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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.
SME Ratings
Rating 1
Security Receipts (SRs) are receipts or securities issued under 'The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act' by Securitisation Companies (SCs)/Asset Reconstruction Companies (ARCs) (against the acquired financial assets) to qualified buyers, after acquisition of distressed assets from the lenders. RBI has issued guidelines for declaration of Net Asset Value (NAV) on these SRs issued by SCs/ARCs with the objective of enabling the qualified buyers to value their investment in SRs in accordance with the applicable guidelines. According to the guidelines issued by RBI, the SRs are required to be rated on a defined recovery rating scale (CARE’s Recovery rating scale: RR 1+ to RR 5) and this recovery rating is to be used for arriving at the NAV.
Recovery rating (RR) is based on the ‘recovery risk (probability of recovery)’ and not the ‘default risk (probability of default)’. Value of underlying security and its recoverability is of prime importance in recovery rating, whereas cash flow adequacy vis-à-vis debt obligations holds significance in credit rating, amongst various other risk parameters. The recovery rating assigned to SRs is based on the net present value ( NPV ) of the cash flows expected from the recovery strategy, stated as a percentage of the outstanding face value of the SRs. The recovery rating assigned to SRs is essentially based on the probability of recovery from the assigned loans within the applicable resolution period.
Recovery ratings are reviewed biannually as per RBI guidelines.
CARE Ratings' credit ratings are its opinion on the relative ability and willingness of the issuer to meet the debt service obligations as and when they arise. Rating determination is a matter of experienced and holistic judgement, based on the relevant quantitative and qualitative factors affecting the credit quality of the issuer. CARE Ratings has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. Within the corporate sector, CARE Ratings rates debt instruments and bank facilities of manufacturing entities, service entities, trading entities, PSUs etc.
CARE Ratings' credit ratings are its opinion on the relative ability and willingness of the issuer to meet the debt service obligations as and when they arise. Rating determination is a matter of experienced and holistic judgement, based on the relevant quantitative and qualitative factors affecting the credit quality of the issuer. CARE Ratings has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. Within the corporate sector, CARE Ratings rates debt instruments and bank facilities of manufacturing entities, service entities, trading entities, PSUs etc.
CARE Ratings' credit ratings are its opinion on the relative ability and willingness of the issuer to meet the debt service obligations as and when they arise. Rating determination is a matter of experienced and holistic judgement, based on the relevant quantitative and qualitative factors affecting the credit quality of the issuer. CARE Ratings has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. Within the corporate sector, CARE Ratings rates debt instruments and bank facilities of manufacturing entities, service entities, trading entities, PSUs etc.
CARE Ratings' credit ratings are its opinion on the relative ability and willingness of the issuer to meet the debt service obligations as and when they arise. Rating determination is a matter of experienced and holistic judgement, based on the relevant quantitative and qualitative factors affecting the credit quality of the issuer. CARE Ratings has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. Within the corporate sector, CARE Ratings rates debt instruments and bank facilities of manufacturing entities, service entities, trading entities, PSUs etc.
CARE Ratings' credit ratings are its opinion on the relative ability and willingness of the issuer to meet the debt service obligations as and when they arise. Rating determination is a matter of experienced and holistic judgement, based on the relevant quantitative and qualitative factors affecting the credit quality of the issuer. CARE Ratings has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. Within the corporate sector, CARE Ratings rates debt instruments and bank facilities of manufacturing entities, service entities, trading entities, PSUs etc.
CARE Ratings' credit ratings are its opinion on the relative ability and willingness of the issuer to meet the debt service obligations as and when they arise. Rating determination is a matter of experienced and holistic judgement, based on the relevant quantitative and qualitative factors affecting the credit quality of the issuer. CARE Ratings has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. Within the corporate sector, CARE Ratings rates debt instruments and bank facilities of manufacturing entities, service entities, trading entities, PSUs etc.
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