The latest round of interest rate hikes by banks has hurt the profitability and competitiveness of micro, small and medium enterprises (MSMEs) by increasing the cost of credit. The move was triggered by the increase in repo and reverse repo rates by the Reserve Bank of India (RBI) on January 25.
“The government wants to cool down the economy by bringing down credit off-take, but by doing so, it is eroding our competitiveness in the international market. Almost all public and private sector banks have hiked their interest rates after RBI’s key rate hike. This is affecting our profitability as well,” said Ashok Patel, former president, Federation of Gujarat Industries (FGI).
Reserve Bank of India had raised the repo and reverse repo rates by 25 basis points each. The repo rate, the one at which RBI lends to banks is now 6.50 per cent, while the reverse repo rate, the rate banks get for depositing funds with RBI, stands at 5.50 per cent. In 2010, RBI had raised the key rates six times by 25 basis points each.
Gujarat houses significant numbers of MSMEs in sectors like engineering, chemicals, pharmaceuticals, plastics, ceramics and food processing. “We have around 950 SMEs in dyes and dyestuff operations alone. All of them are facing margin pressures due to increased interest rates. There has been an average two per cent hike in interest rate over the past six months, which small units find difficult to bear,” said Shankarlal Patel, president, Gujarat Dyestuff Manufacturers’ Association (GDMA).
“There is ample opportunity for MSMEs in Gujarat. But at the same time, industry needs to move cautiously ahead, as factors like inflation, interest rates and reduction in competitiveness may limit their profitability compared to what was visualised at the time of signing the MoU,” cautioned P K Modi of PKM Advisors, a financial advisory firm in Ahmedabad.
Banks do not see much pressure on micro and small units. But medium units with a turnover of over Rs 5 crore may feel the pinch due to the rate hikes. “MSMEs are our priority. Micro units are almost exempted from the pass-on effect of the rate hike. Small units may feel a little impact due to increased interest rates. They need not worry as of now,” said a senior official of Bank of India in Ahmedabad.
Industry players said the situation was becoming more difficult, as raw material and transportation costs had increased sharply over the past several months. “The situation is unfavourable for new units. Many existing units may avoid expansion due to high interest costs,” added Ashok Patel.
Monday, May 9, 2011
SMEs in home decor sector back on their feet
The home furnishings and home decor accessories industry is back on its feet, with the effects of the economic slowdown waning slowly, according to the findings of a survey of SMEs in the industry, conducted by IndiaMART Knowledge Services (IKS).
About 58.3 per cent of the respondents reported that the market has picked up since 2009, while 29.17 per cent replied that there was no change. Consumer sentiment also showed an upward trend, with 70.8 per cent of respondents witnessing an upward trend, though marginal, while 12.5 per cent said the rise had surpassed their expectations.
When compared to 2009, 16.67 per cent of the respondents said their sales had risen by more than 20 per cent and 66.67 per cent said their sales increased by up to 20 per cent. As against this, 16.67 per cent said their sales had declined.
With respect to product prices, five per cent said prices had shown adverse trends in 2010 and 25 per cent reported no change over 2009. While 45 per cent of the respondents recorded a slight improvement in prices, 25 per cent reported a significant improvement compared to 2009.
The findings reveal that the increase in input costs is greater than the improvement in product prices. A majority of the respondents (60 per cent) experienced significantly increased input costs, while 35 per cent said that the rise was marginal. Only five per cent reported stability in inputs costs.
As regards exports, 16.67 per cent of SMEs said their export demand had declined in 2010, 62.5 per cent reported an improvement of up to 20 per cent, and 20.8 per cent reported an improvement of more than 20 per cent. Clearly, the sector has begun to witness better export demand.
Only 15 per cent of the respondents are satisfied with the liquidity scenario, while 85 per cent said that liquidity needs to be further eased.
About 58.3 per cent of the respondents reported that the market has picked up since 2009, while 29.17 per cent replied that there was no change. Consumer sentiment also showed an upward trend, with 70.8 per cent of respondents witnessing an upward trend, though marginal, while 12.5 per cent said the rise had surpassed their expectations.
When compared to 2009, 16.67 per cent of the respondents said their sales had risen by more than 20 per cent and 66.67 per cent said their sales increased by up to 20 per cent. As against this, 16.67 per cent said their sales had declined.
With respect to product prices, five per cent said prices had shown adverse trends in 2010 and 25 per cent reported no change over 2009. While 45 per cent of the respondents recorded a slight improvement in prices, 25 per cent reported a significant improvement compared to 2009.
The findings reveal that the increase in input costs is greater than the improvement in product prices. A majority of the respondents (60 per cent) experienced significantly increased input costs, while 35 per cent said that the rise was marginal. Only five per cent reported stability in inputs costs.
As regards exports, 16.67 per cent of SMEs said their export demand had declined in 2010, 62.5 per cent reported an improvement of up to 20 per cent, and 20.8 per cent reported an improvement of more than 20 per cent. Clearly, the sector has begun to witness better export demand.
Only 15 per cent of the respondents are satisfied with the liquidity scenario, while 85 per cent said that liquidity needs to be further eased.
New tool to help MSMEs register Indianised Net addresses
A new tool now makes it easier to find and register ‘Indianised’ Internet addresses. It has been developed by Verisign and launched by Tradeindia.com, an online B2B marketplace in India, which provides users with suggestions for Indianised domain names, as well as names based on popular lucky numbers.
Demand for internet addresses in India is growing exponentially. With 1.8 million domain names registered in India already and more being added every day, finding the perfect domain name can be challenging. The Verisign Indianised Name Localiser helps users by suggesting domain names tailored to Indian audiences or addresses that incorporate users’ lucky numbers.
“This tool will greatly enhance the user experience while registering a domain name by making domain name suggestions that are Indianised,” said Bikky Khosla, chief executive officer of Tradeindia.com.
Manish Dalal, vice-president-Asia Pacific, Verisign, said, “The Indianised Name Localiser makes the user experience of searching for a domain name simple and relevant.”
Tradeindia.com has since 1996 been offering business solutions to the global EXIM community through online services, directory services and facilitation of trade promotional events. VeriSign, Inc. is a provider of Internet infrastructure services for the networked world, and helps companies and consumers to connect online.
Demand for internet addresses in India is growing exponentially. With 1.8 million domain names registered in India already and more being added every day, finding the perfect domain name can be challenging. The Verisign Indianised Name Localiser helps users by suggesting domain names tailored to Indian audiences or addresses that incorporate users’ lucky numbers.
“This tool will greatly enhance the user experience while registering a domain name by making domain name suggestions that are Indianised,” said Bikky Khosla, chief executive officer of Tradeindia.com.
Manish Dalal, vice-president-Asia Pacific, Verisign, said, “The Indianised Name Localiser makes the user experience of searching for a domain name simple and relevant.”
Tradeindia.com has since 1996 been offering business solutions to the global EXIM community through online services, directory services and facilitation of trade promotional events. VeriSign, Inc. is a provider of Internet infrastructure services for the networked world, and helps companies and consumers to connect online.
Leather units saw recovery in 2010, says survey
A survey of SMEs in the leather industry, conducted by IndiaMART Knowledge Services (IKS), revealed that 61.9 per cent of the respondents said the market for leather products had picked up in 2010 vis-a-vis 2009, while 19.05 per cent replied that it had declined. A similar number of respondents (19.05 per cent) reported no change.
According to the survey, overall sales growth was far better than export growth in 2010, compared to 2009. While 42.86 per cent of respondents said their sales grew by more than 20 per cent in 2010 compared to 2009, only 33.33 per cent said their exports increased by more than 20 per cent in 2010.
Similarly, 47.62 per cent of respondents said their sales grew in the 0-20 per cent range, while 38.10 per cent reported that their export growth was 0-20 per cent.
Customer sentiment also showed signs of improvement. A majority of the respondents (57.14 per cent) reported that they witnessed an average improvement in consumer sentiment in 2010 as against 2009, while 23.81 per cent said consumer sentiment showed a negative trend, and only 19.05 per cent said that the improvement surpassed their expectations.
The survey further revealed that 61.90 per cent of respondents felt that the main challenge facing them was the liquidity crunch, while 33.33 per cent felt that their main challenge was poor consumer response. Only 4.76 per cent listed lack of infrastructure as their main challenge. A majority of those surveyed (57.14 per cent) said that liquidity needs to be eased.
According to the survey, overall sales growth was far better than export growth in 2010, compared to 2009. While 42.86 per cent of respondents said their sales grew by more than 20 per cent in 2010 compared to 2009, only 33.33 per cent said their exports increased by more than 20 per cent in 2010.
Similarly, 47.62 per cent of respondents said their sales grew in the 0-20 per cent range, while 38.10 per cent reported that their export growth was 0-20 per cent.
Customer sentiment also showed signs of improvement. A majority of the respondents (57.14 per cent) reported that they witnessed an average improvement in consumer sentiment in 2010 as against 2009, while 23.81 per cent said consumer sentiment showed a negative trend, and only 19.05 per cent said that the improvement surpassed their expectations.
The survey further revealed that 61.90 per cent of respondents felt that the main challenge facing them was the liquidity crunch, while 33.33 per cent felt that their main challenge was poor consumer response. Only 4.76 per cent listed lack of infrastructure as their main challenge. A majority of those surveyed (57.14 per cent) said that liquidity needs to be eased.
Indian SMEs not prepared for disasters by Symantec
Symantec Corporation’s 2011 disaster preparedness survey for small and medium enterprises, which measured the attitudes and practices of SMEs and their customers towards disaster preparedness, reveal that though SMEs in India are at risk, they are still not making disaster preparedness a priority until they experience a disaster or data loss.
The findings show that many SMEs do not understand the importance of disaster preparedness. Sixty-eight per cent of the respondents do not have a plan in place, 50 per cent said that it never occurred to them to put together a plan and 17 per cent stated that disaster preparedness is not a priority for them.
Twenty-seven per cent of respondents live in regions susceptible to natural disasters while in the past 12 months, any given typical SME experienced six computer outages. The leading causes cited were cyber attacks, power outages or natural disasters.
“Disasters are unpredictable and can happen due to natural causes, human errors or IT system failures. SMEs that handle sensitive information such as customer records, credit card details or personnel files, cannot afford to risk data loss incidents. Findings from the research show that SMBs in India still haven’t recognised the tremendous impact of disasters. Simple planning can enable SMBs to protect their information in the event of it, which in turn will help them build trust with their customers,” said Vineet Sood, Symantec’s head, channels & alliances.
The findings show that many SMEs do not understand the importance of disaster preparedness. Sixty-eight per cent of the respondents do not have a plan in place, 50 per cent said that it never occurred to them to put together a plan and 17 per cent stated that disaster preparedness is not a priority for them.
Twenty-seven per cent of respondents live in regions susceptible to natural disasters while in the past 12 months, any given typical SME experienced six computer outages. The leading causes cited were cyber attacks, power outages or natural disasters.
“Disasters are unpredictable and can happen due to natural causes, human errors or IT system failures. SMEs that handle sensitive information such as customer records, credit card details or personnel files, cannot afford to risk data loss incidents. Findings from the research show that SMBs in India still haven’t recognised the tremendous impact of disasters. Simple planning can enable SMBs to protect their information in the event of it, which in turn will help them build trust with their customers,” said Vineet Sood, Symantec’s head, channels & alliances.
SME vendor development scheme launched
The presence of leading companies like Tata Motors, Bajaj Auto, Nestle, Hindustan Unilever (HUL), Hero Honda and Ashok Leyland, which have set up manufacturing units in Uttarakhand, is offering new opportunities for micro, small and medium enterprises (MSMEs), according to the Confederation of Indian Industry (CII).
Realising the immense potential, CII has launched an initiative to provide a platform which can help MSMEs look for new opportunities like the supply of components and provision of services like transport and logistics.
The recent three-day expo at the Haridwar industrial estate, jointly organised by CII and the state government, was an effort in this direction. It also ensured a dialogue between manufacturers, service providers and end-users, setting the stage for further industrial growth in the hill state.
More of such expos are in the offing. “We are planning to organise at least one such expo every year. The next time, we are planning to move to the Pantnagar industrial estate, which is a hub of big companies like Nestle, Britannia and Dabur,” said Vibha Malhotra, head of policy at the CII Northern Region here.
After the Centre announced a concessional industrial package for Uttarakhand in 2003, comprising tax sops and other benefits, the state government established several modern industrial estates where companies set up shop. In the next few years, over 2,446 new units entailing an investment of over Rs 29,000 crores were established.
CII roped in businessmen from various states to showcase the potential of the Haridwar industrial estate. The key highlight of the expo was the vendor development programme and procurement system, specially designed to promote intra-industry trade, healthy business relationships, outsourcing of MSME products and components, and the adoption of best practices, in order to avail of collective bargaining for common benefits from governments, public sector enterprises (PSEs) and industry.
A Sanyal, a senior deputy general manager at BHEL, said the company was looking for vendors to supply various components.
“The Indian auto component industry is expected to grow over four-fold to $113 billion by 2020, according to the Automotive Component Manufacturers Association (Acma). The industry is highly fragmented and we expect that such industrial expos will create a platform to boost this industry by providing meaningful opportunities and an interactive platform for MSMEs,” said S P Chowdhary, an official of Shivam Autotech, Haridwar.
Narinder Bhambra, president of the All Indian Fasteners Association, said he had fruitful talks with officials of Tata Motors and Sterlite Technologies, and hoped that something meaningful would come of it.
Realising the immense potential, CII has launched an initiative to provide a platform which can help MSMEs look for new opportunities like the supply of components and provision of services like transport and logistics.
The recent three-day expo at the Haridwar industrial estate, jointly organised by CII and the state government, was an effort in this direction. It also ensured a dialogue between manufacturers, service providers and end-users, setting the stage for further industrial growth in the hill state.
More of such expos are in the offing. “We are planning to organise at least one such expo every year. The next time, we are planning to move to the Pantnagar industrial estate, which is a hub of big companies like Nestle, Britannia and Dabur,” said Vibha Malhotra, head of policy at the CII Northern Region here.
After the Centre announced a concessional industrial package for Uttarakhand in 2003, comprising tax sops and other benefits, the state government established several modern industrial estates where companies set up shop. In the next few years, over 2,446 new units entailing an investment of over Rs 29,000 crores were established.
CII roped in businessmen from various states to showcase the potential of the Haridwar industrial estate. The key highlight of the expo was the vendor development programme and procurement system, specially designed to promote intra-industry trade, healthy business relationships, outsourcing of MSME products and components, and the adoption of best practices, in order to avail of collective bargaining for common benefits from governments, public sector enterprises (PSEs) and industry.
A Sanyal, a senior deputy general manager at BHEL, said the company was looking for vendors to supply various components.
“The Indian auto component industry is expected to grow over four-fold to $113 billion by 2020, according to the Automotive Component Manufacturers Association (Acma). The industry is highly fragmented and we expect that such industrial expos will create a platform to boost this industry by providing meaningful opportunities and an interactive platform for MSMEs,” said S P Chowdhary, an official of Shivam Autotech, Haridwar.
Narinder Bhambra, president of the All Indian Fasteners Association, said he had fruitful talks with officials of Tata Motors and Sterlite Technologies, and hoped that something meaningful would come of it.
Defence cluster sees big business
The offset policy will offer a $5 billion opportunity for local industry
The city’s SME cluster, which has evolved over the past few decades around defence research establishment activities, is getting ready for an all-new business environment provided by the offset policy.
Until now, what mattered to a vendor was its ability to fabricate components. Now, global corporations setting foot in India are going beyond this technical aspect, since they have to source 30 per cent of the contract value domestically.
“The offset policy will be a $5 billion opportunity by the time the defence ministry finalises the aircraft contract. The policy unveiled in 2009 has now started translating into new business opportunities for local industry. Even if three per cent of this business comes to the Hyderabad cluster, the opportunity would be huge,” says Subba Rao, chairman and managing director of Ananth Technologies.
To qualify for a contract from a global company, a vendor has to comply with specific standards in terms of testing, quality and management practices. “This is a major challenge faced by several SMEs, as they have to make additional investments to achieve the standards required by global companies. This is not an easy proposition, as many of these companies are small,” says Ravinder Reddy, chairman of MTAR Technologies, which is involved in defence and aerospace.
There are over 100 engineering and electronics companies in the city with annual turnover in the Rs 10-150 crore range. These form the vendor base of the defence and aerospace sectors. Though most have attained a high degree of technological prowess, not many have grown in size — defence contracts have been a low-volume business so far.
“Hyderabad is the centre for the entire knowledge-based defence industry and is much larger in size than the one in Bangalore. Core defence research and development happen here. That is why the support industry is also much larger here,” says Subba Rao.
These companies together generate an annual business of over Rs 2,000 crore. They operate in the fields of mechanical, metallurgical, alloys, electrical, electronics and software support systems, composites, hydraulics, tooling, forging and foundry.
A few SMEs also have global exposure. Ananth Technologies, an electronics and embedded systems company, provides core embedded systems, telemetry, telecommand, avionics systems for launch vehicles, simulator units among other products and services to the Indian Space Research Organisation (Isro), Space Applications Centre and National Remote Sensing Agency.
Similarly, Zetatek Industries Limited’s product portfolio includes test equipment, vibration testing, climatic chambers and quality control services for all defence projects. The company also makes motion simulators for testing of defence equipment, avionics components and navigation components. “We are the only company in the country that can calibrate guided systems,” says its chairman and managing director, R Siva Kumar.
The embedded systems and other electronic equipment developed by Ananth Technologies also go into foreign satellite systems being built by Isro. Zetatek exports its equipment to Israel, Russia, China, Germany and Spain. Siva Kumar says exports contribute 20 per cent of Zetatek’s business.
According to a survey by PricewaterhouseCoopers, global companies can achieve cost savings of 15-25 per cent through local sourcing, depending on the type of component.
The Tata group’s decision to establish four aerospace manufacturing units in collaboration with Sikorsky and Lockheed Martin in Hyderabad is testimony to the strengths of this cluster. The state government has also set up an exclusive aerospace SEZ near Hyderabad to boost the sector.
To cash in on global opportunities, 40-50 companies led by Ravinder Reddy of MTAR Technologies and Subba Rao of Ananth Technologies have jointly formed a company of technocrats christened Samuha Engineering Industries Ltd. The government has given 200 acres of land in the aerospace SEZ to this cluster company, which includes SEC Industries, S&U Mek Engineering and SKM Technologies.
Apart from developing basic infrastructure with Rs 200 crore, the group will also set up facilities for high-precision meteorological tests and measurements to be utilised by its members.
Samuha plans to launch operations at the SEZ in the first quarter of 2012. Later, it will upgrade to sub-systems, systems and integration from the present level of component fabrication, says Sriram M M, director of Samuha. It will bid for high-value global contracts, which in turn will be sub-contracted to SMEs, including its promoter members, in the SEZ.
The city’s SME cluster, which has evolved over the past few decades around defence research establishment activities, is getting ready for an all-new business environment provided by the offset policy.
Until now, what mattered to a vendor was its ability to fabricate components. Now, global corporations setting foot in India are going beyond this technical aspect, since they have to source 30 per cent of the contract value domestically.
“The offset policy will be a $5 billion opportunity by the time the defence ministry finalises the aircraft contract. The policy unveiled in 2009 has now started translating into new business opportunities for local industry. Even if three per cent of this business comes to the Hyderabad cluster, the opportunity would be huge,” says Subba Rao, chairman and managing director of Ananth Technologies.
To qualify for a contract from a global company, a vendor has to comply with specific standards in terms of testing, quality and management practices. “This is a major challenge faced by several SMEs, as they have to make additional investments to achieve the standards required by global companies. This is not an easy proposition, as many of these companies are small,” says Ravinder Reddy, chairman of MTAR Technologies, which is involved in defence and aerospace.
There are over 100 engineering and electronics companies in the city with annual turnover in the Rs 10-150 crore range. These form the vendor base of the defence and aerospace sectors. Though most have attained a high degree of technological prowess, not many have grown in size — defence contracts have been a low-volume business so far.
“Hyderabad is the centre for the entire knowledge-based defence industry and is much larger in size than the one in Bangalore. Core defence research and development happen here. That is why the support industry is also much larger here,” says Subba Rao.
These companies together generate an annual business of over Rs 2,000 crore. They operate in the fields of mechanical, metallurgical, alloys, electrical, electronics and software support systems, composites, hydraulics, tooling, forging and foundry.
A few SMEs also have global exposure. Ananth Technologies, an electronics and embedded systems company, provides core embedded systems, telemetry, telecommand, avionics systems for launch vehicles, simulator units among other products and services to the Indian Space Research Organisation (Isro), Space Applications Centre and National Remote Sensing Agency.
Similarly, Zetatek Industries Limited’s product portfolio includes test equipment, vibration testing, climatic chambers and quality control services for all defence projects. The company also makes motion simulators for testing of defence equipment, avionics components and navigation components. “We are the only company in the country that can calibrate guided systems,” says its chairman and managing director, R Siva Kumar.
The embedded systems and other electronic equipment developed by Ananth Technologies also go into foreign satellite systems being built by Isro. Zetatek exports its equipment to Israel, Russia, China, Germany and Spain. Siva Kumar says exports contribute 20 per cent of Zetatek’s business.
According to a survey by PricewaterhouseCoopers, global companies can achieve cost savings of 15-25 per cent through local sourcing, depending on the type of component.
The Tata group’s decision to establish four aerospace manufacturing units in collaboration with Sikorsky and Lockheed Martin in Hyderabad is testimony to the strengths of this cluster. The state government has also set up an exclusive aerospace SEZ near Hyderabad to boost the sector.
To cash in on global opportunities, 40-50 companies led by Ravinder Reddy of MTAR Technologies and Subba Rao of Ananth Technologies have jointly formed a company of technocrats christened Samuha Engineering Industries Ltd. The government has given 200 acres of land in the aerospace SEZ to this cluster company, which includes SEC Industries, S&U Mek Engineering and SKM Technologies.
Apart from developing basic infrastructure with Rs 200 crore, the group will also set up facilities for high-precision meteorological tests and measurements to be utilised by its members.
Samuha plans to launch operations at the SEZ in the first quarter of 2012. Later, it will upgrade to sub-systems, systems and integration from the present level of component fabrication, says Sriram M M, director of Samuha. It will bid for high-value global contracts, which in turn will be sub-contracted to SMEs, including its promoter members, in the SEZ.
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