Crisil looks at 10-fold increase in SME rated portfolios

Credit ratings agency Crisil on Tuesday said it expects to increase its rated portfolio in the small and medium enterprises (SME) segment by 10 folds in the next 3-4 years.

The firm, which currently has 20,000 SME firms under its ratings portofolio, also said it expects more and more small scale industries to go for renewal of ratings.

"We see no reason why not two lakh. We don't know by what time...maybe 3-4 years. That's our medium-term goal," Crisil CEO and MD Roopa Kudva said, when asked about her company's plan to expand business.

She was speaking during an event on Crisil' SME Ratings. Kuvda said that in a span of 12 months, since April, 2010 till now, the firm has doubled its clientele base in the SME segment from 10,000 to 20,000.

"Henceforth, we also plan to launch specialised research on SMEs on a regular basis," she said. Besides, 20,000 SMEs, Crisil also has rated potrfolios of over 6,200 large companies.

Kudva said around 40 per cent of the SMEs come back for rating renewal. The Ministry of Small and Medium Enterprises subsides rating projects to the tune of 75 per cent for the first year.

However, for renewals, SMEs have to bear the full cost which may go up to around Rs 30,000.

"Over time, our expectation is that it will go up to 50 per cent. Then we will be satisfied," Kudva said.

When pointed out that the current renewal numbers seem too moderate, she said: "The 40 per cent figure of renewal may look small, but one has to understand that many firms have undergone ratings only during the past year and so are not eligible for renewal. Besides, others may not get the expected financial benefits and so do not go for renewal."

Commenting on the benefit of a ratings structure, Kudva said it is very important for transparency and independent analysis in the Indian market. SMEs employ 66 million workers and almost 1 million new jobs are created in the segment every year.

They account for 45 per cent of the country's manufacturing output and 40 per cent of Indian exports.

"Ratings are integral to development of a credit culture in India and development of a bond market. And a major part is that ratings help SMEs get better access to credit and banking facilities. Over 10 per cent of the banking sector advances are to SMEs and scope is there to increase it," Kudva said.

Crisil's client base covers SMEs with turnover between Rs 10 lakh to Rs 300 crore.