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MSME Ratings

Introduction to MSME

Micro, Small and Medium Enterprises are playing very important role in the development of world economy. Especially, Indian MSMEs have gained rapid development in recent years. However, financing difficulty is a predominant and common problem for the MSMEs in India. One of the solutions is to establish a credit rating mechanism which can help MSMEs to access finance. Brickwork Ratings is committed to help the MSME sector by offering rating services to them.

The unique characteristics of MSMEs are broadly identified by low capitalization, limited recognizable assets, geographical diversity (cluster behavior), short business lifespan, poor access to capital markets, huge cash intensity in transactions, absence of dependable credit information / history and other internalized issues of promoters to enable reasonably good credit decisions, high credit risk perceptions coupled with high borrowing cost and slow acceptance of changes through technology-based solutions.

MSME Rating Rationale

The MSME Rating Rationale takes into account the following aspects:

  • BWR MSME Rating Criteria includes five main categories: Financial Conditions, Characteristic and Perspective of the product, Operation Risk and Competitive Strength, Management Measure and Conditions of Industry of evaluated MSMEs
  • The industry in which a company operates, together with the company's competitive position within that industry, are key factors in assessing business risk.
  • High dependence on only one major production facility or market, or a limited number of customers - characteristics common to micro, small and midsize enterprises (MSMEs) - could also affect credit quality, even when this dependence underpins the company's high degree of success. BWR considers this too in their rating analysis.
  • Poor financial flexibility is usually a negative rating factor for MSMEs because of their limited capacity to withstand unexpected setbacks, and their limited access to external cash debt or equity to cover near-term vulnerabilities or temporary cash shortfalls.
  • Larger firms generally have substantially more staying power and often benefit from the extended support of key stakeholders in times of stress who provide a platform for launch of new products and continue to thrive.
  • Fast growth often is pursued at the expense of profitability, and often is subject to poor execution, even if the idea is well conceived

For more details on the above Rating Rationale, click here

MSE Rating Scale

Brickwork Ratings has adopted a rating scale for MSEs as prescribed by NSIC and the same may be referred in the table here below for NSIC Mandates

NSIC – BWR Performance and Credit Rating Scale for Micro and Small Enterprises

Rating Symbol Defnition
BWR MSE 1 Highest credit worthiness in relation to other MSEs
BWR MSE 2 High credit worthiness in relation to other MSEs
BWR MSE 3 Good credit worthiness in relation to other MSEs
BWR MSE 4 Above Average credit worthiness in relation to other MSEs
BWR MSE 5 Average credit worthiness in relation to other MSEs
BWR MSE 6 Below Average credit worthiness in relation to other MSEs
BWR MSE 7 Weak credit worthiness in relation to other MSEs
BWR MSE 8 Poor credit worthiness in relation to other MSEs
Financial Strength
Highest
High
Good
Above Average
Average
Below Average
Weak
Poor
Operating Performance
Highest
High
Average
Weak
Poor

Credit Rating Scale Illustration:

XYZ Limited BWR MSE 1
Financial Strength Highest
Operating Performance High

The above ratings signify its creditworthiness in relation to other MSEs. In all there are 8 rating scales, MSE1 is the highest and MSE 8 being the lowest. The rating also indicates the performance capability in 5 point scale and financial strength in 8 point scale.

For the other MSMEs, those not registered with NSIC, BWR adopts the following Rating Scale:

Non-NSIC – BWR Performance and Credit Rating Scale for MSMEs

Rating Symbol Defnition
BWR SME 1 Highest credit worthiness in relation to other SMEs.
BWR SME 2 High credit worthiness in relation to other SMEs.
BWR SME 3 Good credit worthiness in relation to other SMEs.
BWR SME 4 Above Average credit worthiness in relation to other SMEs.
BWR SME 5 Average credit worthiness in relation to other SMEs.
BWR SME 6 Below Average credit worthiness in relation to other SMEs.
BWR SME 7 Weak credit worthiness in relation to other SMEs.
BWR SME 8 Poor credit worthiness in relation to other SMEs.

MSME Rating Fee

NSIC-BWR Rating Fee - General
Turnover (Rs. Lakhs)
<50 50 to 200 >200
Rating Fee (Rs.) 28,696 43,478 56,522
Service Tax @ 15 percent 4,304 6,522 8,478
Total Fee (Rs.) 33,000 50,000 65,000
Subsidy from NSIC (Rs.) 15,000 30,000 40,000
Amount Payable by MSE (Rs.) 18,000 20,000 25,000
Concessional pricing * (Rs.) 9,500 15,000 16,000

* applicable for bulk discounts, bank MOUs, industry associations, etc

NSIC-BWR Rating Fee - SC & ST category
Turnover (Rs. Lakhs)
<50 50 to 200 >200
Rating Fee (Rs.) 19,565 39,565 48,348
Service Tax @ 15 percent 2,935 5,935 7,252
Total Fee (Rs.) 22,500 45,500 55,600
Subsidy from NSIC (Rs.) 20,000 40,000 50,000
Amount Payable by MSE (Rs.) 2,500 4,500 5,600

Note: Rating Fee is subject to change from time to time

How to Apply

The application form can be obtained in either of the following ways:

You can send the filled-in rating application form in duplicate along with requisite documents and a cheque / DD in favour of Brickwork Ratings India Pvt. Ltd. towards the rating fee, to any of the BWR offices. You can also contact our Business Development Executives who will guide you with the process.

Why Brickwork?

Brickwork Ratings’ proprietary models in Credit Risk Rating customized for large corporates, MSMEs, Banks, Financial Institutions, State and Local Governments, help investors understand the complexity of the investment world. BWR has developed MSME rating methodology with two approaches. First is the SME rating model similar to the issuer rating model and second is the MSE rating model, adhering to NSIC guidelines for rating performance capability and financial strength of micro and small enterprises.