Majority of the films felt that the impact of Covid on earnings could be between 20-50% while more than 62% of the businesses felt that they were positive regarding their business outlook.
MUMBAI: Companies operating in the micro, small and medium enterprises segment are confident of surviving the pandemic, despite an estimated 20-50% hit on their earnings says a joint survey conducted by Magma Fincorp and SP Jain Institute of Management and Research (SPJIMR).
The survey spanned 14,444 micro, small and medium enterprises who were surveyed across India between May 15 to May 31 to understand the impact of the pandemic on their earnings, business outlook, their perceived financial health, future loan requirements and extent of moratorium availed from various lenders.
Majority of the FIRMS felt that the impact of Covid on earnings could be between 20-50% while more than 62% of the businesses felt that they were positive regarding their business outlook. This despite the fact that the proportion of businesses resuming activities during the survey period was lower, at 58%.
More than three-fourths of the respondents rated themselves average to above average on their Financial Health Scores. The report was authored by Manish Jaiswal, MD, Magma Housing Finance & SME Business, Dr Tulsi Jayakumar, Professor-Economics & Chairperson, Family Managed Business SPJIMR and Dr Anshul Verma, Associate Professor (Finance), SPJIMR
“A key outcome of the report is the revelation of the deep transformation that will be required in the underwriting standards, which will need to deploy a plethora of data trails and data emerging from multiple variables arising out of structured and unstructured transactions which have been ignored hitherto. Conventional underwriting models will undergo a quiet requiem post the Covid pandemic, teaching us a few lessons along the way,” said Jaiswal of Magma.
As per the MSME Ministry, over 633.88 lakh unincorporated non-agriculture MSMEs are engaged in various activities ranging from manufacturing, trading and services in the country. The micro sector with 630.52 lakh estimated enterprises accounts for 99.4% of the total MSMEs operating in the country.
A whopping 51% respondents said they do not have any loanrequirements while 57% respondents had availed of the RBI moratorium.
Out of all the firms surveyed the impact of the pandemic was most felt of small category businesses, a sizeable number of which had a negative outlook on their future earnings. Almost 50% of the small businesses felt they could need a loan support in the immediate term.
The top states citing respondents with loan requirements were Jharkhand, Rajasthan, Orissa and Bihar, while the lowest loan requirement was stated in Kerala, Tamil Nadu and Western Uttar Pradesh.
As per government’s new classification, micro enterprises are those which involve investment of upto Rs 1 crore and turn over of Rs 5 crores while small enterprises are those with investments of upto Rs 10 crore and turnover of upto Rs 50 crores. Medium enterprises are those with investments of upto Rs 50 crores and turnover of upto Rs 250 crores.
“This report is a step in the direction of fostering SMEs amidst this crisis situation, as also building a meaningful and relevant industry-academia interface. The SMEs represent the under-served segments and research and practice in this area is in line with SPJIMR’s mission of ‘Influencing Practice,” said SPJIMRs Jayakumar.
On May 21, the Cabinet had approved additional funding of up to Rs 3 lakh crore at a concessional rate of 9.25% through ECLGS for the MSME sector.
Under the scheme, 100% guarantee coverage are being provided by National Credit Guarantee Trustee Company (NCGTC) for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested Micro Units Development and Refinance Agency (MUDRA) borrowers in the form of a guaranteed emergency credit line (GECL) facility.