Unit No. 4Skill Development for Entrepreneurs. Business incubation – Meaning – Setting up of Business

Incubation Centre,. Meaning and definition of a sick industry - Causes of industrial sickness. Preventive

and remedial measures for sick industries

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Entrepreneurial Development

Programs

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Entrepreneurial Development Programmes

• It may be defined as a programme designed to help an individual in strengthening his entrepreneurial motive and in acquiring skills and capabilities necessary for playing his entrepreneurial role effectively.

• An EDP is primarily concerned with developing and motivating entrepreneurial talent and growing him to be an effective entrepreneur

Objectives/Need of EDPs

1. To formulate project.

2. To select project/product.

3. To analyze the environment.

4. To acquire the basic managerial skills.

5. To understand the process and procedure of setting up of enterprise.

6. Enable to communicate clearly and effectively.

7. Develop a broad vision about the business.

8. Enable to take decisions.

Phases of Entrepreneurial Development Programs

• An EDP consist of 3 broad phases:

1.Initial or Pre-Training Phase.

2.Training or Development Phase.

3.Post Training or Follow-Up Phase.

Initial or Pre-Training Phase

• This phase includes activities and preparation required to launch the training programme.

• The main activities are:

1. Creation of infrastructure for training.

2. Preparation of training syllabus.

3. Tie-up of guest faculty.

4. Designing tools and techniques for selecting the trainees.

5. Formation of selection committee.

Training or Development Phase

• During this phase training programme is implemented to develop motivation and skills among the trainees.

• The objective of this phase is to bring desirable changes in the behaviors of the trainees.

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• Content of the Training Programme:

The main training inputs are as follows:

1.Technical knowledge

2.Achievement motivation training

3.Market Survey

4.Managerial Skills

5.Project Preparation

Post Training or Follow-up Phase

• This phase involves assessment to judge how far the objectives of the programme have been achieved.

• Monitoring and follow-up reveals drawbacks in the earlier phases and suggest guidelines for framing the future policies.

National Policy on Skill Development and

Entrepreneurship 2015• Ministry is an integral part of the

government policy on "Sabka Saath, Sabka Vikaas" and its commitment to overall human resource development to take advantage of the demographic profile of our country's population in the coming years.

Objective

• Skilling at scale with speed and standard (quality).

• A framework to all skilling activities being carried out within the country, to align them to common standards and link the skilling with demand centers.

• How skill development efforts across the country can be aligned within the existing institutional arrangements.

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Proposed Scheme on Entrepreneurship

Development• An entrepreneurship development scheme

is currently being developed by Ministry of Skill Development and Entrepreneurship.

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Educate and equip potential and early stage entrepreneurs

across India:• In partnership with experts, a world class

entrepreneurship education curriculum will be developed and will be delivered at no cost.

• Leveraging online learning, entrepreneurship courses can be taken as and when needed by students and business people alike through Massively Open Online Courses (MOOCs).

• Focus on entrepreneurship education will be integrated into the mainstream curriculum in 3,000 colleges around India.

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• Entrepreneurship education courses will also be delivered in approximately 325 industrial clusters across the nation. Through 50 nodal Entrepreneurship Hubs (E-Hubs) set up across all states, existing and potential entrepreneurs will be targeted for entrepreneurship education modules that suit their need.

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Connect entrepreneurs to peers, mentors,

incubators: • A web and mobile based platform connecting the

entire entrepreneurial ecosystem will be established. • Platform members will access content online,

including information on government services and special packages offered by service providers.

• The creation of new incubators will be encouraged and a national network of incubators and accelerators established to support young entrepreneurs.

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•Entrepreneurship activities in innovative and cutting edge technology areas will be aligned with initiatives such as Atal Innovation Mission (AIM) and Self Employment Talent Utilisation (SETU).

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Support entrepreneurs through

Entrepreneurship Hubs (E-Hubs): • Support to entrepreneurs, including

coordinated delivery of national and state government entrepreneurship programs and access to enabling resources, a national network of Entrepreneurship Hubs (E-Hubs) will be established.  One national, 30 state, 50 Nodal and 3,000 college based E-Hubs will be set up to deliver support. These E-Hubs will, collectively, cover the entire nation.

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Catalyse a culture shift to encourage

entrepreneurship:• To promote entrepreneurship, state and national

level interactions with stakeholders will be convened.• International linkages will be established through

internship opportunities and exchange trips to global entrepreneurship hubs

• National brand ambassadors. • Awards will be instituted for young achievers • a National Entrepreneurship Day will be celebrated.

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Encourage entrepreneurship among

underrepresented groups: • Special focus will be given to the inclusion

of scheduled castes & scheduled tribes, minorities, differently abled, etc., and regionally under-represented areas including large part of Eastern and North Eastern India in entrepreneurship programs.

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Promote Entrepreneurship amongst Women:

• Focus will also be placed on encouraging women entrepreneurs through appropriate incentives for women owned businesses under the public procurement process. 

• It will also be ensured that gender neutral incubation/ accelerator, network of mentors, industry, resource centres and credit institutes are developed to facilitate Women Entrepreneurs.

• Priority will be given for mentorship and support system for women entrepreneurs in existing business centres and incubators. Steps will also be taken to assemble gender disaggregated data.

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Foster social entrepreneurship and

grassroots innovations:• Universities and academic institutions will be

encouraged to launch a course on ‘Social Entrepreneurship’, including through online distance education, to actively promote social entrepreneurship in the country. Additional support, including through fiscal incentives and incubation, will also be considered.

• To foster grass-roots innovation, a focus on innovations in hubs, collaborations with organisations such as the National Innovation Foundation and promotion of Intellectual Property Rights will also be encouraged.

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Entrepreneurial Development Programme in India

1. Entrepreneurial Development Institute of India.

2. National Institute for Entrepreneurship and Small Business Development.

3. Xavier Institute of Social services Ranchi.

4. Madhya Pradesh Consultancy Organization Ltd.

5. Calcutta “Y” Self Employment Centre.

6. Technical Consultancy Organizations.

Role of Business Incubator

1. What is Business Incubator?

2. Why we need them?

Entrepreneur

Just born Baby Incubator

Business Incubator

Business Incubation

• Unique and highly flexible combination of business development process, infrastructure

and people designed to nurture new and small businesses by helping them to survive and through the difficult and vulnerable stages of development.

• It provided the services like fund raising, management training, office space etc.

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Developing Profitable Enterprises.

Create Jobs

Raise the awareness of Potential Entrepreneurs.

Create ecosystem conducive for entrepreneurship.

Success measures number of companies incubated and their being successful.

Objectives of these Incubators

Nature of these Incubators

NGO – Government financedPrivate – Self financed

• ICT (Information and Communication Technology) services • Office space • Shared workshops • Financial management/accounting services • Linkages to financiers, Loan and Loan guarantee• Incubation and Business Development: Business information • Business management and development advisory services • Incubation program for non-resident clients (virtual incubation) • Incubation program for resident clients • Mentoring/coaching and mentoring • Pre-incubation services • International Business Services: Help entering particular markets • Networks and Synergy: Networking events • Referrals to business professionals • Technology Transfer: Help with commercializing technology • Help with intellectual property/patent advice

• Other: Facilites also includes shared resources. • Strong support for access to business network, Angel/ VC/ Loan funding.

Facilities Provided by Incubators

How to start an Incubation center?

• Entrepreneurship in India is on the verge of explosive growth.

• This also throws new opportunities for the eco-system to take shape.

• Angel investors, venture capital, media, startup clubs, service providers, mentors and training companies are going to grow.

Assess the market conditions and entrepreneurs requirements• One important thing to keep in mind is what do

entrepreneurs really want from an incubator – is it access to cheap office space, internet, electricity (the tangible benefits of an incubator) or the spirit to work along with fellow entrepreneurs, chance to meet investors, get access to quality manpower and experienced advisors (the intangible benefits of an incubator).

• This will help you identify the real pain point of your customers (the entrepreneurs) and address their needs most effectively. It is very important to ask the question – why do we want to setup an incubation center?

Identify team and service providers

• While it may sound great to have an incubator which connects the entrepreneurs, investors, mentors, trainers, students and faculty – the real test comes in execution. The team that manages the incubator has to be A-class, as they are the ones who will drive the incubator, while the incubatees will drive their individual businesses. It is also good to identify a set of advisors – preferably a mix of industry veterans, faculty and investors, which always guides the incubation managers on strategic issues.

Arrange for resources• An incubation center needs resources during setup and

operations. Few of them are listed below:• a. Space• b. Connectivity – internet/telephone/electricity• c. Data center• d. Services – maintenance, security• e. Furnishing – chair, table, cubicles• f. IT Infra and Support – software, LAN, leased lines, wi-fi,

printer, scanner, copier, Access control system• g. Others – board rooms, meeting rooms, coffee machines,

restaurants etc.

Establish industry linkages

• Once the incubation center is setup, it is very important to establish industry linkages – maybe even before the first company starts operations. This maybe contact with local entrepreneurs, lawyers, CAs, industry associations like CII, FICCI, Nasscom etc. or media (TV, print etc.), and other parts of the eco-system like investors. Many incubators are not able to perform well for themselves or for their portfolio companies because of being too internally focused.

Draw out a calendar of activities

• It is important to draw out a calendar of activities, which keeps the incubator always charged. Conducting training programs, mentor meets, talks from experts, job fair, product showcases, technology demonstrations etc. from time to time helps the community to grow and brings in a great network effect!

Attract, select, retain and manage startups

• Last, but not the least, an incubators’ primary reason of existence is entrepreneurs! The team needs to think about ways to attracting, selecting, retaining and managing startups that inhabit their planets. A clearly conceived and stated criterion for selection is important – for example, most college based incubators do not allow anyone else other than their own alumni/students to get incubated. So it is important to communicate the same in advance to avoid disappointment. Another benefit of a government supported incubator is that the portfolio companies get service tax rebate – which again is a way to attract startup entrepreneurs

Name Place Website

Society for Innovation and Entrepreneurship (SINE)

IIT Bombay www.sineiitb.org

Technology Business Incubator (TBI) IIT Delhi www.fitt-iitd.org

Rural Technology and Business Incubator (RTBI)

IIT Chennai www.rtbi.in

Tiruchirappalli Regional Engineering College - Science & Technology Entrepreneurs Park (TREC-STEP)

REC Tamilnadu

www.trecstep.com

Science and Technology Entrepreneurship Park (STEP)

JSSATE Noida

www.jssstepnoida.org

PSG Science and Technology Entrepreneurship Park (PSG-STEP)

PSG Coimbatore

www.psgstep.com

IndiaCo Centre (for profit) Pune www.indiaco.com

Some Business Incubators in India

Top 10 Startup Incubation Centers in India

• Innovation and Entrepreneurship (SINE), IIT Mumbai• Technology Business Incubator, IIT Delhi• Technopark Technology Business Incubator (T-TBI), Kerala• Startup Village• Indian Angel Network (IAN)(National Science & Technology Entrepreneurship Development Board and

the Department of Science & Technology of the Government of India.)• Technopark TBI(a joint association of Technopark, Trivandrum and the Department of Science and

Technology (DST), Government of India)

• Centre for Innovation, Incubation and Entrepreneurship (CIIE), IIM Ahmedabad

• NSRCEL, IIM Bangalore• GSF Accelerator• AngelPrime- was launched recently in 2011 in Bengaluru

by well known names in the Indian tech industry like Bala Parathasarathy, Shripati Acharya and Sanjay Swamy. The areas that AngelPrime aims to incubate in are mobile payments, e-commerce and smartphone / tablet apps. It has already begun incubating a mobile payments company and a smartphone and tablet startup.

• http://trak.in/tags/business/2012/03/27/top-5-famous-startup-incubation-centers-india/

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Industrial sicknessIndustrial sickness

• The sickness of a firm has been defined as the situation where the rate of return realized on invested capital, taking risk involvement into consideration, is significantly & continuously less than the prevailing rates on similar investment.

• In other words we can say that it is situation where the revenues of a firm are insufficient to meet the costs & the average rate of return on investment is less than the firm's cost of capital.

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Definition according to companies Act,2002

Sick industrial company also means an industrial company which has –

- Accumulated losses in any financial year which are equal to 50 percent or more of its average net worth during four year immediately preceding such financial year

- Failed to repay its debts within any three consecutive quarter on demand made in writing for its repayment by a creditor of such company.

Criteria of Sickness

The criteria to determine sickness in an industrial company are •(i) the accumulated losses of the company to be equal to or more than its net worth i.e. its paid up capital plus its free reserves •(ii) the company should have completed five years after incorporation under the Companies Act, 1956•(iii) it should have 50 or more workers on any day of the 12 months preceding the end of the financial year with reference to which sickness is claimed. •(iv) it should have a factory license.

SYMPTOMS OF SICKNESS

To ascertain the symptoms of Sick Unit

The below Factors has to be taken in account•(a) The rate of return on investment & capital cash flow•(b) Ability to meet socio- economic obligation•(c) Capacity to redeem its debts•(d) Profitability•(e) Ability to face competition•(f) Ability to acquire share in the market

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Causes of industrial Causes of industrial sicknesssickness

External causesInternal causes

External causes:

1.Power Cuts:

- lack of power electricity support - shortage in electricity

Cont’d…Cont’d… 2. Erratic supply of inputs:

- shortage of raw material. - lack of transportation facility. - high price.

3. Demand & credit restraints:- lack of credit facility.storage expanses. chance of out of fashion. – no equal balance of demand and supply and lack of credit facility.

Cont’d…Cont’d…

4. Government policy:

- change in government policy. - lack of government support. - high authority to large unit.

Internal causes:

1.Fault at the planning & construction stage: - wrong location area - absence of market analysis. - unbalance capital structure. 2. Financial problem: - unable to repay payment. - lack of financial support from bank &

institution.

Cont’d…Cont’d…

3. Defective plant & machinery - lack of technical & professional skill - lack of technology - in efficient in machine. - high maintenance.

4. Entrepreneurial incompetence - lack of knowledge of market - lack of efficient professional skill - lack of innovation

Some concerns related to Sick Units

• A dividend postponing unit to investors• losing or discouraging unit to industrialists• A doubtful debtor & a weak borrower to

creditors & bankers• An industrial problem unit to the government • A bad employer to workers • Great wastage of technical & human resources to

the country.

Revival Measures & Strategies

• Identify the sickness in a unit as early as possible & to analyses & diagnosis its causes

• Nurse the unit immediately with appropriate remedial measures with a view to turnaround the sick unit to an economically viable one which means a substantial & sustained positive change in the performance of the business entity

Broad objectives of SICA

• Timely detection of sick and potentially sick companies.

• Speedy determination by a body of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies.

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The important provisions of SICA

• Two quasi-judicial bodies were formed: Board for Industrial and Financial Reconstruction (BIFR) and Appellate Authority for Industrial and Financial Reconstruction (AAIFR).

• BIFR was set up as an apex board to tackle industrial sickness and was entrusted with the work of taking appropriate measures for revival and rehabilitation of potentially sick undertakings and for liquidation of non-viable companies.

• While, AAIFR was constituted for hearing the appeals against the orders of the BIFR.

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Revival of sickness

When an Industrial Unit is identified as sick a viability study should be conducted to assess the unit, it covers:

Market Operations Finance Human Resource Environment

The viability study may suggest one of the following measures: Debt restructuring Infusion of funds Replacement of existing management

How to detect symptoms of sickness

Commercial banks & financial institution can detect the symptoms of sickness through periodical progress report •Financial statement, •Stock statement & return under periodical information system•Plant visit, personnel discussion•Report from nominee directors•The establishment of management information system within the industrial unit will help its management to detect the symptoms of the sickness & forward it to adopt remedial measures

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Steps to be taken by banks.

- giving adequate working capital when there is a shortage.

- recovery of interest reduced rate- arrange the special committee of state level

in the local branch for link between financial institution and government agency.

Policy framework and Concession by the government

BIFR: How to apply

• BIFR would make an inquiry as it may deem fit for determining whether any industrial company had become sick, under the following conditions:-

• If the Board of Directors of a sick industrial company made a reference to the BIFR for determination of the remedial measures with respect to their company. Such reference was to be made within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year at the end of which the company had become sick.

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• For filing the reference, the Board of Directors must have sufficient reasons to form the opinion that the company had become sick; or

• On receiving such information (reference) with respect to a sick company or upon its own knowledge as to the financial condition of a company. Such a reference to the board may be made by:- (i) The Central Government; (ii) The Reserve Bank of India; (iii) State Governments; (iv) Public financial institutions; (v) State level institutions; or (vi) Scheduled banks.

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• If the Board deems it fit to make an inquiry or to cause an inquiry to be made into any industrial company, it may appoint one or more persons as special director(s) of the company for safeguarding the financial and other interests of the company

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• If after making an inquiry, the Board is satisfied that the company has become sick, it shall, after considering all the relevant facts and circumstances of the case, may take either of the following decisions:-

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Revival programme

Settlement with creditors Disinvestment and disposal Strict control over costs Streamlining of costs Improvement in managerial systems Workers participation Change of management Merger with a healthy company

• If the Board is of the opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court. The High Court shall, on the basis of the opinion of the Board, order winding-up of the sick industrial company in accordance with the provisions of the Companies Act, 1956.

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• Sick Industrial Companies (Special Provisions) Act,1985 (SICA) was repealed and replaced by Sick Industrial Companies (Special Provisions) Repeal Act,2003.

• The new Act diluted some of the provisions of SICA and plugged certain loopholes.

• It aimed not only to combat industrial sickness but also to reduce the same by ensuring that companies do not view declaration of sickness as an escapist route from legal provisions after the failure of the project or similar other reasons and thereby gain access to various benefits or concessions from financial institutions.

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• Under it, the Board for Industrial and Financial Reconstruction (BIFR) and Appellate Authority for Industrial and Financial Reconstruction (AAIFR) were dissolved and replaced by National Company Law Tribunal (NCLT) and National Law Appellate Tribunal (NCLAT) respectively.

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• To sum up ,the incidence of industrial sickness in general and in small industrial units, in particular can be reduced if all the concerns make a concerted effort to study the causes of and cures through their temporary sacrifices with a sense of dedication and belongingness.

Hindustan Motors

• Maker of Ambassador saloon, once the power symbol in India is set to declare itself sick.

Revenue from its flagship product Ambassador tumbled

Slow to respond to aggressive competition from multinational players such as Suzuki and Hyundai due to its design which has remained virtually unchanged for over 6 decades

It had a negative net worth of Rs. 36 crore on June 30th 2013

Board of Industrial and Financial

Reconstruction (BIFR)• A central Govt. agency that helps

restructure bankrupt companies or close down sick unit.

HM is the third automobile company to report in BIFR’s door after PAL, the maker of Premier Padmini and FIAT India.

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Remedial

Chennai Plant is being planned to turn in to a separate entity.

The Chennai unit does contract manufacturing for auto giants such as Mitsubishi and Isuzu.

It also intends to bring in foreign investment for its Chennai and West Bengal units.

It recently launched the BS-IV Ambassador Encore and is developing a sub-4 metre version.

Besides Ambassador, HM also has Winner trucks in its portfolio.

The company management says overall vehicle sales would increase to 7,500 units this year.