amit ola reg. no. 11005480
TRANSCRIPT
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A study on awareness level among MSMEs about Credit Rating
Submitted to Lovely Professional University
In partial fulfillment of the requirement for the degree of
Master of Business Administration (Hons)
Submitted By
Amit Ola
MBA (Hons)
Reg No. 11005480
Department of Management
Lovely Professional University
Phagwara
Punjab
August 2011
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Acknowledgement
I owe a great thanks to all people who helped and supported me to successful completion of this
project. My deepest thanks to Mr. Rahul Sharma (Asst. professor) the guide of project for
guiding and correcting various documents of mine with attention and care, he taken the pain to
go through the project and make necessary correction as and when needed. Thanks and
appreciation to all the respondents who gives their valuable information about the project. In
starting there were many problems included in the RIICO area visit but due to good behavior of
RIICO authority people it was possible to get the address information of the industries which are
in manufacturing business. I would also thank my institution and my faculty members without
whom this project would have been a distant reality.
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Declaration
I hereby declare that the study titled A study on awareness level among MSMEs about Credit
Rating submitted in partial fulfillment of the requirement for the degree of Master of Business
Administration (Hons) is entirely original work of research by me and has not been published or
submitted elsewhere for the requirement of a degree program. Any literature, data or work done
by others and cited within this study has been given due acknowledgement and listed in the
reference section.
Amit OlaReg.No. 11005480
MBA (Hons)
Lovely Honors School of Business
Lovely Professional University
Phagwara
Punjab
August 2011
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Executive Summery
Credit rating is basically to rate a particular company on the basis of its financial and other
performance basis. Rating of MSMEs is the new concept through which the companies can get
the benefits of subsidies given by the banks and the government, on the basis of the grade.
CRISIL is a global analytical company providing ratings, research, and risk and policy advisoryservices. This is India's leading ratings agency. CRISIL is also the foremost provider of high-end
research to the world's largest banks and leading corporations. With sustainable competitive
advantage arising from our strong brand, unmatched credibility, market leadership across
businesses, and large customer base, we deliver analysis, opinions, and solutions that make
markets function better. Major shareholder of CRISIL is Standard and Poor's. Standard & Poor's,
a part of The McGraw-Hill Companies, is the world's foremost provider of credit ratings.
Main objective of the research is to check the awareness level among MSMEs about credit
rating. Along with make them aware about credit rating and benefits of credit rating. For this the
exploratory research was conducted in RIICO areas of Sikar, Palsana, Reengus, Chirawa and
Pilani (Rajasthan). Main manufacturing business were granite tiles and slabs, plastic granules
manufacturing, furniture manufacturing, bag manufacturing, cattle feed manufacturing,
transformers manufacturing. Except this there are many other industries which are manufacturing
other goods and grocery products.
The sample was taken in the research was 220 manufacturing industries. After the research is
was found that approx 85% industry people are not aware about the credit rating schemes. Only
15% industry people were aware about rating. Industries that have done credit rating were using
the subsidies given by the banks but most of them were not satisfied for services provided by
CRISIL.
Response about rating was approx 35%, as they were interested in rating only for getting loan
and to get the benefit of subsidies on loan and interest.
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CONTENTS
Topic Pg. No.
1 Introduction 2-7
2 Literature review 9-10
3 Objective of the study
Research Methodology
11
4 12
4.1 Research Design
4.2 Research Method
4.3 Source of Data
4.4 Tools of data collection
5 Analysis of Research 13-21
5.1 Granite manufacturing Industry
5.2 Plastic product manufacturing industry
5.3 Furniture manufacturing industry
5.4 Steel manufacturing industry
5.5 Agriculture instruments manufacturing industry
5.6 Grocery product manufacturing industry
5.7 Other manufacturing industry
6 Findings 23-34
6.1 Findings in RIICO area of Sikar
6.2 Findings in RIICO area of Palsana
6.3 Findings in RIICO area of Reengus
6.4 Findings in RIICO area of Chirawa & Pilani
7 Recommendations 35
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Conclusion
Annexure
A Questionnaire
Refrences
36
37-40
41-42
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INTRODUCTION
The credit rating represents the credit rating agency's evaluation of qualitative and quantitative
information for a company or government; including non-public information obtained by the
credit rating agencies analysts. Credit ratings are not based on mathematical formulas. Instead,
credit rating agencies use their judgment and experience in determining what public and private
information should be considered in giving a rating to a particular company or government.
The credit report contains information regarding the financial history and current assets and
liabilities of an individual. A bank or credit card company will use the credit score to estimate
the probability that the individual will pay back loan or will pay back charges on a credit card.
A poor credit rating indicates a credit rating agency's opinion that the company or government
has a high risk of defaulting, based on the agency's analysis of the entity's history and analysis of
long term economic prospects. A poor credit score indicates that in the past, other individuals
with similar credit reports defaulted on loans at a high rate. The credit score does not take intoaccount future prospects or changed circumstances.
CRISIL is the pioneer of credit ratings in India, now offers credible and affordable special rating
services to help Micro, Small and Medium Enterprises (MSMEs) make the most of these
opportunities. CRISIL has set up a dedicated team of specialists in SME ratings, and has
designed separate rating scales for rating SMEs and Small Enterprises (earlier known as Small
Scale Industries or SSIs). CRISIL has already rated more than 12000 MSMEs up to May 2010.
CRISIL is assigning 600 new ratings to MSMEs every month.
According to the ministry of micro, small and medium enterprises recent ceilings on investmentfor enterprises to be classified as micro, small and medium enterprise are as follows
Classification Manufacturing Enterprises Service Enterprises
Micro Rs 25 lakh Rs 10 lakh
Small Rs 5 Crore Rs 2 Crore
Medium Rs 10 Crore Rs 5 Crore
The credit rating is used by individuals and entities that purchase the bonds issued by companiesand governments to determine the likelihood that the government will pay its bond obligations.
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Benefits of credit Ratings-
Cheaper and faster bank loansCRISIL enjoys a high level of credibility with banks. Therefore, banks use CRISIL ratings to
make lending decisions and determine interest rates and terms. CRISIL has already signed MoUs
with 32 banks and financial institutions to rate their borrowers. As per these MOUs, CRISIL
charges fees at concessional rates to the banks customers, and the banks in turn offer favorable
terms to entities with high CRISIL ratings.
Confidence building with business partners:
CRISIL is the best-known rating agency in India. Hence, a CRISIL rating will help increase the
confidence and comfort levels of your customers, suppliers, and business partners.
Support for export initiatives
For exporters, CRISILs international linkage offers an additional advantage: Standard & Poors,
a globally respected rating agency, is the majority shareholder in CRISIL. Therefore, a CRISIL
rating will help establish your credentials with international customers.
A tool for self-improvementAlong with its ratings, CRISIL provides detailed analytical reports on the strengths and
weaknesses of rated entities. Based on the CRISIL report, you can take steps to strengthen your
operations and become more efficient. Each report provides reliable and independent feedback
from customers, suppliers and banks.
Improved visibility
Along with the CRISIL rating, you get a free listing in CRISILs SME Connect and website,
both of which are used as reference points by stakeholders in the SME sector. The listing will
thus improve your visibility in your target market.
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Affordable
CRISILs SME Rating Services, while being highly credible, are also very much affordable.
CRISIL offers an attractive concession in the rating fee for Small Enterprises. Also, NSIC Ltd,
which is a corporation under the Ministry of MSME, Govt. of India provides 75% subsidy in the
rating fee for Small Enterprises. Thus, the rating fee payable by the Small Enterprises ranges
from Rs.7,456 to Rs.13,236 depending upon the turnover of the enterprise. For enterprises not
registered as Small Enterprises, the fee is higher as the subsidy is not available from NSIC.
Company profile
History
Since its inception CRISIL has constantly redefined industry standards through best
practices and innovations. CRISIL was incorporated and promoted in 1987 by ICICI ltd
along with UTI and other financial Institutions. Mr. N Vaghul and Mr. Pradip Shah are
CRISIL's first Chairman and Managing Director, respectively.
In 1996 CRISIL forges a strategic business alliance with Standard & Poor's (S&P)
Ratings Group. This was a part of CRISIL,s strategy to develop skills and processes. In
1998 CRISIL sets up India Index Services Ltd (IISL), a joint venture with NSEIL, to
provide a variety of indices and index-related services and products to India's capital
markets.
The year 2000 CRISIL acquires the business, and brand, INFAC, of Information Products
and Research Services (India) Pvt Ltd. INFAC is a leading provider of research to India's
financial sector. The acquisition strengthens CRISIL's research business, and makes it
India's leading provider of integrated research.
In 2005 CRISIL launches Small and Medium Enterprise (SME) Ratings to serve the
specialized needs of the SME sector. CRISIL partners CNBC-TV18 for Emerging India
Awards - the first platform to recognize and reward the achievements of India's Small &
Medium Enterprises. CRISIL's SME Ratings group assigns its 5000th SME rating.
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CRISIL captures about half of India's bank loan rating market
In 2006 CRISIL launched IPO grading services to provide investors with independent,
reliable, and consistent assessments of the fundamental strengths of new public issues.
Irevna is ranked globally as the top Investment Research Outsourcing Firm by The Black
Book of Outsourcing.
In 2010 CRISIL SME Ratings crosses its 15,000th SME rating. CRISIL launches Real
Estate Star Ratings.CRISIL acquires Pipal Research, further strengthening its leadership
in the KPO industry.
Ratings
CRISIL is the largest credit rating agency in India.
CRISIL pioneered ratings in India more than 20 years
ago, and is today the undisputed business leader, with
the largest number of rated entities and rating
products: CRISIL's rating experience covers more
than 38,663 entities, including 18,000 small and
medium enterprises (SMEs). As on March 31, 2011,we had more than 12,684 ratings (including over
6,500 SMEs) outstanding.
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Board of Directors
Mr. Deven Sharma,
Chairman
Mr. Deven Sharma is President of Standard & Poor's, a division
of the McGraw-Hill Companies, and the world's foremost source
of financial market intelligence, providing independent credit
ratings, indices, risk evaluation, investment research and data. Mr.
Sharma joined S&P in 2007 as executive vice president,
Investment Service and Global Sales. Prior to joining S&P, Mr.
Sharma was executive vice president, Global Strategy at The McGraw-Hill Companies for five
years. Deven joined The McGraw-Hill Companies in January 2002 from Booz Allen &
Hamilton, a global management consulting company, where he was a partner.
During his 14 years with that firm, he provided guidance to client companies on business
strategy and globalization, as well as on branding and sales management. Much of his experience
includes work with global corporations in U.S., Latin America, Europe and parts of Asia. Prior to
BoozAllen, Deven worked with manufacturing companies, Dresser Industries and Anderson
Strathclyde. Deven holds a bachelor's degree from the Birla Institute of Technology in India, a
master's degree from the University of Wisconsin and a doctoral degree in Business Management
from Ohio State University. Deven has authored several publications on competitive strategy,
customer solutions, sales and marketing. He is a Board member of the Asia Society Business
Council.
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LITERATURE REVIEW
Gonzalez et.al.(2004) stated that rating agencies who strive to provide credit assessments that
remain broadly stable through the course of the business cycle have been themselves affected as
the growing reliance on rating mean that they are increasingly expected to satisfy a widening
range of constituencies with different and sometimes conflicting interests.Companies have
responded to this challenge largely by adding more products to their traditional product palette
but also through modifications in the rating process. So its not predicted that these changes
mean fundamental shift in the approach of the companies in risk measurement.
Huang. Zan et al. (2004 found that in Credit rating analysis Artificial Intelligence (AI) methods
achieved better performance than traditional statistical methods. This article introduces a
relatively new machine learning technique, support vector machines (SVM).Another direction of
the research was to improve the interpretability of the AI-based model and on that basis they
conducted a market comparative analysis on the difference of determining factors in the United
States.
Altman .Edward et al (2004) didresearch on collateral values and recovery rates on corporate
defaults can be volatile and, moreover, that they tend to go down just when the number of
defaults goes up in economic downturns. This traditional focus on default analysis has been
partly reversed by the recent significant increase in the number of studies dedicated to the subject
of recovery-rate estimation and the relationship between default and RRs. Empirical evidence
concerning this issue is also presented and discussed.
Kavvathas,D. ( 2000) Research was based on motivating and exhibiting the potential of
conditioning on economy wide state variables in improving the forecasting of the Credit Rating
Transition Probability (CRTP) Matrix, both statistically and economically in sample and out
sample experiments.findings of the study were that an increase in nominal short and long and
real rates, a lower equity return and a higher equity return volatility are associated with higher
relative downgrade intensities. They found that financial sector was more sensitive.
http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248890 -
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Cantor. Richard et al. (1996 ) did research on determinants and impact of sovereign credit
ratings assigned on two leading U.S agencies,Moody's Investor Services and Standard and
Poor's. Of the large number of criteria used by the two agencies, six factors appear to play animportant role in determining a country's credit rating: per capita income, GDP growth, inflation,
external debt, level of economic development, and default history. In addition, the authors find
that sovereign ratings influence market yields particularly those on non-investment-grade issues -
independently of any correlation with publicly available information.
Altman, E. et al.( 2007) Conducted a research to know the contribution of small and medium
sized enterprises (SMEs) the economy of many countries and the considerable attention placed
on SMEs in the new Basel Capital Accord. They took the sample over 2,000 U.S. firms (with
sales less than $65 million) on panel data of over the period 19942002, and develop a one-year
default prediction model. This model has an out-of-sample prediction power which is almost 30
per cent higher than a generic corporate model. An associated objective is to observe our model's
ability to lower bank capital requirements considering the new Basel Capital Accord's rules for
SMEs.
Altman,E. & Sabato,G. (2004) two researchers did their research competitive effects of
implementation of Basel II capital requirements on banks in the market for credit to SMEs in the
U.S. After the research they came to know that only relatively minor competitive effects on most
community banks because the large A-IRB adopters tend to make very different types of SME
loans to different types of borrowers than community banks.
Lehmann, I. (2001) found in a research that strong lending relationships between banks and
small and medium sized enterprises (SMEs) play a key role in the bank-based financial system of
Germany. So far, they have been mainly described by the notion of a house bank and
transactional features of long term bankcustomer relationships. Data taken from the banks about
the relationship and interaction variables prove to affect loan prices, collateral requirements and
credit availability.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1028774##http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1028774## -
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Czarnitzkr,D. ( 2006) The objective of the research was to know the research and development
activities in German small and medium-sized firms (SME). The empirical evidence suggests that
West German SMEsare financially constrained in their R&D activities by both internal and external
resources. Special attention is paid to the role of public research and development (R&D) subsidies.
The results show that R&D in East Germany is to a large extent driven by public subsidies and that
the usual financial market mechanisms are dysfunctional with respect to R&D in this region.
Chernih, A. et al ( 2006 ) did a research related to base II Accord outlines a general frame work
for determining regulatory capital requirements for credit risk portfolios. Different obligors
usually operate in dependent socio-economic environments and these structural correlations are
the main reason why regulatory capital is needed. There for it is not surprising that an important
component of the regulatory regime for capital is the asset correlation between obligors.
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3. OBJECTIVE OF THE STUDY
Check the awareness level among MSMEs about rating. CRISIL is a pioneer of credit ratings in
India. It offers credible and affordable special rating services to help Micro, Small and Medium
Enterprises. CRISIL has set up as dedicated team of specialist in SME ratings, and has designed
separate rating scales for rating SMEs and small enterprises.
Visit to the manufacturing units of RIICO area and collect the data which product is being
manufactured those industries. Make the industry people aware about the ratings and future
benefits of credit ratings. Make them aware about different Government schemes and the
benefits from these schemes.International Cooperation Scheme
Performance and Credit Rating Scheme
Technology Up gradation Fund Scheme (TUFS) for the textile sector
Marketing Assistance Scheme
Rajiv Gandhi Udyami Mitra Yojana (RGUMY)
Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme
for Women
Credit Linked Capital Subsidy Scheme for Technology Up gradation
Credit Guarantee Scheme
ISO 9000/ISO 14001 Certification Reimbursement Scheme
National Manufacturing Competitiveness Programme (NMCP) Schemes Under
XI Plan: there are 10 schemes under NMCP like Marketing Support, Lean
Manufacturing, Mini Tool rooms, etc
Micro & Small Enterprises Cluster Development Programme (MSE-CDP)
MSME MDA
Mini Tool Rooms
http://rgumy.nic.in/http://www.dcmsme.gov.in/schemes/Credit_link_Scheme.htmhttp://www.dcmsme.gov.in/schemes/sccrguarn.htmhttp://www.dcmsme.gov.in/schemes/sciso9000.htmhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/sciso9000.htmhttp://www.dcmsme.gov.in/schemes/sccrguarn.htmhttp://www.dcmsme.gov.in/schemes/Credit_link_Scheme.htmhttp://rgumy.nic.in/ -
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4. METHODOLOGY
The methodology applied for this project is to undergo exploratory research. Since, CRISIL is
itself undergoing through various activities, therefore the research format was to be kept
exploratory. It will not only help us to identify the various businesses which can be successful
and well organized in the small towns and all the RIICO areas, but also come out with some
other useful findings which would help CRISIL in one way or other (e.g. Rating and bank loan).
The research has been kept flexible and both the existing and potential industries were mapped
so as to avoid the narrow minded approach towards the project. Another profit for the research
that the industry in which CRISIL people will go for research for the crediting rating program of
MSMEs the will be a potential customer will go under rating upcoming future.
4.1 Research Design
The research study follows an exploratory research design in order to study the awareness level
about credit rating among MSMEs.
4.2Sources of Data
The primary data for the research study has been collected through a questionnaire containing 16
questions which were filled by the industries which are manufacturing units or manufacturing
cum trading units. The questionnaire included various parameters such as awareness, responseabout credit rating, banker and products. Various supplementary questions were also asked to
gain maximum information from the respondents.
4.3Sampling
It is basically stratified quota sampling. For this study, 220 manufacturing units have been taken
as the sample. The sample size research area was approx 250 km
4.4Tools of Data Collection
A questionnaire has been used for the purpose of collecting the primary data. Total 220questionnaires were filled up through one on one interaction with respondents.
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5 ANALYSIS OF THE RESEARCH
There are approx 230 samples of industries for the survey to check the awareness level of
crediting rating of MSMEs. The project work is to visit the industrial areas and to know that in
which kind of the business the industries are. All industries are manufacturing units; some of
them are manufacturer cum trading industries. As its clear in the objective that we are to check
the awareness level about crediting rating and make the industry people aware that they are
interested for ratings. Industry people are not aware about the rating companies and the scheme
of rating of MSMEs. Some industries have gone through the rating services but they are not able
to get profit after rating.
Main source of awareness among these areas according to the research is TV and news paper.
Some respondents are asking about SMS facilities on their mobile, but that should be only once.
If somebody will be interested in rating services he will contact you.
5.1 Granite Manufacturing Industry
Granit industry is a medium enterprise in RIICO
areas.
Awareness level is Approx 33% of the industry
which was included in the random sampling.
Reason behind this is mostly companies are at
small scale and the big industries have done
their ratings.
The Response about the Credit ratings was so not goodand the report did not include those companies which
have rated.
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There is one third part of the industry who wants to rate their industry.
Most of the granite industries are self finance since the companies which have rated they did not
get any kind of profit so another industry people do not want rating of the Industry.
Banker plays a vital role in the case of ratings. In RIICO are most of the Industries are self
financed and mostly their Banker are SBI,
SBBJ, PNB. In Granite Industry the SBI
user Bank are more as compare to PNB
SBBJ and other banks.
Main Reasons before this is many
Industries are using the subsidy schemes
given by these banks.
Another reason for this is the loyalty about
the banks. Banks like Coperative bank,
ICICI are new market player, since most of the granite Industries are more than 20 years old so
they people are less interested in shifting their banks.
5.2 Plastic manufacturing Industries
Plastic manufacturing industry is in the business
of plastic granules, plastic tanks and other plastic
materials.
The response about credit ratings is quite good,
since industry people less aware about the credit
rating scheme. After the visit and they come to
know about the rating schemes and 38 % of
industry people are interested for ratings. They
supply plastic tanks and granules all over India.
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The plastic industry people are not much aware
about credit rating of MSMEs.
Most of the industries are new internets and some
plastic industries which are in the business of
Polythene bags manufacturing are closed. Approx
13% of people who are in market are aware about
that and have done ratings.
Main Banker of the industry is SBBJ and PNB .the amount of PNB users is increasing because
many plastic industries in Palsana have taken
loan form PNB banks at a low interest rate as
compare to the other banks.
There are some industries which are using
services of Banks like ICICI,OBC and
Cooperative banks as they are new entrants and
providing fast services as compare to other
banks.
5.3Furniture Manufacturing Industries
Furniture manufacturing industries are the
small and medium enterprise. The main
banker that the enterprises use for transaction
and loan is SBBJ. This is the most reliable and
oldest bank of India.
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Many small scale furniture manufacturer have taken loan from SBI ( State bank of India) and
PNB as they are providing good services at low interest rate
Awareness level in Furniture industry is 35%, and as compare to this same is response of the
industry people about crediting ratings. The industries which are aware about Credit rating do
not want to do rating of their firms and vice versa.
Some small scale industries that are using subsidy scheme or have taken loan from banks are
interested since they want more subsidy and less interest on the loan taken.
5.4 Steel Manufacturing industries
Steel manufacturing in the RIICO are of Chirawa,
Pilani and Palsana is at small scale and micro
level as there is a lot of small enterprises which
are manufacturing steel gate and windows. They
did not respond positive for rating since they are
less aware about the rating schemes and benefits
of rating.
RIICO area of Reengus is developing in case of
steel angle manufacturing and steel melting. Some big marketers have done the rating. Steel
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industries which are new in the market earning a handsome profit are interested for rating since
they want to increase their business
Bankers of the steel Industries are SBBJ
PNB and OBC and SBI Banks. Though the
steel Industries are small and micro level
enterprises and most of them are self
financing firms with no loan amounts.
As the Steel enterprises are small and micro
level enterprise in RIICO are as well as in the
domestic market of Sikar, Palsana and Chirawa.
Firms are not aware about Credit rating Scheme
of MSMEs as this is new concept for them and
many of them do not want to indulge any kind
of activity of the companies because they think
that like insurance and other sales oriented
companies they will disturb them for the schemes. So they are did not take interest in the
schemes for them during the research.
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5.5 Agriculture Instruments Manufacturing
Main banker of the Agriculture industry is SBBJ,
SBI and PNB bank. Users of PNB and SBI are
same. This is order base manufacturing industry
and they do not need to manage inventory and
other materials.
SBBJ user is 33% and the customers of another
business are 17%.
For manufacturing they take advance from the
customers and then give the delivery to the
customers.
The agriculture instruments manufacturing people are
25% aware about the Credit ratings. These industries are
medium organizations and deal with heavy instruments.
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Response of the agriculture industry is not positive.
Since they persons are having order base
manufacturing and the domestic are is 60% depend on
agriculture and farmers who are having tractors willbuy agriculture instruments.
5.6 Grocery (Bread, Dal, Snakes, Flour) products manufacturing
In Grocery business the main bankers
are PNB, SBBJ, SBI, Dena bank,OBC.
Flour and Dal manufacturing are small
industries and the Snakes and Bread
manufacturing industries have taken
loan from PNB.
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As the small grocery companies are not aware about credit ratings and the rating schemes by
CRISIL. But after the industrial visit many of small and medium industries that are looking for
loan and subsidy on the interest rate gave their positive response. Some industries like snake
manufacturing want to expand their business
5.7 Industry in different manufacturing business (sodium, clothes, plywood)
The industries which are have small units
of sodium manufacturing , clothes and
banners are also have the same bank as
SBBJ and PNB are dominating in the
industries and the awareness level of these
industries is 15% as per sample size and
after the visit many of them want credit
rating of their company. It will benefit for
them, to take loan easily and to expand
business. Due to that macro and small
enterprises will able to establish themselves in the market.
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Response of small and macro enterprise was good and
many of them were really interested for rating so that
new entrants can come in the market and become the
part of growth in the economy.
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6 FINDINGS OF THE RESEARCH
In RIICO areas where the survey was conducted the existing business is adding a high value of
living standard of the industry people as well as the skilled labor who are working with those
industries. The common business in those areas ( Sikar, palsana, Reengus, Chirawa, Pilani) that
is manufacturing of furniture, Granite slabs and granite tiles, manufacturing of transformers as
well as the boxes of transformers. Except this other industries are in manufacturing of Cattle
feed, plywood and bread, snakes.
From the survey, existing business were identified which if organized have potential to provide
employment to hundreds of labor. The products involved in these businesses are in high demand
in their respective markets. These businesses have tremendous opportunity for the economic and
social security of women and youth.
Manufacturing business units in RIICO Areas:
Granite Tiles & Slabs Manufacturing
Furniture Manufacturing
Cattle feed
Transformers Manufacturing
Plastic granules and Tanks
Bag manufacturingMilk Products( cheese, ice-cream & sweets)
Agriculture Instruments
PVC pipes and Sprinklers Manufacturing
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6.1 Finding in RIICO Area Sikar
Granite Industries-
The main business in the industrial area is the
manufacturing of Granite slabs and tiles and stone
cutting. There are many industries which are in granite
business for example Raj garanites, Khetan granite
industries Granite India. These all industries are
manufacturing units. Some of them are having their
trading units in the market of Sikar.
Material and instruments-
Granite stone, stone cutter, finishing machine electricity, stone lifter and work force.
The raw material for these industries is granite stone which they purchase form Jodhpur,
Bikaner, Makarana, Kishangrah or Jhunjhunu.
Manufacturing and supply-
All the industry people have more than 1000 squre feet area for the manufacturing plants and
having go downs for the slabs and tiles form there they supply to their trading units of theircustomers in different states of India. In Rajasthan the main supply area is Jaipur, Jhunjhunu,
Bikaner, Barmer, Ajmer.
Process-
In manufacturing process at starting the workers cut
the big stone in small slabs by the stone cutter, the
this process water is needed so that the stone could be
cut easily. Then they put it down in a circle and finish
its one side by the cleaner and then cut the stone
according to different measure. Granite slabs are
mostly come for the use of making kitchen and the
dining tables in hostels. Tiles are used in floor and on roofs. In Rajasthan many people who are
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lying in good income group are using granite tiles on their roofs to make the house water
resistant.
Bag Manufacturing
Manufacturing is another main business in the market of Sikar. It is growing with a fast pace.
Main reason to increase this business is that sikar on top in the area of education. There are many
school collages and computer education centre. Strength of the students in Sikar is more than
20000. The main player of the educational market is CLC (Carrier Line Coaching), GCI (Guru
Kripa Carrear Institute), Prince Senior Secondary School. They are providing foundation course
along with the preparation of RPMT, CPMT, ATEEE, IIT and ICAR.
There are many computer institutes like Vision IT College,
ICA,IIJT. They are providing basic computer course and
professional course as Tally, C++, Java, MNSC and CCNA.
They all have adopted a market strategy that is called value
added facility along with the courses, they give the diary of
that particular institute and a study bag with the logo of that
institute on that. For that they give the order to the
manufacturer in the local market. They charge approx Rs.125
for a study bag.
Along with the study bags they manufacture carry bag and travelling bags and for that they
charge more than 30% of the cost price and get a good amount of profit.
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Furniture Manufacturing-
In RIICO area of Sikar there are some flour mills and
some industries as manufacturing plastic granule and
plastic tanks. Some industries are manufacturing cattle
feed. These people have their shops as well as supply in
the local market in Rajasthan.
Some industries are in steel manufacturing. Main
products which they manufacture are cooler, chairs steel
box, steel gates and steel windows. In summer season
they earn a handsome profit from the sale of cooler or steel box. In steel furniture the industry
manufacture steel gate, channel gates collar, table chair and steal railing. The main reason to use
the steal furniture is durability and cheaper as compare to wooden.
Wooden Furniture-
In RIICO area there are some industries which are in the business of furniture manufacturing. It
was their traditional business which their ancestors used to do. At that particular time it was not a
profitable business. That time they
used to do this for their livelihood but
at present the tome has totally
changed. The Economy of India is
growing so the customers will go for
luxury goods.
In wooden furniture the Industry
manufactures Beds, sofa, chair, table,
wooden railing, temple and many
other wooden products. Ghasloyia
Furniture House, Karimi Furniture
House, Jyoti Furniture House, Kayamkhani Furniture House are some famous industries which
are in this business for last many years. They are having a good brand image in the domestic
market and are earning good profit from their business.
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Material and instruments-
Material required for furniture is wood, and plywood, and the instruments are wood cutting
machine, finishing instruments and painting machine. The raw material for the furniture
manufacturing they purchase form farmers of local area or import from neighboring state of
Rajasthan.
Cattle Feed Manufacturing
Many industries like Jain Industries, Anukampa Industries, Anupam Industries and Anurag and
Company are having manufacturing units of cattle feed. Some of them do supply in small towns
of Sikar RIICO area. Some of them as Anupam industries and Khetan Industries are having their
trading units in the market and they are making a handsome profit of this business.
Machine and Material, Mustard , cotton seeds ,oil extracting machine, packaging bags and labor
force
Manufacturing and supply
As the industry persons purchase the raw material
mustard from the local area framers and the cotton seed
that they purchase form Ganganagar district since
Ganganagr is the leading district in the production of
Cotton. In the unit the workers put the grains the machine
which extract the oil and the Khali of the oily grains, the
Khali is the food product of cattle. The workers dry this
for 2 to 3 days and that pack this in the bags and sale or
supply in the market. The price in the domestic market is Rs 1300 per 100 kg and the price of oil
in hole sale that the industries charge that is Rs 55 per kg.
Industries supply this in the neighbor district as Jhunjhunu, Sikar, Mukundgrah and Jaipur.
Industries sale the product at market price in the domestic market.The local market price of
cotton seeds is approx Rs 2000 per 100 kg and Mustard is 2500 per kg.
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Uses of product
The Khali which is made from cotton seeds is more useful for
cattle as compare to Khali made by Mustard seeds. The oil is used
for cooking purpose as well as cattle feed. This helps to the dairy
persons to increase the milk production. To use this dairy persons
or the milk men get more production of milk and earn more profit.
6.2 Finding in RIICO area Palsana
In industrial area of Palsana the industries are in the business of manufacturing of furniture, stonecutting and plywood. In this are the dominant business is granite marble. The industry persons
purchase granite stone from different regions of Rajasthan and then make granite tiles and slabs
and sell this in domestic market and supply in neighbor cities. Another business in Palsana is
manufacturing of transformers plastic granules and plastic tanks.
Transformers & Cement pole manufacturing
These are industries are private limited companies
which work on the contract base and manufacturing
according the order of the contractor who is taking
charge of the make power house in the villages and
towns of the area.
Mainly these companies are having contract with
Ajmer Vidhyut Nigam Ltd. Whereis the main
electricity board of Rajasthan is situated. Some industries as Mor Transformers pvt.ltd., Mahriya
Enterpriese are main transformer manufacturer. Except these companies there are some
companies which are manufacturing transformers cabinet and coils which are used in
transformers.
Same in the case of cement pole manufacturing, the industries manufacture the pole on the
contract base. Cement poles are more durable as compare to the steel poles, since there is no
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rusting problem in cement poles and another thing is that they are cheaper as compare to steal
poles.
The contractors are replacing the steel ones by cement poles so that there will be no risk in rainy
season and expense will be decrease.
Plastic Granules and Plastic Tanks manufacturing
In RIICO area of Palsana the business of plastic granule and tank manufacturing also exists and
the industry persons as Premier Plastic Industries, Shri Agro Industries and Kisan polymers are
getting good amount of profit from this business.
These storage tanks have gained wide appreciation for the
following features such as:
Non-corrosive
Light weight
Durable
Leak proof
Low maintenance
The entire range is widely used to store highly corrosive chemicals at high temperature and
pickling. These are available in the capacity ranging up to 500- 10000 liters. Available in
different shapes such as cylindrical, vertical, horizontal and rectangular, these tanks can also becustomized as per clients requirements.
Flexible tank linings can contain extremely corrosive and high temperature chemicals, acid or
alkaline and waste fluids as well as water, water based products and gases.
Material and manufacturing
PVC linings are made for are made from only highest grade, first run, virgin materials, no
fillers. There is a wide range of other materials available, Polypropylene, Polyurethane, Hypalon,
HDPE, Teflon. The PVC material is dielectrically seamed, that creates max material tear strength
and even thickness of the material over the seal. Other materials may take other manufacturing
methods.
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Uses
Plastic tanks are used in plating, chemical storage linings, ponds, water reservoirs and
cisterns, clarifier tanks, canals, gas recovery systems, membranes in pressure vessels, and
many more places.
Plastic tanks are used for storage of water,
chemical and also used as dustbins.
PVC granules are widely used in the purpose of
refrigeration and automobile industries.
These are mainly use as raw material of plastic products and the use of plastic granules is
in the business of Handicraft. They people use to make many kind of toys and home
interiors from the granules.
PVC pipes and Sprinklers Manufacturing
Arwali Industries, Khendalwal industries Pvt.ltd.and Kohinoor industries are in the manufacturing
business of Irrigation system. These industries
manufacture PVC pipes, sprinklers, water tubes etc.
Khandalwal and Kohinoor are the supplier of
irrigation system all over the country.
In Shekhawati region most of the areas comes under dark zone. In those area farmers cannot
deep tube wells and the farmers who are having their own tube wells most of them got dried. So
the sale of sprinklers is not up to mark. But the new concept of farming is dropping irrigation is
in progress so the industry people are manufacturing the dropping pipes which are 1inch of
diameter and easy to carry in farms. Since they are easy to carry but these are only success full in
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the farm of Aloe Vera and Ratanjot because they take
minimum 3- 5 year time to mature. Earlier in 1980 the
farmer of Shekhwati used aluminum sprinkler system for
irrigation. They were costly and difficult to carry at night.
But plastic PVC pipes and sprinkler system is cheaper as
compare to the aluminum and easy to carry for the farmer
at any point of time.
6.3Finding in RIICO area Reengus
In Reengus industrial are the main business is melting of steel and manufacturing of steel garter,
railing and steel slabs. Except this some industries are in the business of manufacturing of white
cement and powder. One or two industries are in the business of lamination paper, snakes and
bread manufacturing.
Steel gate and Angle manufacturing
In industrial area of Reengus steel manufacturing units which manufacture steel wire, steel
window, steel gate, channel gate and steel slabs. Mayank Industries , Neelkanth industries are in
manufacturing of steel slab and steel melting.
They purchase the scrap from the local market or import
from big steel plants in India and melt them in the
manufacturing unit and make steel slabs from that.
Manufacturing of steel angle is the toughest task the steel
is melt at high degree temperature and then the workers
sent it through the machine to give it shape like slab and
then cut this according to the size. There is a lot of hard
work and concentration needed for this if any worker miss
to catch the angle which is coming to him through the machine he will meet with the harm in his
leg or in hand.
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Workers mostly neglect to work with these industries. But what the industries people have done
they have adopted the HR policy that is called flexi timing. According to that policy the worker
work continuous for 2 hours and then take rest for one hour and again work for 2 hours. Salary
paid to them is according to hourly basis.
Uses
Channel gates are used in office, go dawns and
showrooms
Steel gate is for the houses
Steel angle are used in construction and steel gate
manufacturing and to apply them in the houses.
Steel angles are mainly used by the car painters to
make the furniture durable and strong
Milk products manufacturing
Milk products include Curd, butter and Cheese manufacturing. There are some industries which
are in the manufacturing and supply business of milk to the
different states and different cities of Rajasthan. According toa survey of Amul India is the biggest manufacturer of milk
and milk products and consumer also. The main Industries are
prbhuji Dairy, Gopal G dairy and Kishan dairy. They
purchase milk from the local villages and supply this to the
cities as Jaipur, Bikaner, Gelhi NCR and many other cities.
Some of them supply milk to Saras Dairy and local Sweet
makers who are famous for sweets made by milk, butter, Cheese and lassi.
The main Sweet makers are Rawat and Shodani sweets which are in jaipur and Milan Sweets and
bakery which is situated in Sikar.
The local vender purchase milk form the villages at a margin rate that is Rs 15-20 per liter for
cow milk and Rs 25-30 per liter of buffalo milk.
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Firstly in dairy they the workers burn the milk and separate the fat from milk and then pack it
and supply in the market or supply to small towns or cities.
The price in the market for the milk products is
Product Price (in Rs)
Milk 30 per Kg
Cheese 180 per Kg
Deshi Ghee 400 per kg
Curd 50 Per kg
6.4Finding in RIICO area Chirawa & Pilani
In these areas the main business is furniture manufacturing, steel furniture, and stone cutting.
The RIICO areas of these areas are not having manufacturing units. Some steel manufacturing
cum trading units are in the market but as compare to Sikar and palsana RIICO area this is not so
developed. Except this there is one or two manufacturing unit which is manufacturing Vermicompost. This time vermi compost is most valuable for farms. This is natural compost (khad)
and increase the productivity of the farms as compare to urea and DAP. There is no harm of
excess use of the vermi compost as compare to other fertilizers. Most of the farmers who are
growing vegetables in their farms are using vermi khad and getting handsome profit from the
vegetables as they are natural and fertilizers free.
Brick Manufacturing
A new business is growing in these areas that are Brick
Industry. This time the construction work in the cities is on
peak. The main reason behind this is the income level of
the people who are living in small towns and villages is
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increasing and many government employees who are living in villages are going to cities.
The raw material is sand and water which is easily available and they are charging 3000 rupees
for 1000 Bricks. Some of these industry people are have their own tractors or tractors on contract
basis. They take extra charge for the supply of the bricks to the contractor or the customers.
The industry people are getting handsome profit from this business and providing jobs to the
peoples who are living in nearby villages.
Agriculture Instruments Manufacturing
Shri Shain agro workers and Shri shyam agri
instruments are the main market players in the
RIICO area of Sikar. This is the era of technology.
In 1970 farmers of Rajasthan used to plough his
fields by camel and bulls. Now a day approx 70% of
farmers do farming by tractors. But still there are
some farmers who cannot afford tractors are using
the old trade of farming. Some farmers still believe that farming by the cattle is the best in
cheaper way and the productivity of the land remains same for a long time period.
They manufacture soil digger, two furrow ploughs,
tractor trailer trolly, seed grader and other
agricultural instruments. The industry persons
prepare according to the customers needs and on
order basis.
The target market for this is the domestic farmers or
the farmers in the different cities of Shekhawati
Region which includes Churu, Jhunjhunu and Sikar.
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Businesses that Failed
From the survey, some industries were known which were started in the surveyed small towns.
Some manufacturing units of polythene manufacturing and furniture (Sikar, Palsana) failed.
Main reason of fail of this business is ban on use. The poly bags which are available in the
market are the main cause of pollution. They are making earth pollution as well as air pollution if
one burn them. By burning of the poly bags they release carbon dioxide gas and carbon
monoxide. These gases directly impact on Ozone layer of atmosphere and making it
thin day by day and that is the main cause of global
warming.
Another reason to fail is the unavailability of skilled and
semi skilled labor for the industries. According to the
industry people the main reason of the unavailability of
labor is the different program run by the government,
NAREGA is one of them. Due to this program workers are
not interested to work with the manufacturing industries.
By the government schemes they get good salary for fewer efforts in lesser time. Unskilled
workers who come for the work their performance is not up to mark because they do not have the
knowledge of work done in the manufacturing units. In that case
company does not able to fulfill the order on time and they people
end up with loss at the end. This becomes the cause to loss brand
image as well as customer loyalty for the products.
The labor charges are high as unskilled labor charge is Rs 250 per
day. Reason for high labor charges is unavailability of labor.
Mostly persons have gone to abroad for work and earning more as
compare to India.
Except this there are more duties and taxes on the raw materials if the industry people import
from another states. Due to this they people do not earn their desired profit and closed their
business.
A SWOT analysis of these businesses should be conducted separately so that similar flaws may
not create problems for new upcoming businesses.
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7 Recommendations
1) It is recommended to do the SWOT analysis and develop business plan for the above
suggested industries.
2) Business Plan should consist of detailed study on marketing aspect of the product. This is the
weakest point identified for the failed businesses.
3) Some of the potential industries identified in Brick industries water purifier manufacturer,
vermin compost manufacturer.
4) Mostly industries are self financing industries and if in any case they need money they do
transactions with theprivate financing companies of the Shahukar in the villages. The interest
rate which the Shahukar charge is a bit higher as compare to the bank but in that case there is
no security deposit system and easy availability of money.
5) Top managers of CRISIL should continue with its enthusiastic approach towards the
undertaken project. It keeps the team motivated and helps the project to proceed in the right
direction.
6) Most of the companies do not have their personal Wed address and not having any kind of
internet connection. So this can be beneficial for the management to go in these services.
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Conclusion
Credit rating Scheme represents the status and performance of a firm or industry in the national
and international market as well as in domestic market. The industries which are in
manufacturing in the survey areas are more than15 years old, there is a great risk involved in the
market for the new industries.
Rating means the performance of the company and on that basis this will decide the level and
strength of the economic condition of manufacturing units in that area and will help to increase
per capita income and living standard of the persons.
It has facilitated in mapping industries on which further studies should be conducted and
business plan be developed for the same. These industries will result into source of income much
above the current sustenance level.
CRISIL as a facilitator will play very important role in empowering rural women and also giving
gainful employment to the unskilled youth. Further the business plan will take care of the
profitability and check on the shortcomings in the business.
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Annexure: A
Questionnaire
Survey on Awareness Level among MSMEs
Date: ____________
Name of the company ___________________________________________________________
Product ______________________________________________________________________
Place
_____________________________________________________________________________
Contact Person and Designation ___________________________________________________
Mobile: _________________________ Contact number: _______________________________
E-mail: _______________________________________________________________________
Banker________________________________________________________________________
1. Have you heard of Credit Rating for MSMEs?
a) Yes b) No
2. Has any Credit Rating Agency approached you for rating? (please name )
_____________________________________________________________
3. If Yes, have you undergone the Credit Rating exercise for your enterprise?a) Yes b) No
(IF NO, MOVE TO QUES.9)
4. If Yes, what motivated you to opt for the rating?a) Interest rate concession
b) Credibility among customers and suppliers
c) Reputed third-party opinion
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d) All of the above
e) Any other (please specify) __________________________________________
5. Has the rating helped you in bringing improvement to your business?
a) Yes b) No
6. If Yes, what was the kind of improvement?a) Management Strategy
b) Finance
c) Human Resource (HR)
d) Marketing
e) Production Process
f) All of the above
7. Has the rating helped you with your lenders and bankers?
a) Yes b) No
8. If Yes, how did the rating help you in meeting your financial needs?
a) Getting adequate quantum of loan from bank
b) Concession in interest rates
c) Relaxation in providing collaterals
d) Reduction in transaction cost
e) Faster decision on the part of the lenders
f) All of the above
9.
If No, are you interested to go for rating and know the benefits of credit rating?a) Yes b) No
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10.Are you aware about the various government schemes of the Ministry of MSME for the
development of MSMEs?
a) Yes b) No
11.Have you heard of or taken assistance under any of the following government schemes in
the past?
i. No b) if Yes, Kindly tick
1. International Cooperation Scheme
2. Performance and Credit Rating Scheme
3. Technology Upgradation Fund Scheme (TUFS) for the textile sector
4.
Marketing Assistance Scheme
5. Rajiv Gandhi Udyami Mitra Yojana (RGUMY)
6. Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme
for Women
7. Credit Linked Capital Subsidy Scheme for Technology Upgradation
8. Credit Guarantee Scheme
9. ISO 9000/ISO 14001 Certification Reimbursement Scheme
10.National Manufacturing Competitiveness Programme (NMCP) Schemes Under
XI Plan: there are 10 schemes under NMCP like Marketing Support, Lean
Manufacturing, Mini Tool rooms, etc
11.Micro & Small Enterprises Cluster Development Programme (MSE-CDP)
12.MSME MDA
13.Mini Tool Rooms
14.Scheme of National Award
12.
How many government schemes are you aware of ?:
a) None
b) 1-5 schemes
c) 6-10 schemes
d) More than 10 schemes
http://rgumy.nic.in/http://www.dcmsme.gov.in/schemes/Credit_link_Scheme.htmhttp://www.dcmsme.gov.in/schemes/sccrguarn.htmhttp://www.dcmsme.gov.in/schemes/sciso9000.htmhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/award_scheme.htmhttp://www.dcmsme.gov.in/schemes/award_scheme.htmhttp://www.dcmsme.gov.in/schemes/award_scheme.htmhttp://www.dcmsme.gov.in/schemes/scminitool.htmhttp://www.dcmsme.gov.in/schemes/MSME_MDA_Guidelines.pdfhttp://www.dcmsme.gov.in/MSE-CDProg.htmhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/NMCPDetail.htmlhttp://www.dcmsme.gov.in/schemes/sciso9000.htmhttp://www.dcmsme.gov.in/schemes/sccrguarn.htmhttp://www.dcmsme.gov.in/schemes/Credit_link_Scheme.htmhttp://rgumy.nic.in/ -
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13.If yes, how would you rate the usefulness of the schemes?
a) Very useful
b) Moderately useful
c) Not useful
14.Some of these schemes are operated through banks. Have the banks been supportive in
channelizing assistance under these schemes?
a) Highly supportive b) Somewhat supportive c) Not supportive
15.
Which media do you think will be most effective to make these schemes better known
among the MSMEs?
a) Radio
b) TV
c) Newspaper
d) Website
e) Any other suggestions .
16.Do you have any suggestions for the government to address
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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