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The business of survival

Small and medium enterprises had been hit laborious via the lockdown. Five younger entrepreneurs let us know how they're suffering to stick afloat.

Micro, small and medium enterprises (MSMEs) are crucial to the Indian economy. Not simplest do they feed into larger firms, supplying them with materials and merchandise, they supply employment to over 12 million people in the country. With the worldwide lockdown, this sector has been the worst hit. The loss of industry, experts say, may just power lots of the smaller avid gamers in the sector to bankruptcy.

“We really need to lend a hand MSMEs stand on their ft these days,” says Shreekant Somany, chairman, CII National MSME Council. “They are the biggest task suppliers in the country, and also responsibe for roughly 40 according to cent of our production. The share of MSMEs in India’s overall exports is slightly over 40 according to cent. This sector is in reality a backbone of the economy.”

MSMEs may well be either family-run, sole proprietorship or partnerships, and depending on annual turnover — as according to a recentlyrevised govt definition — are categorised as micro (Rs 25 crore and above), small (Rs 75 crore and above) and medium (Rs 250 crore and above). They may well be production devices or operate in the services and products house. “They are hardly ever cash-rich, with proprietors having to put in their very own capital or borrow from banks,” says Chandrakant Salunkhe, president of the SE Chamber of India. In most circumstances, he provides, assistance via either the banks or the federal government is minimum. Post Covid, Salunkhe estimates that of about 6.five crore MSMEs in India, about four.8 lakh will most certainly shut shop.

The reasons are widely the similar around the board: capital and labour. Many MSME record that have they now not gained their dues from customers (as numerous as large MMCs and PSUs, to smaller companies) thru all the lockdown period, and feature spent all their cash reserves either paying workers or on overheads.

Numerous MSME are also labour-intensive; they are not positive if their migrant employees will go back from the villages as soon as the lockdown is lifted. Ashish Vaid, president of the IMC Chamber of Commerce and Industry says: “Our chamber has made suggestions in the path of deferment of payments, and handholding via offering comfortable loans to companies at slightly over the repo rate, to tide over these difficult instances.”


Ameya Prabhu, 33
Partner, UAP Advisors & Nafa Capital

“MSMEs feed into larger companies as a result of they're frequently a part of their supply and worth chain,” says Prabhu. “The MSME sector acts as a barometer to the well being of the economy. But like a domino chain, if one part collapses, it all does as neatly.” According to Prabhu, the large issue going through MSMEs these days is the loss of access to credit score. “We don’t have large cash reserves. Our firms are mostly sole proprietorships or partnerships with little or no capital,” he says. “Today, with compliance problems, the cost of our operations has long past up and not using a corresponding build up in earnings.”

Prabhu, who is also chairman of the Indian Merchants Chamber Young Leaders Forum, operates in monetary, equities and advisory services and products. He has 32 workers across places of work in Mumbai, Chennai and Delhi, but is operating with just a skeletal personnel presently. “Our advisory and investment industry have noticed some cancellations, even from shoppers out of the country, and we’ve all been affected by the vagaries of the stock marketplace right through this time. Our earnings margins are getting significantly constricted,” he says. Some UAP investments — like a healthcare initiative which used to be simply turning profitable — have had to be shut down. “We rely on equity infusions, so we are okay, but if the economy helps to keep contracting and revenues keep shedding, we’ll need to scale down. And this is never good news.” The lockdown, says Prabhu, is more likely to set many MSMEs again via at least 4 years.

“Right now, my largest concern is survival,” he provides. “Everyone is in self-preservation mode.” If the loss of industry continues, Prabhu fears he can have to shut down some verticals. “We may now not develop, but I'd fairly keep the existing jobs than create new ones.”

Ameya Prabhu


Kairavi Mehta, 25
Director, VK Industrial Corporation

Mehta’s medium-sized undertaking distributes metal plates and coils to infrastructure, engineering and renewable-power firms, among others. Steel is part of the very important commodities record, so the corporate has been working right through the lockdown, distributing materials to customers engaged in renewable tasks, development activities or even the ones taking a look to build or renovate hospitals. But it has still suffered a 20 according to cent loss of industry. It’s warehouses in Navi Mumbai and Chennai were closed till April 25, and now the corporate is suffering to find transporters.

“We had been dispatching metal without delay from the generators of [partners like] Jindal Steel and Essar Steel to our customers who’ve gained particular permission to continue with paintings,” says Mehta, a second-generation entrepreneur in the family-owned industry. “From March-end our gross sales had been hit, and we now have noticed no earnings after paying our workers and vendors, since we now have now not been receiving payments from customers either. Very few MNCs are making payments, let by myself the small investors. Everyone goes thru tough instances.”

If the lockdown extends beyond May, it will put an enormous power at the company’s sources, Mehta provides. “Some of our export partners may just cancel tasks. At the instant, our warehouse can simplest perform one or two deliveries an afternoon, as a result of a disruption in the supply chain. If the lockdown continues, the rest of the 12 months can also be a foul one for the MSME sector.” Smaller customers, who usually order one or two tonnes of metal, might become bankrupt, which can even affect her company’s margins, says the graduate from Boston’s Babson College, who joined the industry five years ago.

Kairavi Mehta


Siddharth Desai, 42
VP, Hindustan Electric Motors

Desai’s large drawback as a result of the lockdown relates to his supply chain. His mid-sized company manufactures electric motors for industrial use. But whilst the two plants in Daman and Vapi have began working since May five — they're in the green and amber zones — the providers have now not. “The providers, who need to send us materials in order that we will be able to keep working, are positioned in crimson zones like Mumbai and Rajkot,” says Desai. “They are not able to open their stores. If this continues, I may well be compelled to find new, native vendors as a substitute. Many others can even switch, so a large number of providers will lose their industry and be compelled to shut down.” Even if some plants and factories have opened, materials can not get started transferring till everything is opened, he provides.

Desai has permission to start with 150 workers — half his common capability — but he says he can arrange as a result of there isn't a lot demand either. “Numerous my group of workers is migrant labour. They’ve filled out their paperwork and are looking forward to some roughly indication from the federal government to depart for their villages,” he says. “Once they pass, it’ll be many months earlier than they go back. I will arrange with some native labour, but now not everyone seems to be that lucky.”

The entrepreneur has a positive take at the lockdown. “Two or 3 months of a downturn is not going to bankrupt you unless you were already in trouble earlier than Covid,” he says. “Because of money circulate problems, some firms may not be capable of function quickly. But the demand for goods gained’t pass away. If anything, post the pandemic, we can see an enormous surge in demand. It might simply take two, 3 or six months to occur.”

Siddharth Desai


Kedar Chaudhari, 38
Director, Reva Process Technologies

“We are working on 50 according to cent efficiency at our engineering firm,” says Chaudhari. “Usually we need to execute paintings in teams, which we will be able to’t do presently.” The Pune-based firm supplies engineering solutions to environmental, chemicals and oil and fuel firms.

Reva faces a big cash-flow drawback presently. “Our shoppers haven’t paid us in the final 3 months, and whatever cash reserves we had, have long past towards paying our workers’ salaries and overheads,” says Chaudhari, a first-generation entrepreneur. “I don’t know the way we will be able to arrange this month. Job losses will become forthcoming, which we don’t need. We are talking to banks for additional capital.”

Many entrepreneurs allege, however, that banks are cautious of lending to MSMEs, that are frequently viewed as dangerous loans and non-performing belongings. A bit over a 12 months ago, Chaudhari had carried out for a Rs 2 crore mortgage underneath a government scheme began via the Centre, but the mortgage used to be denied. “That money will have tided us over this period,” provides Chaudhari. “We don’t need govt subsidies. All we want is a letter of credit score in order that banks will prolong us a mortgage, which we will be able to pay again over two years or so.”

With international oil costs having hit all-time low, Reva is also more likely to lose many of its oil and fuel shoppers, in particular in the Middle East, the place a lockdown has brought exports to a halt.

At house, Chaudhari is anxious that the apparatus he has equipped to shoppers is mendacity unused at many firms. “Besides our increased expenditure, we can need to pay vendors an extra cost to extend the warranties on such unused apparatus, which might have lapsed via now,” he provides.

Kedar Chaudhari


Rohit Mehta, 34
Director, SMI Coated Products

Mehta’s mid-sized SMI, which gives the adhesive that businesses use to stick labels on their merchandise, is if truth be told an very important carrier. “No bottle or jar may also be offered or shipped and not using a label,” says Mehta. “There can be no hand sanitisers out there, as an example, if we didn’t provide the glue for the label.” So whilst Mehta has were given the go-ahead to operate, he has no raw materials. “About 60 according to cent of our raw material, which is imported from Europe and Southeast Asia, is stuck in containers. The goods arrived in Mumbai via ship, but because the lockdown used to be introduced all at once, we couldn’t get the clearance documents out of our place of business in time.” The containers are being saved in a backyard, and Mehta is having to pay Rs 40,000 an afternoon as condominium.

His company is operating with simplest 50 of its 250 personnel, and a large segment of employees have also left for their villages. “On their go back, we’ll have to offer 14-day quarantine facilities and dormitories in order that they can keep on website,” says Mehta. “We’ll have to verify social distancing and scattered dining at paintings. We’re taking a look at huge logistical bills.” All of this hurts when you’re down to just 20 according to cent of your gross sales. Mehta also worries about shedding out of the country customers. “Some shoppers have already began buying materials from China and Europe. Since we will be able to’t cater to them now, they’re opting for other vendors.”

As a commodity merchandise company, SMI already has a wafer-thin benefit margin. “There aren't any earnings. If the lockdown continues, we can need to do what we’ve never accomplished earlier than: Sell off raw material out there and let pass off people. Otherwise, the corporate will be unable to survive,” Mehta says.

Rohit Mehta

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