Marketing, a strategic tool for business development, is critical for the growth and

survival of micro, small & medium enterprises. Marketing is the most important

factor for the success of any enterprise. Large enterprises have enough resources

at their command to hire manpower to take care of marketing of their products

and services. MSME sector does not have these resources at their command and

thus needs institutional support for providing these inputs in the area of

marketing.

Ministry of Micro, Small & Medium Enterprises, inter-alia, through National

Small Industries Corporation (NSIC), a Public Sector Enterprise of the Ministry,

has been providing marketing support to Micro & Small Enterprises (MSEs)

under Marketing Assistance Scheme.

Emergence of a large and diverse services sector in the past years had created a

situation in which it was no longer enough to address the concerns of the small

scale industries (SSI) alone but essential to include the entire gamut of

enterprises, covering both SSI Sector and related service entities, in a seamless

web. There was a need to provide space for the small enterprises to grow into

medium scale enterprises, for that is how they will be able to adopt better and

higher levels of technology and remain competitive in a fast globalizing world.

Thus, as in most developed and developing countries, it was necessary that in

India too, the concerns of the entire range of enterprises micro, small and

medium, were addressed and the sector was provided with a single legal

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framework. The Micro, Small and Medium Enterprises Development (MSMED)

Act, 2006 addresses these issues and also other issues relating to credit,

marketing, technology upgradation etc concerning the micro, small and medium

enterprises. The enactment of MSMED Act 2006, w.e.f. from 2nd October, 2006

has brought medium scale industries and service related enterprises also under the

purview of the Ministry, accordingly the name of Ministry has also been changed.

The need of the hour presently is to provide sustenance and support to the whole

MSME sector (including service sector), with special emphasis on rural and micro

enterprises, through suitable measures to strengthen them for converting the

challenges into opportunities and scaling new heights. Thus although the medium

enterprises are also proposed to be included as the target beneficiaries in the

scheme, special attention would be given to marketing of products and services

of micro and small enterprises, in rural as well as urban areas.

NSIC MARKEING SCHEMES

3. OBJECTIVES:

The broad objectives of the scheme, inter-alia, include:

To enhance marketing capabilities & competitiveness of the MSMEs.

To showcase the competencies of MSMEs.

To update MSMEs about the prevalent market scenario and its

impact on their activities.

To facilitate the formation of consortia of MSMEs for marketing of

their products and services.

To provide platform to MSMEs for interaction with large institutional

buyers.

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To disseminate/ propagate various programmes of the Government.

To enrich the marketing skills of the micro, small & medium

entrepreneurs.

4. MARKETING SUPPORT TO MSMEs

Under the Scheme, it is proposed to provide marketing support to Micro, Small &

Medium Enterprises through National Small Industries Corporation (NSIC) and

enhance competitiveness and marketability of their products, through following

activities:

4.1 Organizing International Technology Exhibitions in Foreign

Countries by NSIC and participation in International

Exhibitions/Trade Fairs:

International Technology Expositions / exhibitions may be organized by NSIC

with a view to providing broader exposure to Indian micro, small & medium

enterprises to facilitate them in exploring new business opportunities in emerging

and developing markets. These exhibitions may be organised in consultation with

the concerned stakeholders and industry associations etc. The calendar for these

events may be finalised well in advance and publicised widely amongst all

participants/stakeholders. The calendar of events would also be displayed on the

Web-site of NSIC. Such expositions showcase the diverse technologies, products

and services produced/rendered by Indian MSMEs and provide them with

excellent business opportunities, besides promoting trade, establishing joint

ventures, technology transfers, marketing arrangements and image building of

Indian MSMEs in foreign countries. In addition to the organisation of the

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international exhibitions, NSIC would also facilitate participation of Indian

MSMEs in the select international exhibitions and trade fairs. Participation in

such events exposes MSMEs to international practices and enhances their

business prowess. These events provide a platform to MSMEs where they meet,

discuss, and conclude agreements on technical and business collaborations.

4.1.1 Scale of Assistance:

A. Organizing Technology Exhibitions in Foreign Countries:

S.

No.

Eligible Items Scale of Assistance

1. Space rent

(Built up stall)

For General Category Entrepreneurs:

Micro Enterprises : 75% of the actual charges

Small Enterprises : 60% of the actual charges

Medium Enterprises: 25% of the actual charges

For the Enterprises belonging to NE Region/ Women/ SC/ST

entrepreneurs:


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2. Freight

charges for the

goods

transported to

the events.

Actuals subject to maximum of 25000/- (Rs. 37500/- for Latin

American countries), each way per entrepreneur.

3. Air fare : For General Category Entrepreneurs:

Micro Enterprises :

- 85% of the economy class return fare (for one representative

from one enterprise).

Small Enterprises



Medium Enterprises:



For the Enterprises belonging to NE Region/ Women/ SC/ST

entrepreneurs:

Micro Enterprises: 95% of the economy class return fare

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where budgetary support for an event exceeds Rs. 50 lakhs, the approval of the

Administrative Ministry would be required.

B. Participation in International Exhibitions/Trade Fairs held in Foreign

Countries:

S.

No.

Eligible Items Scale of Assistance

1. Space rent (Built

up stall)

For General Category Enterprises:




For the Enterprises belong to NE Region/ Women/ SC/ST

entrepreneurs:




2. Freight charges

for the goods

transported to the

events

Actuals subject to maximum of Rs.15000/- (Rs. 20000/- for Latin

American countries) per entrepreneur.

3. Air fare : For General Category Enterprises:

Micro Enterprises :

-85% of the economy class return fare (for one representative

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Small Enterprises



Medium Enterprises:



For the Enterprises belong to NE Region/ Women/ SC/ST

entrepreneurs:

Micro Enterprises: 95% of the economy class return fare

(for one representative from one enterprise).

Small Enterprises: 85% of the economy class return fare

(for one representative from one enterprise).

Medium Enterprises: 50% of the economy class return

fare (for one representative from one enterprise).4. Maximum

amount of

Assistance

towards air fare,

space rental &

shipping /

transportation

charges:

General Category

Latin America Other countriesMicro

Enterprises

Rs. 1.75 lakh Rs. 1.50 lakh

Small Enterprises Rs. 1.50 lakh Rs. 1.25 lakhMedium

Enterprises


Enterprises belonging to NE Region/ Women / SC/ST

category

Latin America Other countries

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Micro

Enterprises


Small Enterprises Rs. 1.75 lakh Rs. 1.50 lakhMedium

Enterprises


5. Advertisement,

publicity and

theme pavilion,

etc.

20% of the total subsidy admissible under the above four sub-

heads subject to a maximum of Rs. 5 lakhs.

(i) Normally, in such events, at least 5 MSMEs should participate. In case of

participation of up to 10 MSMEs, 1 representative each from the Ministry of MSME and

the NSIC may accompany the participating MSMEs. However, in case of participation

of more than 10 MSMEs, the Screening Committee may consider a proposal for deputing 1 additional NSIC official for such event depending upon the requirement.

The Screening Committee, with proper justification and recommendation, would submit

the proposal to CMD, NSIC for approval.

(ii) The maximum net budgetary support for participating in an international

exhibition/trade fair would normally be restricted to an overall ceiling of Rs. 20 lakh per

event (Rs. 25 lakh for Latin American countries). In cases where budgetary support for

an event exceeds Rs. 20 lakhs (Rs. 25 lakh for Latin American countries), the approvalof the Administrative Ministry would be required.

4.2 Organizing Domestic Exhibitions and Participation in Exhibitions/ Trade Fairs

in India:

In order to provide marketing opportunities to MSMEs within the country, certain theme

based exhibitions / technology fairs etc. may be organized by NSIC, focused on products

and services offered by MSMEs, including technologies suitable for employment

generation, products from specific regions or clusters (like North Eastern Region, Food

processing, Machine-tools, Electronics, Leather etc). Micro, Small & Medium

Enterprises would be provided space at concessional rates to exhibit their products and

services in such exhibitions/fairs. Apart from above NSIC may also facilitate

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participation of MSMEs in the exhibitions / trade fairs / events being organized by

various State Government departments, industry associations and other institutions, all

over the country to exhibit their products and services. These exhibitions may be

organised in consultation with the concerned stakeholders and industry associations etc.

The calendar for these events may be finalised well in advance and publicised widely

amongst all participants/stakeholders. The calendar of events would also be displayed on

the Web-site of NSIC. Participation in such events is expected to help the MSMEs in

enhancing their marketing avenues by way of capturing new markets and expanding

existing markets. This would also help them in becoming ancillaries, partners in joint

ventures and sub-contracting for large companies.


Built up space would be provided by the implementing agency i.e. NSIC, to MSMEs in

various domestic exhibitions at subsidised rates to enable them to exhibit their products

and services. The rates of subsidy available on space charges would be as under:

General Category

Micro Enterprises : 75%

Small Enterprises : 60%

Medium Enterprises: 25%

Enterprises belonging to NE Region/ Women / SC/ST category




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The budget for organising the Domestic exhibition/trade fair would depend upon thevarious components of the expenditure, i.e. space rental including construction and

fabricating charges, theme pavilion, advertisement, printing material, transportation etc.

However, the budgetary support towards net expenditure for organising such

exhibition/trade fair would normally be restricted to a maximum amount of Rs. 30 lakhs.

The corresponding budgetary limit for participation in an exhibition/trade fair shall be Rs.

10 lakhs. In cases exceeding the above budgetary limits, the approval of Administrative

Ministry would be required.

4.2.2 "Techmart" exhibition by NSIC

NSIC has been organising "Techmart" exhibition every year during India International

Trade Fair (IITF) in the month of November. This is an international exhibition

showcasing the best MSME products, technologies and services of India. No subsidy

would be available to General Category entrepreneurs participating in this exhibition.

Upto 30% of the total area may be allocated for the entrepreneurs belonging to the

Special Category i.e. Entrepreneurs belonging to NE Region/ Women / SC/ST category,keeping in mind the instructions and guidelines issued in this regard from time to time.

The rates of subsidy available on space charges for the Special category would be as

under:-




The total budgetary support for organizing "Techmart" would normally be restricted to

Rs. 75 lakhs only. The proposal exceeding this limit would require approval of the

Administrative Ministry.

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4.3 Support for Co-sponsoring of Exhibitions organized by other organisations/

industry associations/agencies:

Support may be provided to various institutions, industry associations and organisations

engaged in promotion & development of MSMEs, for organizing exhibitions/ fairs within

the country for the benefit of MSME sector. This support would be in the form of co-

sponsoring of the event by NSIC. In order to apply for co-sponsoring of an event by

NSIC, the applicant organisation/agency must fulfil the following criteria/conditions:

(a) The applicant organization / industry association / institution should be

engaged in the development of MSMEs for at least three years and should be able

to demonstrate sufficient experience and capability for holding such events.

(b) The event to be organized should have at least 5000 sq ft covered area

exclusively for stalls/shops and must have participation from at least 50 MSME

units. The organizer shall be required to submit a blueprint / layout of the

proposed exhibition along with his application.

(c) The organizer would provide a stall of at least 100 sq. ft. to NSIC, to

disseminate information about the promotional and other schemes of the Ministry

and its organisations.

(d) The name of event would be prefixed with NSIC and also display

prominently that the event is for the MSMEs and supported by Ministry of

MSME.

(e) The names of NSIC and Ministry of MSME would be prominently displayed

in all publications, literature, banners, hoardings etc. of the event.


The scale of assistance to the applicant organisation/agency for co-sponsoring of an

exhibition/trade fair would depend on the place of the event. The budgetary support

towards partially meeting the expenditure on hiring of exhibition ground/hall, erection of

stalls, publicity etc. for co-sponsoring the event and would be limited to 40 % of the net

expenditure (gross expenditure - total income), subject to maximum amount of -

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Rs. 5 lakh in case of A class cities.

Rs. 3 lakh in case of B class cities.

Rs. 2 lakh in case of C class cities.

Rs. 1 lakh in case of rural areas.

The assistance towards co-sponsoring the event shall be provided to the applicant

organisation on reimbursement basis after the event, on submission of event report and

other relevant documents.

4.4 Buyer-Seller Meets :

Buyers-Sellers Meets are organized to bring bulk buyers / Government departments and

micro, small & medium enterprises together at one platform. Bulk and departmental

buyers such as the Railways, Defence, Communication departments and large companies

are invited to participate in buyer-seller meets to bring them closer to the MSMEs for

enhancing their marketing competitiveness. These programmes are aimed at vendor

developments from micro, small & medium enterprises for the bulk manufactures.

Participation in these programmes enables MSMEs to know the requirements of bulk

buyers on the one hand and help the bulk buyers to know the capabilities of MSMEs for

their purchases. These Buyers-Seller Meets may be organised in consultation with the

concerned stakeholders, including industry associations and other agencies involved in

industrial development, and the calendar for these events may be finalised well in

advance and publicised widely.


No subsidy would be available to General Category entrepreneurs participating in such

meets. However, the entrepreneurs belonging to North-East/women/SC/ST category,would be provided space at subsidized rates for participation in Buyer-Seller Meets as per

the rates mentioned hereunder:-

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Upto 30% of the total area in such Buyer-Seller Meets may be allocated for the

entrepreneurs belonging to the Special Category i.e. Entrepreneurs belonging to NE

Region/ Women / SC/ST category, keeping in mind the instructions and guidelines issued

in this regard from time to time.

The budget for organising the Buyer-Seller Meet would depend upon the various

components of the expenditure, i.e. space rental, interior decoration, advertisement, printing material, transportation etc. However, the net budgetary support for the Buyer-

Seller Meet would be subject to the following limits:-

Rs. 5 lakh in case of the meet is held in A class cities.

Rs. 3 lakh in case of the meet is held in B class cities.

Rs. 2 lakh in case of the meet is held in C class cities.

Rs. 1 lakh in case of the meet is held in rural areas.

4.5 Intensive Campaigns and Marketing Promotion Events:

Intensive Campaigns and Marketing Promotion Events are conducted all over the country

to disseminate information about the various schemes for the benefit of the micro, small

& medium enterprises. They are also facilitated to enrich their knowledge regarding latest

developments, quality standards etc. and improve the marketing potential of their products and services.

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Expenditure incurred for organizing Intensive Campaigns and Marketing Promotion

Events would be met out of the budgetary support provided by the Government under the

Scheme, subject to a maximum limit of : -

Rs. 80,000 in case of A class cities.

Rs. 48,000 in case of B class cities.

Rs. 32,000 in case of C class cities.

Rs. 16,000 in case of rural areas.

No financial assistance would be given to the participating units for attending the event.The participating MSMEs have to attend these programmes at their own cost.

4.6 Other Support Activities:

Under the Scheme, the following activities for supporting the marketing efforts of

MSMEs may be undertaken by NSIC:

Development of Display Centres, Show windows and hoarding etc. for

promoting products and services of MSMEs.

Printing of Literature, Brochures and Product-specific Catalogues and

CDs etc. and preparation of short films for disseminating information

Development of website/portal for facilitating the marketing of MSME

products and services.

Development and dissemination of Advertising and Publicity material

about various programmes / schemes for MSME sectors and events.

Preparation and Upgradation of MSME Manufacturers/Suppliers

/Exporters Directory .

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Documentation of the success stories of MSMEs.

Conducting studies to explore and assess new markets/businesses and

product ranges for both domestic & International markets.

Hosting international delegations and networking events.

The maximum amount of budgetary support for such activities would be limited to 5% of

the total annual budget for the scheme and for an individual proposal, the maximum

permissible limit for any of the above event/activity would be Rs. 5.00 lakh only

5. PROCEDURE FOR IMPLEMENTAION OF THE SCHEME:

Ministry of MSME shall implement the scheme through National Small Industries

Corporation (NSIC), which shall carry out the various activities under the Scheme

through its offices located all over the country. Funds for implementing the scheme shall

be placed at the disposal of NSIC, which shall be wholly responsible for proper

utilisation of the same and submission of Utilisation Certificates and other reports as

required.

The applications/proposals for seeking assistance under the scheme shall be submitted

directly to NSIC, with full details and justification. The consolidated proposal shall be

put up before the Screening Comm

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