ONICRA has been present in the Indian Credit Rating space since mid – 2000. SME WORLD presents a brief interaction with Rajiv Soni of Onicra who shares his views on the need for credit rating and the size of the market amongst other issues.

While Small and Medium Enterprises (SMEs) are always irked by the fact that banks and financial institutions are not forthcoming in giving loans to them, I feel SMEs too should make some effort so that they are able to get loans easily without sweat. Even then around 9000 SMEs made sure to get themselves rated on the fact that the benefits of getting a credit rating are manifold because it makes banks comfortable while dealing with them and thus helps in reducing the interest rates.

It is an accepted fact that a good rating helps SMEs in obtaining faster and concessional credit from banks. As such credit rating helps for the capital provisioning requirement for SMEs. So undertaking credit and performance rating from Onicra Credit Rating Agency of India, I believe, is energy rightly spent.

Those SME unit owners strongly believed that providing banks with objective financial and performance information about the unit can speed up the process and allow them access to much-needed capital. A credit rating conducted by Onicra removes the uncertainty of loan to a small enterprise. It increases transparency among other small enterprises seeking capital from some of the same sources. Also, many businesses rely heavily on Onicra's ratings to decide whether and on what scale to do business with other companies.

The Credit Rating of SMEs has met with success, and the ratings now hold significant clout in the operations of banks. To date, more than 25 public and private sector banks endorse Onicra SME ratings and use them when conducting their internal credit evaluations of SMEs.

To encourage enterprises to obtain the ratings, the first rating is subsidized by up to 75% by the Indian government through the National Small Industries Corporation. The rating lasts for one year.

At ONICRA, we have quite strict guidelines. We want to identify the reasons and communicate them and we are transparent. We partner with the entity in collecting the information for doing a meaningful exercise. And, once that is done, we are encouraging the entity to interact with us.

When we rate an entity, we usually never assure an entity that they would certainly get a good rating, but what we assure the SME is, we will be giving them the rating and give satisfactory reason as to why we have rated them so.

How big is the credit rating market space? What prompted ONICRA to venture into this arena? Who are your main competitors? What stage of growth are you today vis-a-vis your competitors?

The credit rating market is increasing at a higher speed with the banks insisting that their SME borrowers, with a good credit exposure, get rated.  Looking at the growing market space of SME sector in India, Onicra ventured into the space to help the SSIs get themselves rated and hence obtain an easy loan from the banks. Onicra acts as the fountainhead of information exchange and solutions to enable its customers to manage financial risk and build successful lasting individual relationship.

Ratings help units to get credit from lenders and other business partners. Besides, it is a tool for improvement. Credit ratings are credibility enhancing tools for a unit and provide it with an opportunity to get favorable borrowing terms from lenders—lower collateral requirements, reduced interest rates and simplified lending norms. Some MSMEs have seen a decline in turnaround time in processing credit applications due to Onicra credit ratings.

Our economy is growing at a rapid pace. It is crucial for small and medium businesses to keep pace with the growth. It is an exercise based on the audited balance sheets. However, Onicra voluntarily surveys sectors and rated units to remain proactive in downgrading or upgrading their status.

What is ONICRA's internal definition of SMEs? Do you consider Micro-businesses too or your focus is on SME segment only? What are the individual percentage of your rated clientele Micro, Small and Medium respectively?

We at Onicra, strongly define that SMEs play a crucial role in evolving an alternative pathway that is more market-oriented and spirited for poverty alleviation and income generation among the marginalized groups. SMEs are the creative leaders who have an enormous potential to “eradicate poverty through profits” and “enabling dignity and choice through markets.”

I believe that it is industrialization that brings about a plethora of opportunities for generating employment and income. The benefits of industrialization are characterized by both “spillover” and “cascading” effects. In India, rapid industrialization has proved to be a key constituent in economic growth and development.

Onicra is into rating Micro businesses as well. We focus on providing the rating services to such units ensuring that getting loans from the banks to expand their business moves on as an easy process. Micro and Small units realize that credit rating streamlines their dealings with banks & improves credibility.

A number of Micro & Small businesses have seen benefits ranging from finances, interest-rate reduction, foreign market exposure, easy and convenient lending, and supplier's confidence and so on, due to credit rating. This provides a comprehensive, transparent and reliable third-party assessment of a company.

What kind of tie-ups do you have with Banks and NBFCs who consider your rating while evaluating financing applications from MSMEs?

Onicra gets into a Memorandum of Understanding (MoM) with the Banks, a voluntary agreement between a bank and our agency to expresses a convergence of will between the parties, indicating an intended common line of action.

Please provide at least 3-5 companies who have undergone credit rating service of ONICRA in Gujarat, Delhi, Mumbai, and Bangalore.

Gujarat:

1.         Mahendra Alloys

2.         Goldstone Ceramic Pvt. Ltd.

3.         Naigra Industries

4.         Northern Alloys Bhavnagar Ltd.

5.         AEP Industries Pvt. Ltd.

Delhi:

1.         I.H. Engineers

2.         Fittite Fastners Private Limited

3.         Beta Tools Private Limited

4.         Babbar Wreckers Private Limited

5.         Economic Enterprises

Maharashtra:

1.         Gromotech Modified Starch Company

2.         Poornima Cotton Ginning & Pressing Factory

3.         Dimensions Engineering Technologies Private Limited

4.         Sunshine Fine Chemsol India Private Limited

5.         Balaji Agro Industries

Bangalore:

1.         VPL Chemicals Private Limited

2.         Triton Engineering Solutions

3.         Embee Agro Food Industries Private Limited

4.         Sri Banashankari Steel

G. Adhimurthy

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Rajiv Soni's thoughts on 'In today's globalized environment, on what parameters should

SMEs be categorized'

Small and medium-sized enterprises (SMEs) are important agents of development throughout the world. Promoting a country's SME sector plays a crucial role in maintaining high employment and income generation and is therefore critical for achieving sustainable growth.

It may be noted that today's SMEs are faced with a fast changing environment. Firstly, globalization is changing everything. Before, it was usual that SMEs used to be operated in local areas. Most of the input was secured from the local area; whereas, the market was also local and SMEs were competing in the local market. However, it is now obvious that SMEs are competing in the global market. So, it is necessary to monitor globalization trends and their effects on the subnational innovation system and SMEs.

SMEs would be categorized

 as under:

• All loans to segments namely Small and Medium Enterprises in the Manufacturing sector irrespective of sanctioned limits.
• Advances to Services Sectors such as Retail Traders, Professional & Self-Employed, Small Business Enterprises and other enterprise.
• Green field SME projects that are in the 1st / 2nd year of their operations.