MSMEs face existential crisis, revenue to fall a fifth: Report – The Economic Times

Clipped from: https://economictimes.indiatimes.com

For MSMEs, the fall in revenue will be steeper at 17-21%, while Ebitda margin will shrink 200-300 bps to 4-5%.

MUMBAI: The 5% contraction in the Indian economy wrought by the Covid-19 pandemic – will significantly hurt micro, small and medium enterprises (MSMEs) across sectors, according to Crisil Research. While the pain is expected to lead to a 15% decline in revenue and 25% fall in EBITDA for India Inc, this crisis could prove a death knell for the small industries.

For MSMEs, the fall in revenue will be steeper at 17-21%, while Ebitda margin will shrink 200-300 basis points to 4-5% as weak demand gnaws away gains from lower commodity prices.

A sharp decline at the operating level will also impact creditworthiness, aggravating the liquidity stretch these units have been grappling with, particularly on the working capital front, Crisil Research said in a note.

The challenges would be the hardest for micro enterprises, which account for 32% of the overall MSME debt, and are facing material stress in terms of revenue growth, Ebitda margins and working capital stretch.

Previous downturns have shown that micro and small enterprises are unable to manage transient working capital challenges as easily as their large and medium peers.

To that extent, the measures announced by the Ministry of Finance and the RBI, nudging banks and other institutions to lend more, will help them tide over tapered cash flows.

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