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
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.