The Small and Medium Enterprises (SME) segment plays a very vital role in the economic development of our nation. On the other hand, credit risk assessment in this segment requires a specific approach, as the factors affecting the creditworthiness are somewhat dissimilar compared to a large corporate. Hence, to further support the growth for this sector and help the investors to determine the relative creditworthiness of entities belonging to this segment a need for separate rating product was felt. Accordingly, CARE introduced SME ratings in 2006, which is intended entirely for Small and Medium Scale Enterprises.

CARE ADVISORY SME Ratings

SME Rating indicates the relative level of creditworthiness of an SME entity, adjudged in relation to other SMEs. It is an issuer-specific rating reflecting the overall general creditworthiness. It is a one-time assessment of credit risk of the rated entity in comparison with the other SMEs.

Benefits of CARE ADVISORY SME Ratings

  • ➡ An independent third-party opinion on creditworthiness:

    CARE ADVISORY is a leading rating agency in India recognized by the major regulators of the financial market viz SEBI and RBI. CARE ADVISORY’s unbiased opinion is trusted by various investor communities.

  • ➡ Enables establishment of credibility with stake holders:

    A good rating may help an entity to establish comfort & confidence with customers, suppliers, collaborators, lenders, etc. This in turn facilitates the better SMEs to differentiate themselves from others.

  • ➡ Self-improvement tool:

    The SME rating also helps an important self-improvement tool as it provides insight for benchmarking. CARE ADVISORY’s rating report subsequent to the rating assignment enlists the strengths and weaknesses of the rated entity thus providing the management to improve upon its weaknesses.

  • ➡ Comparatively easy access to funding:

    A better-rated entity can explore vide untraditional sources of funding, which not only reduces the access time but also opens up the possibility for borrowing at a lesser cost.

  • ➡ Increased visibility:

    All the accepted ratings are posted on the website of CARE ADVISORY. Our various publications also mentioned the list of outstanding ratings.

CARE ADVISORY SME Rating Symbols & Definitions

CARE SME Rating Definition
CARE SME 1 The level of creditworthiness of an SME, adjudged in relation to other SMEs is the Highest
CARE SME 2 The level of creditworthiness of an SME, adjudged in relation to other SMEs is High
CARE SME 3 The level of creditworthiness of an SME, adjudged in relation to other SMEs is Above Average
CARE SME 4 The level of creditworthiness of an SME, adjudged in relation to other SMEs is Average
CARE SME 5 The level of creditworthiness of an SME, adjudged in relation to other SMEs is Below Average
CARE SME 6 The level of creditworthiness of an SME, adjudged in relation to other SMEs is Inadequate
CARE SME 7 The level of creditworthiness of an SME, adjudged in relation to other SMEs is Poor
CARE SME 8 The level of creditworthiness of an SME, adjudged in relation to other SMEs is the Lowest. Such entities may also be in default

SME rating is valid for one year from the date of the rating, provided no significant changes/events occur during this period that could materially affect the business or financial parameters of the organization. The entity may approach CARE for review on happening of such event and CARE may review the rating for a predetermined fee.

CARE would provide a rating report followed by a rating letter on completion of the assignment. On acceptance of the rating, the name along with the rating would be put on the website of CARE.

Rating Letter

On completion of the assignment CARE would issue the rating letter which would contain the details pertaining to the rating assigned to the client, its definition and validity of the rating.

Rating Report

CARE would also provide the soft copy of rating report which would contain the key rating considerations, brief snapshot of the rated entity, its business profile and the financial performance analysis.
On receipt of the mandate (in a specified format) and submission of the requisite information (again in a specified format) by the SME entity, CARE’s analyst team would process the case. A site visit and discussion with the top management would also be undertaken. The rating committee will assign the rating. The rating is a one-time assessment and is based on the information and documents submitted by the entity. The entire process will take about 2-3 weeks after the receipt of full information.

The rating is the outcome of overall credit risk assessment which can potentially affect the general creditworthiness of the entity. It takes into account various parameters including industry dynamics, competitive position of the entity, operating efficiency, management capability, organization systems, customer profile, track record with lenders and other stake holders. The list is inclusive and not exhaustive.

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