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Volume 2 | Issue 1 | March 2012Initiated by SME Chamber of India

CO NNECT

SME BANKING

CONCLAVE 2012

SME MANUFACTURING

SUMMIT 2012

EMPOWERING SMEs

FOR INCLUSIVE GROWTH

Proceedings of the Activities Includes

Pg 6 Pg 30 Pg 46

Private Circulation Only

Empowering

SMEs for

Financial Inclusion

and Growth- Dr. K. C. Chakrabarty

Deputy Governor, Reserve Bank of India

Issue 1 | | 03March 2012www.smeconnect.in

The financial crisis and slowdown in EU nations has adverse impact

on economies across the world. India, too, is facing the heat of this

current crisis with the GDP growth falling to 6.1% in Q3, 2011-2012

from 6.9% in Q2, 2011-12 from 8.9% in Q2, 2010-11. Also the Index of

Industrial Production (IIP) that had increased to 5.9% in November, 2011

slipped back to 1.8% in December, 2011 clearly indicates the impact of the

economic crisis on the Indian Economy.

The importance of Indian SME sector is well known. Currently the sector is

facing severe problems, mainly due to the impact of the slowdown in the West

as well as reduction in manufacturing growth. Most important of them

include; lack of access to adequate and affordable finance, mainly resulting

from decrease in the credit flow to the sector, decrease in exports, volatility of

Dollar, increased input costs like manpower, electricity and raw materials

amongst many others.

I observed that,

Therefore we insist bankers to enhance credit

flow towards SME as well as market financial products aggressively to attract

more SME customers. But we found that 92% MSMEs still do not approach

banks or banks do not approach SMEs to fulfill their requirements. Therefore

we have taken initiative to provide platform to banks and SMEs to grow

together and organized 'SME Banking Conclave' on 4th February at Mumbai

which was attended by leading bankers; and funds and connectivity seeking

SMEs.

In this Issue we have also highlighted the activities organized by the Chamber

on 'SME Manufacturing Summit' and 'Empowering SMEs for Inclusive

Growth' with Central Bank of India which will throw light on various needs of

SME manufacturing sector.

The Chamber will continue to work for development of Indian SME Sector and

provide useful information in our forth-coming issues.

“Without SMEs India cannot grow; and without support

of Banks SMEs cannot grow.”

Editor

Panel of Advisors

Publicity and Marketing

Team

Layout & Graphics

S. Maheshkumar

Chandrakant Salunkhe

A. Rameshkumar

Girish Bhagat

S. Hemant Kumar (Director)

Bricks Marketing & Promotion Pvt. Ltd.

Saakshi Kulkarni

Omesh Kandalkar

Neera Inamdar

Madhuri Khanwalkar

Gandhi Gajelli

V. K. Venkatachalam

Chandrakant SalunkheFounder President

Small & Medium Business

Development Chamber of India

Email: [email protected]

CO NNECTVolume 2 | Issue 1 | March 2012

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Foreword

Integration of SMEs, Capacity Building, Provide

Emerging Business Opportunity, Finance &

Investment, Marketing & Promotion, Export

Promotion, Joint Venture, Technology Transfer,

PE/VC, Redressal of Issues & Problems, Connectivity

with Overseas SMEs, Importers & Buyers

Our Support Services

Contact for Advertisements, Sponsorship

& Speaking Opportunity:

Tel: +91 - 22 - 6667 4444 / 6677 0218 / 6150 9800

Registered & Head Office:

3, Up Gr Floor, Samruddhi Venture Park,

Marol MIDC Industrial Estate,

Andheri (E), Mumbai - 400093. India SMALL & MEDIUM BUSINESS DEVELOPMENT CHAMBER OF INDIA

SME CONNECT - Newsletter Initiated by

Price: 100`

CO NNECT

04 | March 2012 | Issue 1 www.smeconnect.in

Content

Activity of the Chamber

Articles

News

Visit of Estonia Delegation

Singing of

Memorandum of

Understanding

Pg 62

Conference on

EMPOWERING SMEs FOR INCLUSIVE GROWTH

Panel Discussions on Pg 51

Pg 46

Building IntegratedRelationships with

Going beyond Lending

SMEs – Pg 54 INNOVATIVE STRATEGIES

AN IMPERATIVE FOR SMEs

Pg 58CONSERVE

ENERGYby Adopting to

Total Lubrication Management

K. B. Mathur

Director - Global Technical Services

Pg 60

SME BANKING CONCLAVE 2012

Panel Discussions On

Improving capabilities of SMEs for better growth

Transforming SMEs into emerging corporate

Initiatives for development of SMEs

Pg 20Pg 23

Pg 26

Pg 6

SME MANUFACTURING SUMMIT 2012

Panel Discussions on

Challenges and Opportunities For SMEs

Strategies for better growth

Support Services for better growth

Pg 37Pg 40

Pg 42

Pg 30

TOPICS TO BE COVERED

BENEFITS TO THE PARTICIPANTS

WHO CAN PARTICIPATE?

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Micro, Small and Medium Entrepreneurs

Multinational Companies

Government Officials

Exporters and Importers

Engineering &

Financial & Legal Consultants

Traders and Service Providers

IT and IT enabled service providers

Executives from Production, Manufacturing,

Materials, Marketing, ICT & Logistic

Knowledge Providing Institutions

R & D Institutes and Laboratories

Bankers and Financial Institutions

VC / PE Investors

Officials from FTZ, SEZ & Technology Park

QualityAssurance & CertificationAgencies

Credit RatingAgencies

Insurance Companies

Buying and SellingAgents

Management Consultants

Investment Boards

Design,

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An Overview of Manufacturing SME Sector

Initiatives of Government of Gujarat for the growth of SMEs

Role of bankers for the growth of SMEs

Impact of Global Slowdown on Industry / SME Sector

Integration of SMEs from Manufacturing and Service Sector

Investment and Funding Opportunity for SMEs

SME Stock Exchange – New Opportunities for SMEs

Incentives & Support for SME Manufacturers and Exporters

Innovative and IndustrialAutomation- Imperative for SMEs

Importance of Credit Rating for better credibility

Marketing Promotion and Branding Strategy

Efficient H.R. Management System in SMEs

Strategies for enhancement and promotion of Exports

Importance of IPR, Copy Rights and Trade Marks

New IT Solutions for growth of Business

Joint Ventures & International Collaboration Opportunities for SMEs

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Interaction with bankers, investors, Government officials

Connectivity with CEOs of large companies, corporate

Opportunity to establish contact with buyers, suppliers and other

industries

Networking between SMEs, Manufacturers, Service Sector

Industries and Professionals

To understand emerging business opportunities, investment, exports and

technology

New Financial Products

Incentives and Schemes for SMEs

Identifying distributors, suppliers and other potential partners

Current trends in markets and global scenario

Annual Flagship Activity

GUJARAT SME MANUFACTURING SUMMITIntegration of SMEs for Better Growth

SMALL & MEDIUM BUSINESS DEVELOPMENT CHAMBER OF INDIA

Organises

Contact For

Registration in Gujarat

Mr. Pinak J. Shukla

Tel: +91 - 99092 00195

Contact For

Registration in Mumbai

Ms. Madhuri / Saakshi

Tel: +91 - 22 - 6667 4444 / 6150 9800

For Sponsorship &

Speaking Opportunity Contact

Mr. S. Maheshkumar - General Secretary

Mobile: +91 - 98203 37228

www.smechamberofindia.com/Gujarat_SME_Manufacturing_Summit

Friday, 13 April 2012 | Ahmedabadth

Industrial and SMEResearch Centre of India

PACKAGING INDUSTRY

ASSOCIATION OF INDIA

EUROPE - INDIA

SME BUSINESS COUNCIL

EISBC

®

IITC-INDIA

INDIA INTERNATIONAL

TRADE CENTRE (IITC-INDIA)

SME TRAININGINSTITUTE OF INDIA

Macro Eventsand Exhibitions Pvt. Ltd.

CO NNECTM A G A Z I N E & P O R T A L Solutions Private Limited

®

Co-Sponsor Knowledge Partners Supported by Supported by Supported by

Supported by Supported by Supported by

i NDIAN SME

KNOWLEDGE FORUM

IT PartnerEvent Managed by Media Partner

(Dignitaries from left to right) – CEO, Reliance Commercial Finance Ltd., – MD & CEO, Asia

Pragati Capfin Pvt. Ltd. & Chairman, Northern Region, SME Chamber of India, – Executive Director, Central Bank of India,

– President, SME Chamber of India, – Dy. Governor, Reserve Bank of India,

– Former Chairman, SEBI & Chairman, Indian SME Knowledge Forum, – CMD, Indian Overseas Bank,

– CMD, ECGC, – MD State Bank of India and – Chief Executive, IBA

Shri K. V. Srinivasan Shri A. Ramesh Kumar

Shri R. K. Dubey

Shri Chandrakant Salunkhe Dr. K. C. Chakrabarty Shri G. N.

Bajpai Shri M. Narendra Shri N.

Shankar Shri A. Krishna Kumar Dr. K. Ramakrishnan

SME Banking Conclave 2012 | www.smeconnect.in

Saturday, 4th February 2012 | Hotel Sofitel, BKC, Mumbai

SME BANKING CONCLAVE 2012Ensuring growth of SMEs for Better Future

INAUGURAL SESSION

Dr. K. C. Chakrabarty – Deputy Governor, Reserve Bank of India inaugurating the Conclave.

The main purpose of organising the “SME Banking Conclave was to bring the Bankers, Financial Institutions and the

SMEs together at one platform to deliberate on the role of Banking Sector for growth of SMEs, enhancement of credit

flow, current situation of SMEs, impact of global financial slow down on Indian industry and SMEs, unaffordable

interest rates, credit rating systems, avoidance of NPAs, inadequate and timely finance as priority sector, hurdles for getting

funding support for Expansion, Diversification, Technology Transfer and Joint Ventures. The Conclave also highlighted the

necessity of business ethics, good governance, financial management system, strategy and initiatives for promoting SMEs to

emerging Corporate.

06 | March 2012 | Issue 1

CO NNECTActivity of the Chamber

Presentation of

'BEST BANKER AWARDS'

Dr. K. C. Chakrabarty Shri R. K. Dubey– Deputy Governor, Reserve Bank of India presenting the Best Banker Award 2012 to – Executive

Director, Central Bank of India

Dr. K. C. Chakrabarty Shri M. Narendra– Deputy Governor, Reserve Bank of India presenting the Best Banker Award 2012 to – Chairman

& Managing Director, Indian Overseas Bank

CO NNECT Activity of the Chamber

SME Banking Conclave 2012 | www.smeconnect.in Issue 1 | | 07March 2012

Shri G. N. Bajpai, Former Chairman, SEBI &

Chairman, Indian SME Knowledge Forum,

Shri M. Narendra, Chairman & Managing

Director, Indian Overseas Bank, Shri N.

Shankar, CMD, ECGC, Shri A. Krishna Kumar,

MD, SBI, Shri R. K. Dubey, ED, CBI, Dr K.

Ramakrishnan, CEO, Indian Banks'

Association, Shri K V Srinivasan, CEO,

Reliance Commercial Finance Ltd, Shri

Chandrakant Salunkhe, President, SME

Chamber of India, SME Entrepreneurs, other

distinguished guests, members of the print

and electronic media, ladies and gentlemen.

It is a matter of great pleasure for me to be

present here today at the “SME Banking

Conclave 2012' and share some of my

t h o u g h t s a n d ex p e r i e n c e s o n t h e

development of MSMEs which is a vital

sector of our economy. This Conclave gains

importance in the context of globalization

when the Small and Medium Enterprises

(SME) face challenges and take advantage of

opportunities created. Such a forum helps in

garnering and shaping public opinion,

building consensus, crystallizing policy

inputs and giving us feedback on our policy

initiatives. I congratulate SME Chamber of

India for organizing the 'SME Banking

Conclave 2012'. The SME Chambers has

succeeded in bringing a large number of

MSMEs under a single umbrella, thereby,

making it a potent and active forum for

dialogue with the potential partners in the

development of the MSME sector in the

country, which includes the industry, the

financial sector and the Government.

As all of you are associated in some ways

with the MSME sector, its critical role and

place in the Indian economy is very well

known to all of you in terms of employment

generat ion , exports and economic

empowerment of a vast section of the

population and I do not want to spend a lot of

time overemphasizing it. But let me quote

just a couple of statistics. As per available

statistics (4th Census of MSME Sector), this

sector employs an estimated 59.7 million

persons spread over 26.1 mil l ion

enterprises. It is estimated that in terms of

value, MSME sector accounts for about 45%

of the manufacturing output and around

40% of the total export of the country which

is next only to the agricultural sector. It is,

therefore, only appropriate that public

policy has accorded high priority to this

sector in order to achieve balanced,

sustainable, more equitable and inclusive

growth in the country.

The MSMEs primarily rely on bank finance

for their operations and as such ensuring

timely and adequate flow of credit to the

sector has been an overriding public policy

objective. Over the years there has been a

significant increase in credit extended to this

sector by the banks. As at the end of March

2011, the total outstanding credit provided

by all Scheduled Commercial Banks (SCBs)

to the MSE sector stood at Rs.4785.27 billion

as against Rs. 3622.90 billion in March 2010

registering an increase of 32%. The

outstanding credit for the last four years to

the MSE sector is given in Table 1.1 below:

Importance of the MSME sector

Year Public Sector Banks Private Sector Banks Foreign BanksAll Scheduled

Commercial Banks

Last Friday of No of A/Cs Amt O/s No of A/Cs Amt O/s No of A/Cs Amt O/s No of A/Cs Amt O/s

March 2008* 3.967 1511.374 0.819 469.118 0.065 154.892 4.851 2135.386

March 20094.115(3.73%)

1914.083(26.64%)

0.678(-17.21%)

466.563(0.54%)

0.058(-10.78%)

180.634(16.61%)

4.851(No change)

2561.280(19.94%)

March 2010#7.217(75.38%)

2763.189(44.36%)

1.131(66.81%)

648.247(38.94%)

0.157(170.69%)

211.470(17.07%)

8.505(75.32%)

3622.907(41.44%)

March 2017.398(2.51%)

3694.30(33.70%)

1.718(51.90%)

881.16(35.93%)

0.186(18.47%)

209.81(-0.78%)

9.302(9.37%)

4785.27(32.08%)

Table1.1: Outstanding credit to the MSE sector by SCBs

* change in definition of the sector as per the MSMED Act 2006 advised to banks in 2007, # Retail trade included in service sector

Source: Scheduled Commercial Banks Note: Figs. In parentheses indicates Y o Y % growth/decline‐ ‐

INAUGURAL ADDRESS

Dr. K. C. Chakrabarty – Deputy Governor, Reserve Bank of India delivering Inaugural address


SME Banking Conclave 2012 | www.smeconnect.in08 | March 2012 | Issue 1

The total MSE Credit as percentage of Adjusted Net Bank Credit (ANBC) has been increasing since 2007 as shown below in Chart 1.1. In March

2011, it stood at 14.8% for the Public Sector Banks (PSBs).

Despite the increase in credit outstanding to

the sector, the MSME borrowers feel that the

lenders are not doing enough for the MSMEs

and are catering more to the needs of the

large corporates. This gap in perception

needs to be bridged.

SMEs face a number of problems, such as,

absence of adequate and timely banking

finance, limited capital and knowledge, non-

availability of suitable technology, low

production capacity, ineffective marketing

strategy, identification of new markets,

constraints on modernisation & expansion,

non-availability of highly skilled labour at

affordable cost, follow up with various

government agencies to resolve problems,

etc. More recently, the MSME Association /

Chambers feel that the global recession,

inflation and depreciation of the rupee is

affecting them adversely. I would now like to

highlight some of the major constraints faced

by the MSME sector and the important

measures taken by Government of India and

Reserve Bank of India to address them:

Access to timely and adequate credit is

critical for MSMEs growth and development.

To ensure enhanced credit flow to the sector,

and more so to the micro units, in terms of

the recommendations of the Prime

Minister's Task Force on MSMEs (Chairman:

Shri T. K .A. Nair, Principal Secretary,

Government of India) constituted by the

Government of India, banks have been

advised to achieve a 20 per cent year-on-year

growth in credit to micro and small

enterprises; the allocation of 60% of the MSE

advances to the micro enterprises is to be

achieved in stages viz. 50% in the year 2010-

11, 55% in the year 2011-12 and 60% in the

year 2012-13 and achieve a 10% annual

growth in number of micro enterprise

accounts. The Reserve Bank is closely

monitoring the achievement of targets by

banks on a quarterly basis. The matter is

followed up with the laggard banks to know

their constraints and impress upon them the

need to devise strategies to gear up the credit

mechanism for the sector. While the banks

have achieved the target of 20% y-o-y

growth in credit to the sector the target for

the micro units is still an area of concern. The

banks have been advised to device strategies

to step up their lending to micro units

There is, therefore, a need to ensure access of

b a n k i n g f a c i l i t i e s i n t h e r e m o t e

unbanked/under banked areas. Financial

inclusion, including MSME finance and the

drive to universal access is the national

mandate. Financial inclusion makes growth

b r o a d b a s e d a n d s u s t a i n a b l e b y

progressively encompassing the hitherto

excluded population. With an objective of

ensuring uniform progress in provision of

banking services in all parts of the country,

banks were advised to draw up a roadmap to

provide banking services through a banking

outlet in every unbanked village having a

population of over 2,000 by March 2012. The

Reserve Bank advised banks that such

banking services need not necessarily be

extended through a brick and mortar branch

but could be provided also through any of the

various forms of Information and

Communication Technology (ICT) - based

models, including Banking Correspondents

(BCs). About 74,000 such unbanked villages

have been identified and allotted to various

banks through State Level Bankers

Committees (SLBCs). As at the end of

September 2011, as reported by the State

Level Bankers' Committees of various

states/Union Territories, banking outlets

have been opened in 42,079 villages across

the various States in the country. This

comprises of 1127 branches, 39998 business

correspondents and 954 other modes like

rural ATMs, mobile vans etc. In addition, the

Reserve Bank of India has advised banks to

roll out the Financial Inclusion Plans (FIP)

for drawing up an action plan to provide

banking facilities in villages with population

less than 2000 through multiple channels.

Venture /Risk capital is often a more

appropriate financing instrument for high-

growth-potential and start-up SMEs.

Although MSMEs commonly use traditional

debt, this type of financing is often not

accessible for fast-growth and start-up firms.

During their initial phase, firms need finance

to study, assess and develop an initial

concept (seed phase) or for product

development and initial marketing (start-up

phase). At this stage, firms may be in the

process of being set up or may exist, but have

yet to sell their product or service

commercially. High-growth firms usually

develop an idea, concept or product that

requires an incubation period before

generating revenues and profits. Firms,

typically, look for venture capital to provide

them with the financing they need to expand

or break into new markets and grow faster.

Thus, the ability of MSMEs (especially those

involving innovations and new technologies)

to access alternative sources of capital like

angel funds/risk capital needs to be

enhanced considerably. For this purpose,

removing fiscal/regulatory impediments to

the use of such funds by the MSMEs should

be considered on priority. The Government

of India, in terms of the recommendations of

the PM's Task Force on MSMEs, is looking

into the area.

Chart-1.2 : Financial Exclusion in MSMEs

Access to Credit

Need for Venture / Risk Capital



The number of units identified as potentially

viable as a percentage to total sick MSE units

is around 8% whereas the number of sick

units found unviable was as high as 85%. The

units placed under nursing as a proportion to

the total number of sick units stood at 5.22%.

I would like to emphasize that timely

detection of sickness is critical as any delays

in this regard makes the possibilities of its

revival of potentially viable sick units recede.

As any other sickness, the need for timely

treatment after identification of sickness

cannot be overemphasized in MSMEs. In

order to hasten the process of identification

of a unit as sick, a proposal for modifying the

extant definition of sickness, in line with the

recommendations of the Working Group on

Rehabilitation of sick SMEs, is under

consideration of the Reserve Bank of India.

For viable units, timely and effective

rehabilitation by way of renegotiations of

terms of loans, induction of fresh dose of

funds, business restructuring, change of

management etc. may become necessary.

The process should not only be quick,

efficient, cheap and fair to all stakeholders

but also acceptable to and implement able by

a l l , w i t h n e c e s s a r y m o n i t o r i n g

arrangements for implementation of the

same. In case the unit is not found viable,

recovery of the dues of lenders through a fair,

efficient and swift legal mechanism should

be the focus. As it is observed that

rehabilitation of sick micro, small and

medium enterprises could not be taken up

due to non-availability of promoters'

contribution in a large number of cases, we

have recommended to the GOI to set up a

Rehabilitation Fund for rehabilitation of sick

MSMEs.

All Scheduled Commercial Banks have also

been advised on May 4, 2009, to review and

put in place MSE Loan policy, Restructuring /

rehabilitation policy and Non-discretionary

One Time settlement scheme for recovery of

non-performing loans, duly approved by

their Board of Directors. Banks were advised

in December 2009 to give wide publicity to

the Non-discretionary One Time Settlement

scheme for recovery of non-performing

loans for the MSE sector by placing it on their

bank's web-site and through other possible

modes of dissemination.

Access to Equity Capital

Need for Skilled Labour

Factoring to Tackle Delayed

Realization of Receivables

Sickness

Access to Equity capital is a genuine

problem. At present, there is almost

negligible flow of equity capital into this

sector. Absence of equity capital may pose a

serious challenge to development of

knowledge-based industries, particularly

those that are sought to be promoted by the

first-generation entrepreneurs with the

requisite expertise and knowledge. There is

a demand for a dedicated Exchange for

MSMEs and SEBI has permitted BSE and NSE

to set up an Exchange for MSMEs in terms of

the recommendations of the PM's Task Force

on MSMEs.

The sector often feels the constraint of non-

availability of skilled labour. It is indeed

ironic that in a nation of more than a billion

individuals, skilled labour is cited as scarce.

In this regard, I feel that we are a very young

nation – just over 64 years since

independence – setting out on a path of

sustained economic growth, for decades to

come. As per the National Commission on

Population, the age-wise distribution of the

population of India is going to change

significantly in the coming years. By 2016,

approximately 50 per cent of the total

population will be in the age group of 15 - 25

years. Thus, there would be a tremendous

increase in the number of youth entering the

education and job market in the ensuing

years. On an average, it is estimated that

around 1.5 crore persons per annum would

enter the employment market during the

next 30 years. Each person, in this bold new

generation, will be in the prime of his or her

life, striving for a better tomorrow – creating,

in the process, new growth opportunities, for

budding entrepreneurs! We need to

capitalize on this unique demographic

advantage. At present, there are various

organizations at the national and State levels

offering support to entrepreneurs in various

ways. The Government of India and various

State governments have been implementing

a number of schemes and programs over the

years. The Rural Self Employment Training

Institutes (RSETIs) are working in this

direction. There is, however, a need to

examine the impact of RSETIs.

Considerable delay in settlement of

dues/payment of bills by the large-scale

buyers to the MSMEs units adversely affects

the recycling of funds and business

operation of MSME units. Though the

Government has enacted the Delayed

Payments Act, 1998 many of the MSME units

are reluctant to pursue cases against major

buyers. After the enactment of the Micro,

Small and Medium Enterprises Development

(MSMED), Act 2006, the existing provisions

of the Interest on Delayed Payment Act, 1998

to Small Scale and Ancillary Industrial

Undertakings, have been strengthened. The

banks have been advised by Reserve Bank of

India to sanction separate sub-limits within

the overall limits sanctioned to the corporate

borrowers for meeting payment obligations

in respect of purchases from MSME sector. In

practice, however, the legislation did not

improve the position of MSEs because of

their dependence on large businesses for

continued business. This problem has to be

institutionally tackled by factoring and

banks should provide such services

particularly for MSMEs. To facilitate

factoring services the Government has

recently passed the Factoring Regulation Bill

that would address delays in payment and

liquidity problems of micro and small

enterprises. Factoring provides liquidity to

small and medium enterprises against their

receivables from customers and is regarded

as a cash management tool. Besides, factors

would be entitled to take legal recourse for

recovering assigned debt and receivables

from buyers of goods and services. The

Factoring Bill creates the legislative

environment for factoring and makes the

process easier.

Growing incidence of sickness of SSIs is yet

another area of concern. When the sickness

prolongs it leads to the closure of units and

unemployment. The mortality of the SSI

units is high. This has wider implications

including locking of funds of the lending

institutions, loss of scarce material resources

and loss of employment. The data showing

the position of sick small and micro

enterprises as at the end of March 2010 & 11

is given below:

End of Total No. of SickUnits

PotentiallyViable

Non-Viable Viability yet to bedecided

Units put undernursing

Units O/S Units O/S Units O/S Units O/S Units O/ S

March 2010 77723 5233.15 9160 964.75 64403 3891.33 4160 377.03 2360 478.84

March 2011 90141 5211.25 7118 1112.98 76518 3589.12 6505 509.15 4698 518.30





Role of MSME Associations / Chambers

A Piece of Advice

Conclusion

The MSME Associations and Chambers have

an important role to play in stepping up

credit to this segment. They need to

proactively engage themselves in organising

workshops and training programs for their

members to enlighten them about cash flow

cycles , various f inancial products ,

accounting practices, etc. In this regard, the

M S M E A s s o c i a t i o n s , C h a m b e r s o f

Commerce, etc. may like to collaborate with

banks, NIBM or any other training institute

in the area of banking and finance, basic

accountancy and information technology for

MSEs. I appreciate the effort of the SME

Chambers in organizing this Conclave. I

would, however, urge upon the Industry

Associations to play a more proactive role

and bring forward specific cases where the

MSME entrepreneurs are facing problems in

accessing credit through the banking

channels. Such issues could be discussed and

resolved in such a forum. Even if we can

resolve ten percent of the cases of genuine

problems being faced by a MSME

entrepreneur, I would feel that such

conclaves have been successful. By doing so,

the industry associations can bridge the gap

between banks and individual firms in

reaching of objectives such as addressing

problems common to all members,

stimulating cooperative action among

manufacturers and providing access to

resources aimed at assisting manufacturers

MSMEs should understand that banks are

responsible to their depositors and

shareholders and, therefore, they, i.e. the

MSEs, as customers of bank credit, have

certain obligations to fulfill by way of

repaying bank loans, maintaining proper

books of accounts, submitting information

correctly and more importantly, sharing

information about financial problems when

these arise so that they can work together

with the bank in resolving these. It is in the

interest of MSEs, to get themselves rated by

independent rating agencies, as it could

enable them to negotiate with their bankers

for interest rate reduction, larger loan size or

even obtain faster processing of their loan

applications etc. MSEs need to be aware that

if they default and their credit history is poor

they will find it difficult to access bank

finance, as banks have been mandated by RBI

to pass on all credit history of their clients to

CIBIL or any other credit bureau registered

with RBI.

Further, senior-level representatives of

SME/SSI Associations in each State are

members of the Empowered Committee set

up by RBI at each of its regional offices, with

the SLBC Convenor, representatives of banks

having predominant share in SME financing

in the State, SIDBI, Director of Industries of

the State Government etc., are also members.

MSE Associations need to use this Forum not

only for removing bottlenecks in the smooth

flow of credit to the sector and for reviewing

the accessibility of bank finance to more and

more MSEs, but also highlight gaps if any in

the attitude and skills at the bank branch

level. I would urge upon the Industry

Associations/Chambers to take up region-

specific issues relating to MSEs with the

concerned Regional Director of Reserve

Bank of India and the SLBC convener banks.

Such issues that cannot be resolved at

regional office level could be brought to the

notice of central office of RBI. They could also

spread awareness of the Government

Schemes and Code of Bank's Commitment to

MSEs among their members. Lastly, the

success stories of micro and small

enterprises may be widely disseminated as it

would inspire others to strive for excellence

and thus contribute towards achieving

greater heights in building a strong and

prosperous India. The new entrepreneurs

could also take a cue from the mistakes of

their experienced counterparts and ensure

not to repeat the same.

While I have sought to highlight the

expectations from various stakeholders in

supporting the growth of MSMEs, it is

important to remember that individual

MSMEs, themselves, have to constantly seek

to transform themselves, in line with

changing environmental factors, to ensure

that they end up among the success stories

instead of the failures. I have, in the past also,

drawn from the famed management thinker

Peter F. Drucker's writings to highlight four

typical mistakes that entrepreneurs need to

avoid as they develop their businesses.

These are, particularly relevant for MSMEs

during the growth phase. These include the

need to be open to potential new /

unintended markets or applications for

products developed by companies; the need

to focus on cash flows instead of focusing

only on profits as these are the lifeline that

keeps the company going; creating a

management team as the business develops;

and lastly, the need to constantly ask the

question that what the business needs at this

stage and whether one is concentrating on

the right things.

Let me conclude by restating the fact that

MSMEs will continue to play a very

important and vital role in our economy

where the twin problems of unemployment

& poverty constitute a major developmental

challenge. In fact, if India were to have a

growth rate of 8-10 percent for the next

couple of decades, it needs a strong micro,

small and medium sector. MSMEs are the

best vehicle for inclusive growth, to create

local demand and consumption. The MSMEs

of yesterday are the large corporates of today

and could be MNCs of tomorrow. Thus, the

banks and other agencies should take pride

while servicing the MSMEs as they are

playing an instrumental role in the formation

of MNCs of tomorrow. MSMEs themselves

have to be on their toes, in this rapidly

changing business environment, and keep

evolving to stay clear of all the potential

pitfalls that confront them in their progress

from small enterprises to large corporations.

I look forward to your feedback in creating an

enabling environment for the promotion of

MSMEs in the country.

References:

1. Peter F. Drucker: 'Managing in the next Society', Truman

Talley Books, St. Martin's Press, New York.

2. Report of the PM's Task Force on MSMEs, January 2010

(Chairman: Shri T.K.A.Nair)

3. Report of the Working Group on Rehabilitation of sick

SMEs (Chairman: Dr.K.C.Chakrabarty)

4. RBI Annual Reports

Address by Shri Chandrakant Salunkhe – President, SME Chamber of India

“The Finance is fulcrum of any

business activity and the banks

provide the lifeline i.e. the finance for

the survival and growth of the SME

Sector. Therefore the banks are the

partners for growth in small and

medium enterprises”, said Shri Salunkhe

in his welcome address.

Explaining the theme of the Conclave, he

mentioned that Small and medium

enterprises (SMEs) are the driving force

behind economic growth of India facilitating

large scale employment and contributing a

major percentage towards industrial

production and exports. While SMEs are

crucial in boosting the economy, they face

numerous challenges, the prominent

amongst them being the availability of

affordable and timely finances for growth

and expansion. To meet the financial

challenges, a number of countries have

endeavored to develop capital markets

specifically meant for SMEs, and have

allowed this market to complement the

banking sector.While highlighting on funding towards SME

Sector, Mr. Salunkhe said that the Banks and

Financial Institutions are main sources of

funding and financing for SME Sector and

other start-up enterprises for business

expansion and diversification. Also

currently the NBFCs, HNIs, VCs and PEs are

keen to invest and finance the growth

oriented SMEs and industries, but there are

many SME who fall outside this scope and

hence their growth is hampered.

He stressed on Banks adopting KYE norms

adopting KYE Norms i.e. “Know Your

Entrepreneur” s imi lar to KYC. He

emphasized the need for the SMEs to be

transparent in their deals with the Banks and

govern their enterprise efficiently. He

declared that many conferences related to

the SME Finance will be organised by the

SME Chamber of India in various parts of the

country to bring together the SMEs, Bankers

and FIs. 8% growth can be achieved only if

support from all agencies is available to the

manufacturing sector.

Shri Salunkhe expressed his sincere thanks

to State Bank of India, Indian Overseas Bank

and Central Bank of India for understanding

and appreciating the concept of this

Conclave to reach out to the SME Sector as

well as for their unstinted support by way of

sponsorship.

Shri Salunkhe informed that SME Chamber

of India has taken initiative to recognize the

bankers by presenting “Best Banker Awards”

every year to the head of the Bank, Executive

Directors, General Managers and Branch

Managers as well as other executives who

put efforts for the growth and development

of SMEs as well as taking efforts for resolving

their problems on priority basis. Also the

bankers should educate SMEs for financial

management and adopt better financial

systems.

Shri Salunkhe also announced that the

Management Committee of SME Chamber

and Awards Selection Committee have

selected Shri M. Narendra, Chairman and

Managing Director, Indian Overseas Bank

and Shri R.K. Dubey, Executive Director,

Central Bank of India for the “Best Banker

Awards” for 2012.

The Finance is

fulcrum of any

business activity

and the banks

provide the

lifeline



Address by Shri G. N. Bajpai – Former Chairman, SEBI & Chairman, Indian SME Knowledge Forum

Shri G.N. Bajpai, while highlighting on

economic growth of India and development

of enterprises said that enterprise is formed

out of a dream of an entrepreneur who

converts his dream into an idea, accumulates

the resources, which then develops idea in to

concept, develops that concept into product

and from product to development ,

development to growth and from growth to

success. The success of the enterprise leads

to contribution towards economic

development of nation and employment

generation. It is during this journey, from

converting a dream into a successful

enterprise various resources like physical

resources, financial resources, human

resources most importantly, entrepreneur's

emotional resources are required.

Availability of all these resources stems from

basic resource generation that is called

financial capital and hence the banking;

observed Shri G. N. Bajpai. He further added

that while transforming a dream into a

successful enterprise there are different

types of risks involved and hence different

types of capital are required. While

converting idea to concept, Angel capital or

Venture Capital is required, from product to

development venture capital or private

equity, and while transforming in to large

enterprise & become economic contributor

of the nation equity market is required.

He further observed that with angel capital

and venture capital functioning mainly in the

private equity segment and with just few of

them willing to fund growing SMEs, it gives

banks the vast opportunity to cater to SME

segment. In order to make banking more

effective for SMEs, he said, banks have to

concentrate on to most fundamental pillars

of risk management and reducing the cost of

administration. He stressed for bankers to

have high technical orientation to make

process management effective, which would

in turn lower the cost, make the quality

consistent and delivery easy. This would

make banking for SMEs effective, profitable

and less risky.

He concluded saying that SMEs need

working capital, risk capital, debt capital,

equity capital, counseling and mentoring in

m a n a g e m e n t a n d e x p l o re va r i o u s

opportunities in financing. Banking industry

in India is capable of delivering all that is

required to make the SMEs more competitive

and contributors towards Indian economy,

only if banking industry are able to manage

their risks towards SME sector, bring down

the cost of administration and lending on the

basis of volumes and not margins, which

would in turn lead to truly inclusive growth.



Address by Shri M. Narendra – Chairman & MD, Indian Overseas Bank

Mr. Narendra declared that the motto of the

Bank is to

he said. In order to increase the credit flow

to the SME Sector, he stressed that, that

Banks should have passion about SMEs and

make the products and services available to

them as per the needs of SMEs. Banks should

also adopt a flexible approach while lending

to SMEs to suit to the local conditions and

local aspects of the business. He emphasized

on banks giving more preference to

capability of the entrepreneur rather than

simply focusing on financial ratios of the

enterprise. He also commented on having

complete engagement between bankers and

SMEs in order to make the lending successful

and viable. He encouraged the banks to give

importance to field level staff as they have

better understanding of dynamics of the

supply chain of the enterprise. In order to

assess the risk of an enterprise, he

commented that bankers should not only

assess the financial risk of the enterprise but

also the non-financial risk concerning the

entire supply chain. This would enable the

banks to understand their risk exposure and

take adequate measures to mitigate the risks.

While talking on how SMEs can grow in to

large Corporate, Shri M. Narendra said that

S M E s h a v e t o f o c u s o n b u i l d i n g

organizational leadership if they want to go

global and become competitive. Introducing

EU crisis, he said that this is the right time for

Indian SMEs to consider more collaborations

like merger and acquisition for scaling up of

activities as the cost of M&A has gone down.

Mr. Narendra assured that Indian Overseas

Bank will do everything to impart knowledge

to SMEs.

“Grow the SMEs and make them

SMILE”. “We would like to reach out to

many more SMEs as expected by the

regulators and the government agencies”,

Grow the SMEsand

make them SMILE



Shri M. V. Tanksale, addressing the Summit

said funding SMEs is being now considered

more responsibly than before. Banks have

become more committed towards lending to

SMEs by segmenting the sector as an

independent activity of the banks, created

separate vertical for SMEs headed by GM.

There are also special SME branches with

trained personnel and dedicated SME funds.

He also stressed that bankers should

understand the expectations for SMEs from

banks, which are outlined as:

It only when bankers meet the above three

points, SMEs would face no issues with

banking finance. However, the most

important point he said, were the efforts that

banks make to try and understand the

business model of SMEs. While referring to

Chakrabarty report for SMEs, he said report

suggests that in each district and each cluster

banks should identify the activity and

prepare model project report for SMEs. It is

important for the bankers to meet the

entrepreneurs to identify whether the

entrepreneur understands the business

model and not depend simply on the report

prepared by CA, in order to take informed

business decision. It is necessary to

understand the type of business models and

business cycles to clearly understand the

type of credit and credit support that is

required by an SME.

The entrepreneurs should approach the

banks so that banks can understand their

business model and identify if banks would

be able to support them during the toughest

economic situation, because for an SME

there are number of issues; observed Shri M.

V. Tanksale.

He concluded by committing to create

Financial Literature Centre for SMEs in

Central Bank of India to educate SMEs about

nuances of finance. He stressed on the

importance of rating in order to get

concessional pricing of credit from banks. He

also encouraged SMEs in order to improve

their financial management, inventory

management, receivable management,

proper due diligence before selling the

products. He also encouraged policy makers

and Chambers to concentrate on import

substitution in order to produce more

products from local SMEs and to depend less

on overseas imported goods.

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SMEs business model to be understood

Timely delivery of credit

A reasonable price for credit

Shri M. V. Tanksale Shri

Shekhar Agharkar Shri P. Rudran

Shri S. C. Kalia Shri Ravindra Kumar

Shri S. K. V. Srinivasan

– Chairman & MD, Central Bank of India delivering the keynote address during the Panel Discussion. Panelist (L to R)

– Director, Arthtech Consultants (P) Ltd, – Managing Director & CEO, India SME Asset Reconstruction Co. Ltd,

– Ex. Executive Director, Union Bank of India, – Senior Regional Advisor, South Asia, Standard Bank and

– Executive Director, IDBI Bank Ltd.

KEYNOTE ADDRESS

Shri M. V. Tanksale

during Interaction

with panelists



Address by Shri N. Shankar – Chairman & MD, ECGC

Shri N. Shankar, while briefing about Export

Credit Guarantee Corporation of India, he

gave an overview of various activities and

c r e d i t i n s u r a n c e p r o d u c t s o f h i s

organization, with a majority of products

directed to protecting SMEs. He spoke on

dedicated SME branches of his organization

and various schemes meant to help SME

sector. He also noted that for the last 9 years,

the ECGC has refrained from increasing

premium despite of the global slowdown. On

the contrary, during 2007, premium was

reduced by 10% and as a part of stimulus

package ECGC gave few extra covers to SMEs.

He mentioned about various short-

termcover policies that are more popular

over various medium-term and long–term

policies. ECGC has set up “National Exports

Insurance Account” in conjunction with

Exim Bank to provide buyer's credit and

cover large project exports. He also

explained various policies for small

exporters that cover 95% of commercial risk

and 100% for political risks with the

premium of 2% of the entire cover.

Address by Shri A. Krishna Kumar – Managing Director, State Bank of India

Shri A. Krishna Kumar, while talking on the

challenges of the SME Sector, slowing

e c o n o m i c g ro w t h , s t i f f re g u l a to r y

compliances and new accounting guidelines

are proving to be the biggest hurdles for

SMEs as they are finding it difficult to strike

the right chord between meeting the

customers' expectation and managing

business operations. He stressed on the

importance of having good financial

management system in place for the SMEs

who intend to carve a niche for themselves in

the competitive markets.

Most of the small businesses fail mainly

because of deficiencies in internal

management, operations and strategies of

the company more than their exposure to the

external environment, said Shri A. Krishna

Kumar. It is because of these internal

challenges, SMEs are often perceived to have

higher risks and face difficulty in obtaining

finance for start-up, expansion and working

capital. Further, they do not have proper

financial management system that hampers

their cash flows. Further he commented that,

banks being the primary source of finance,

SMEs have to develop good relationships

with banks than simply depending on family

funds and retained earnings. SMEs have to

maintain total transparency with their

bankers as it would enable banks to

understand the company's needs, future

plans and also issues.

While highlighting on challenges faced by

Indian banks, he said banks generally face

the undernoted challenges in financing to

SME Customers:

Reluctance of many SMEs towards

financial disclosure for fear of losing

their competitive edge.

Fe a r o f t a x b u rd e n l e a d i n g to

understating of profits hence weak

balance sheets.

Poor availability of Risk Capital, low

profits margins, low pricing power and

poor receivables management leading to

poor financials.

He also threw light on challenges of the SME

sector like lack of access to capital and credit,

lack of access to technology and product

innovation, inability to forecast business and

lack of focus on manufacturing quality

products.

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Shri K.V. Srinivasan, while explaining the role

of SMEs said that there is an increasing focus

on SMEs, the regulations and reservations

for them etc. Majority of the SMEs are labour

oriented units, use low technology and

produce low cost products. However, in

order to become competitive in the market, it

is necessary for the SMEs to take initiatives

rather than depend on external support.

They have to transform into a knowledge

based, high technology and service oriented

enterprise to compete in the market.

He said, bankers have always considered

SMEs to be risky because of lack of

information that can be obtained from SMEs.

Hence, SMEs should avail the services of

experts like CFOs to professionalize their

enterprise, outsource wherever possible to

cut down cost and introduce a learning

culture across the enterprise which would

enable them to win the trust of the lenders.

SMEs mainly depend on bank finance or their

own sources to fund their operations and are

reluctant to go in for venture capital or

private equity due to the fear of losing the

control. This has been one the key reason

why SMEs have failed to grow, observed Shri

K. V. Srinivasan. He also stressed on the

importance of technology like cloud

computing to enable the SMEs become

competitive. He concluded saying that

though NBFCs and banks know the need of

the SMEs and offer them a variety of the

products and services, SMEs also have to be

equally responsible for revealing the

relevant important data to the lenders to

ensure smooth flow of finance.

Address by Shri K. V. Srinivasan – CEO, Reliance Commercial Finance Ltd

Shri K. V. Srinivasan Shri A. Ramesh Kumar

Shri N. Shankar Shri A. Krishna

Kumar Shri Chandrakant Salunkhe Dr. K. C.

Chakrabarty Shri G. N. Bajpai

Shri M. Narendra Shri R. K. Dubey

– CEO, Reliance Commercial Finance Ltd addressing the delegates. Others (L to R) – MD &

CEO, Asia Pragati Capfin Pvt. Ltd. & Chairman, Northern Region, SME Chamber of India, – CMD, ECGC,

– Managing Director, State Bank of India, – President, SME Chamber of India,

– Deputy Governor, Reserve Bank of India, – Former Chairman, SEBI & Chairman, Indian SME Knowledge

Forum, – Chairman & MD, Indian Overseas Bank, and – Executive Director, Central Bank of India



Shri R.K. Dubey gave an overview of Indian

SME sector mentioning that Indian SME

sector employs about 60.00 million persons

spread over 26.1 million enterprises. The

sector accounts for about 45% of the

manufacturing output and around 40% of

the total export of the country. The sector

contributes 8% to GDP, which is expected to

rise to the level of 10%. He also gave an

overview of credit forwarded to SME sector.

He gave a brief overview of various policies

and initiatives taken by Indian Government

and RBI for the development of the sector are

to include small road transporters, small

professional or self-employed persons, retail

trade and all other service enterprises in

SME services category. Further initiatives

have been taken to ensure adequate credit

flow to each of the sub-segments under SME

sector, collateral free loans up to Rs 10 Lakh.Highlighting on the issues of SME sector, Shri

R.K. Dubey said that bankers have a major

role to play towards the growth of SME

sector. Few of the roles he noted are:

Nurturing and financing budding

entrepreneurs.

Develop the risk assessment and risk

management capacities of banks and

provide for unsuccessful SMEs as part of

their risk management.

Improve Bank's voluntary commitment

for MSMEs.

Being as partner of SME while lending

Hand holding of entrepreneurs

Banks should develop innovative

mechanism to provide not only finance

and banking services but also non credit

related services to at reasonable charges.

Sensitisation towards problems of the

entrepreneurs and a solution finding

approach on the part of the bankers

Timely rehabilitation measures, where

preservation of the enterprise is in the

interest of all stakeholders.

In conclusion, he said that all the

stakeholders viz. Government, Banks and

Financial Institutions should work together

towards the development of SME sector and

focus on providing an enabling environment

complete with required infrastructure and

forward and backward linkages for

promoting the sector.

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Address by Shri R. K. Dubey – Executive Director, Central Bank of India

Delegates at the Conclave



Address by Dr. K. Ramakrishnan – Chief Executive, Indian Banks' Association

Dr. K. Ramakrishnan while highlighting on

the statistics of SME sector stressed on the

importance of the sector for the Indian

economy. He focused on the issues affecting

the SME sector in order to engage the

attention of the PM task force for SMEs. Few

of the major issues he mentioned are lack of

availability of timely and adequate credit;

cost of credit; collateral requirement by

banks; limited access to equity capital;

problems in supply to government

departments and agencies; issues in

procurement of raw materials at competitive

costs; problems of storage, designing,

packaging and product display; lack of access

to global markets; inadequate infrastructure

facilities including power, water, roads etc;

lack of skilled manpower for manufacturing;

multiplicity of labour loss and complicated

rules associated with compliance of such

laws; absence of suitable mechanism for

revival of sick units; issues related to

taxation and procedures thereof.

The Taskforce broadly categorized these

issues into six categories of credit,

marketing, labour, rehabilitation and exit

policies, infrastructure, technology, skill

development and taxation observed Dr. K.

Ramakrishnan. He elaborated on important

recommendations of PM Taskforce which

are; a separate fund to be created by SIDBI to

be used in event of shortfalls in credit

forwarded to SMEs by Commercial Banks – a

special fund for micro enterprises must be

util ized for lending only to micro

enterprises; Standing Committee to be

constituted under Planning Commission to

monitor the flow of credit to MSME sector;

and identify legal and statutory structures

affecting the SME sector and develop

workable legal options for growth and

development of SMEs.

He concluded saying that lot of initiatives are

being taken to understand the issues at

Micro level and industry in general.

(Dignitaries from left to right)

– CEO, Reliance Commercial

Finance Ltd., – President, SME Chamber

of India, – Deputy Governor, Reserve Bank of India, – Former Chairman, SEBI & Chairman, Indian

SME Knowledge Forum, – Chairman & MD, Indian Overseas Bank,

– CMD, ECGC, during the inaugural Session of the Summit

Shri A. Ramesh Kumar

Dr. K. Ramakrishnan

Shri A. Krishna Kumar

Shri R. K. Dubey

– MD & CEO, Asia Pragati Capfin Pvt. Ltd. & Chairman, Northern Region, SME

Chamber of India, – Chief Executive, Indian Banks' Association,

– Managing Director, State Bank of India,

– Executive Director, Central Bank

of India and

Shri K. V. Srinivasan

Shri Chandrakant Salunkhe

Dr. K. C. Chakrabarty Shri G. N. Bajpai

Shri M. Narendra

Shri N. Shankar



Panel Discussion on

IMPROVING CAPABILITIES OF SMEs FOR BETTER GROWTH

Panelist (L to R) – Partner, DSK Legal, – CEO, BSE SME Exchange,

– Sr President, Business Banking, YES BANK, – Former CMD, Corporation Bank,

– GM, Canara Bank, – President & CEO, Tata Asset Management Ltd and – MD & Head,

Commercial Bank, Citibank India

Shri Anand Desai Shri Lakshman Gugulothu, IPS Shri Sanjay

Agrawal Shri Ramnath Pradeep Shri K.S. Balachandra

Rao Shri Sanjay Sachdev Shri Rajat Madhok

Shri Rajat Madhok observed that SMEs play a

very critical role in development of the

nation and hence the sector is extremely

important from the bank's perspective.

While talking about the role of CFO in SMEs,

he highlighted that CFO brings with him a

great expertise and is the primary point of

contact between banks and SMEs. He

enables to put across the interest of SMEs to

the banks. He helps banks to get correct

understanding of SME business model in an

event of divergence between what banks

think about the company and what company

is actually doing. He enables the company to

manage its cash-flows which the lenders

primarily look at before lending the credit.

In an event like recent turmoil, CFO comes

handy in identifying and managing risks

arising from economic downturn and

steering company in a direction so that it

doesn't assume unwanted risks. Presence of

CFO conveys positive image of company's

management that is looking towards growth

of the company, which gives enough

confidence to banks for extending credit to

the company. He concluded saying that CFOs

can bring a great value to the SMEs right from

managing the cash flows, managing the

finance, develop and maintain bank

relationships, generate and maintain work

capital and growth capital.

Shri Ramnath Pradeep in his address said

It

is important to see the growth of India not in

terms of GDP growth percentage, but also the

sustainability of the growth. This is possible

only through inclusive growth while

maintaining the required pace and at the

same time achieve the objective of

employment generation, increased domestic

dependence. This is where the SMEs come to

play. It is only through promoting SMEs can

India truly achieve inclusive growth and

overall development observed Shri Ramnath

Pradeep.

Highlighting the importance of the sector, he

highlighted the growth of the sector and its

contribution towards the growth of the

economy. He concluded saying that despite

the increase in credit flow to the sector, SME

sector continues to face several issues. He

stressed on the fact that in order to make

SMEs more competitive it is necessary to

improve their capabilities and take resolute

actions to resolve the issues facing the SMEs.

'Foundation of an economy is seen

from the fundamentals for growth'.

Shri Ramnath Pradeep – Former CMD, Corporation Bank addressing the delegates

Shri Rajat Madhok MD & Head, Commercial Bank, Citibank India–



Shri K.S. Balachandra Rao observed that

biggest issue that the entrepreneurs face in

terms of accessing the credit is their inability

to prepare proper project reports as per

banks' expectation. Further even banks have

not been taking enough initiatives to

educate the entrepreneur on project

preparations which eventually results in

delayed disbursement. He commented that

the entrepreneurs do not disclose the real

picture of their business and come up with

excuses for non-payment of dues. This

eventually leads to an account becoming an

NPA. On the contrary, if entrepreneurs keep

their bankers updated about the business

situations, it would enable bankers help

SMEs solve their issues and in turn avoid

becoming an NPA. He also observed that few

entrepreneurs after making good sales in the

particular month or quarter try and clear the

entire term loan. They fail to see the business

cycles, which in turn affects their cash flows

adversely. It is important for such

entrepreneurs to conserve the cash for

future contingencies and plan their

repayment judiciously.

He concluded saying that the bankers are not

simply fair weather friends and SMEs should

take initiative to discuss their issues and

challenges with their banks openly. It is only

then can the strong relationships be build

between banks and SMEs that would extend

beyond mere lending.

Shri K. S. Balachandra Rao – General Manager, Canara Bank

Shri Sanjay Agrawal, while addressing the Summit on risk

management for SMEs, said that most of the SMEs fail due to one of

the three reasons:

Most of the SMEs though have good number of customers but they

have 2-3 large customers that give them 80% of their business.

The relationships that most of the SMEs develop with large

companies are mainly because of acquaintances the SMEs have in

those large companies who get them the orders. However, the

relationships with these large companies gets affected and orders

dry up when these acquaintances move out or quit the company.

This in turn affects the entire operations & cash flow of the SMEs.

SME promoters are often tempted with large cash flow and make

unrelated investments and unrelated diversification from core

businesses, which in turn affect their immediate cash flows.

Non-compliance of regulations

Over-dependence on key promoter, which affects the operations

of the company once the promoter steps down. Also, it is difficult

to have second or third generations with similar keenness

towards development and growth of the company which in turns

leads to downfall of the SME.

For SMEs to become large corporate, it is necessary for SMEs to have

more transparency. It is a common observation that SMEs that

report less profit have difficulty in explaining the need for funds

bankers and other investors. By doing this SMEs in order to save few

taxes compromise on their growth, observed Shri Sanjay Agrawal.

Hence it is important for an SME to have appropriate corporate

governance structure in order to grow beyond SME in to a Corporate.

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Shri Anand Desai observed that SMEs mainly suffer from lack of

planning i.e understanding the scenario and many of them lack

clarity as to their business requirements, growth and such other

factors. Second point that he elaborated on was the absence of

appropriate systems and process in most of the SME units. They have

little awareness about using legitimate software, understanding

taxation systems, protecting the intellectual property, running the

manufacturing operations efficiently. Having appropriate systems

and processes means understanding own business in contest to the

market, value that business can create, surviving and sustaining the

business in a manner that is compliant which in turn reduces risks.

Shri Anand Desai – Managing Partner, DSK Legal addressing the delegates

Shri Sanjay Agrawal – Senior President, Business Banking, YES BANK addressing the delegates



Having better cash flow management and

better financial management are critical to

the success of SMEs said Shri Sanjay Sachdev.

He observed that in India most of the SMEs

are owned by promoters. In order to make

the business effective, efficient cash flow

management is very critical.

Taking into consideration that most of the

SMEs in India are family owned businesses,

there is general hesitancy with regards to

corporatization of boards which in turn

bring corporate governance and business

ethics in play. SMEs are also reluctant to

share the information about the company.

However, they fail to realize that in the long

run, having an independent corporate

structure and good governance standards,

would enable the company to tap into

different opportunities including getting

private equity and venture capital funding.

He concluded saying that Good governance

and transparency will improve the

credibility of the entrepreneurs. SMEs

should focus more on managing the capital

than getting capital which would bring lots of

credibility to the organization.

Shri Sanjay Sachdev – President & CEO, Tata Asset Management Limited e addressing the delegates

Shri Lakshman Gugulothu while stressing on

the need to improve the flow of finance to

SMEs, provided brief overview of SME Stock

Exchange initiated by Bombay Stock

Exchange. He gave an overview of various

issues that were taken in to consideration

while initiating SME Stock exchange. He also

mentioned the awareness seminars that the

Exchange is carrying out across the country

is order to educate SMEs on the Exchange

with focus on investors, bankers, high net

worth individuals and mutual funds.

He further mentioned that SME Exchange

will serve to be good platform for SMEs to

build long term capital. Initially around 100

SMEs are lined up for Initial Public Offers.

While talking on the norms for getting listed

on the Exchange, he said the post issue paid

up capital should be a minimum of 50 lakh

and maximum of 25 crore. The rating of the

enterprise is desirable but is optional. He

concluded by sharing thoughts on

importance of due diligence by the merchant

bankers before listing.

Shri Lakshman Gugulothu, IPS – CEO, BSE SME Exchange addressing the delegates

Delegates at the Conclave



Panel Discussion on

TRANSFORMING SMEs INTO EMERGING CORPORATE

Panelist (L to R) – President, Global Procurement Consultants Ltd, – Group Business Head, Reliance

Commercial Finance Ltd, – Executive Director, Export - Import Bank of India, – MD & CEO,

Asia Pragati Capfin Pvt. Ltd. & Chairman, Northern Region, SME Chamber of India, – Strategist & Head

of Research, SMC Global Securities Ltd and – Vice President, Link Intime India Pvt. Ltd.

Shri S. R. Rao Shri Sachin Pillai

Shri Prabhakar Dalal Shri A. Ramesh Kumar

Shri Jagannadham Thunuguntla

Shri Haresh Hinduja

Speaking on Europe crisis, Shri A. Ramesh

Kumar gave an overview of impact of

European crisis on India and other countries.

However, he mentioned that crisis has given

rise to vast array of opportunities for Indian

SMEs to tap. Giving example, he mentioned

about several UK SMEs that are looking for

joint ventures. Further the Defence Policy

h a s m a d e i t m a n d a t o r y f o r 2 0 %

procurement from SMEs which paves huge

opportunities for SMEs in defence sector.

He expressed his concern on dependence of

majority of SMEs on Bank loan alone in order

to sustain and expand their business

operations. Due to poor financial discipline

and inadequate governance, SMEs find it

difficult to attract Angel funds and venture

capitalists. It is important to recognize the

gap between the demand and supply of

venture capital in India. He suggested that

the banks should have their own venture

c a p i t a l t o s u p p o r t t h e d e s e r v i n g

entrepreneurs. The Corporate and the OEM

should support their SME Vendors in

a c c o r d a n c e w i t h t h e n e w p u b l i c

procurement policy. While motivating, he

recommended SMEs to scale up their

activities, adopt high technologies and

improve the quality in order to become

competitive and get more orders from

Corporate and MNCs.

Shri Sachin Pillai, observed that funding

forms a backbone of an organization without

which units would find it difficult to grow.

From the bankers perspective, the financial

and other documents that SME submits

forms the basis of their decision to lend or

not to lend. Traditionally SMEs have led too

much emphasis on saving taxes, which have

resulted in balance sheets, and P&L

statements that do not display their

credibility. However, as the result the real

profitability of the company gets affected

and funding agencies and banks find it

difficult to justify the funding requirements

from SMEs. NBFCs have approached the

SMEs with a new perspective said Shri

Sachin Pillai. NBFCs, though they look at the

financial statements of the SME, go and

engage themselves with the SME and the

entrepreneurs in order to understand the

business and the financial model of the

enterprise. This is done in order to prepare

near to actual cash flow of the enterprise and

lend to the SME on the basis of the cash flow.

This has enabled NBFCs to reduce their risk

exposure to the SMEs and also increase their

funding to the sector.

Shri A. Ramesh Kumar – MD & CEO, Asia Pragati Capfin Pvt. Ltd addressing the delegates

Shri Sachin Pillai – Group Business Head, Reliance Commercial Finance Ltd addressing the delegates



Shri Prabhakar Dalal – Executive Director, Export - Import Bank of India addressing the delegates

Shri Prabhakar Dalal while addressing the

Summit observed that MSME should be more

dynamic in line with the developments

happening. He suggested that for sustainable

development it is necessary for SMEs to

create a brand value, increase productivity

and enhance management capability. It is

only then possible for SMEs to make

themselves more competitive and develop

their business.

Commenting on European crisis, he said

during recession SMEs would find it difficult

to cut down on the manpower because of

their small size, which is not the case with

large corporate. As a result, the SMEs are left

with very few cost cutting options which

mainly gets reflected in quality of the

products manufactured which in turn affects

their competitiveness. Further, they operate

with low capital base with less diversified

products and most of them do not have credit

ratings. Further they have difficulty in

accessing finance as they have fewer options

mainly due to the size of their operations. He

also stressed on importance of managing

working capital in order to ensure efficiency

of business operations.

While talking about EXIM bank, he

mentioned about different services the bank

provides which include marketing

development fund and financial knowledge

support; finance for direct joint ventures in

other countries with working capital and

terms loans. He also highlighted on how

EXIM bank can assist SMEs to get leads from

overseas clients through the network of their

overseas offices.

Shri S. R. Rao, addressing the summit,

commented that for SMEs to grow and

become Corporate of the future, need to have

an international perspective. Having

international perspective means, developing

and growing in the domestic markets and

expand overseas through trade and

investments. It is important for SMEs to

understand that as the economy opens up,

they would be faced with increased

competition.

For SMEs to grow, they have to look at what

needs to be done to achieve and sustain

international competitiveness; and SMEs

need to build these aspects in their business

strategy, commented Shri S. R. Rao. It is

during this growth stage that the external

financing is required. Banks have the ability

to provide variety of products right from

financing day-to-day operations to financing

e x p a n s i o n a n d p r o v i d i n g va r i o u s

information services, observed Shri S. R. Rao.

For SMEs to access finance from variety of

sources including banks and move on higher

trajectory of growth, he said that SMEs

should to focus on what they need to do in

order to create, sustain and to enhance their

credibility. In order to build credibility, SMEs

need to focus on few of the factors:

Quality – SMEs operating or planning to

operate in international market, should

back their products and services with

International Quality Certification which

can be achieved by SMEs working

through cluster programs

Develop & demonstrate overall business

excellence

Proactive approach in terms of market

access

Having and maintaining a good track recordThus for SMEs to move to a higher stage of

growth; networking, linkages, alliance,

associations are of extreme importance and

SMEs need to integrate these in their

business strategy observed Shri S. R. Rao.

He also stressed on the importance of

governance as an enabler to build credibility

amongst the stakeholders. He mentioned

that in many contexts, governance is

expressed in terms of procurement; because

every activity right from modernization,

expansion, diversification to sourcing,

accessing goods and services; and how the

procurement is carried out and the manner

in which SMEs supply to the potential buyers

is of utmost importance.

He concluded saying that if SME wishes to

develop and grow then it is necessary for it to

have good policies, practices and procedures

as a result of which it is able to demonstrate

high level of corporate governance. By doing

so is able to create a sense of credibility

amongst all its stakeholders including

buyers as well as suppliers.

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Shri S. R. Rao – President, Global Procurement Consultants Ltd addressing the delegates



Shri Haresh Hinduja – Vice President, Link Intime India Pvt. Ltd. addressing the delegates

Shri Haresh Hinduja while addressing the

Summit on IPO for SMEs, mentioned two

different types of IPOs – fixed price and book

build issue. He encouraged SMEs to plan an

IPO at least 1 or 2 years in advance in order to

get sufficient time to restructure the

accounts and business plan and to have a

right team which form the critical factors for

the success of an IPO. He also encouraged

SMEs to have a right investment banker, CFO

and compliance officer in order to take care

of compliance part of the IPO and other

intermediateries. He mentioned about the

rate at which IPOs are getting listed and it is

expected to take not more than 7 days to get

the IPO listed. He explained the entire

process of filing an IPO with role of all the

agents and intermediateries that are

involved.

He concluded saying that IPO is best way to

access huge pool of capital and even SEBI is

making processes simpler and easier in

order to reduce the complexities involved.

Shri Jagannadham Thunuguntla – Strategist & Head of Research, SMC Global Securities Ltd. addressing the delegates

Shri Jagannadham Thunuguntla observed

that though funding in necessary for SMEs to

grow, most of SMEs restrict their growth

because of their own inherent weakness or

their unwillingness to change. The biggest

requirement to access funds, whether bank

funding or private equity funding, is the

t r a n s p a r e n c y o f o p e r a t i o n s . H e

recommended that SMEs primarily need to

look in their own business operations to

identify whether their operations are

financially viable or to identify how strong

their balance sheets are. This is where

services of CFO become of great importance

said Shri Jagannadham Thunuguntla.

While highlighting the importance of CFO, he

said while accessing private equity funding

or venture capital, qualified CFO and ESOPs

are mandatory requirements. Private equity

and venture capital stress more on having set

systems and process in place, and believe

that its people that make the organization big

and not the promoters. In most cases SMEs

have their family members as the Board of

Directors which doesn't give enough

confidence to PE and VCs funds as these

funds look at how organization plans to grow

and develop beyond entrepreneur, observed

Shri Jagannadham Thunuguntla.

SMEs need to work and nurture themselves

to become presentable, marketable and

approachable even before getting private

equity funding, if they wish to place their

business on a growth path, stressed Shri

Jagannadham Thunuguntla. SMEs have to

learn to delegate their authority in order to

make their operations efficient and business

successful. It is only through these processes

and systems would the funding agencies find

a SME worthy of funding observed Shri

Jagannadham Thunuguntla. PE and VCs also

bring with them a lot of expertise and a vast

network of businesses across the world,

which in turn would SMEs to access those

businesses and enhance their network.

He concluded saying that having right

systems and process, along with access to PE

and VC funding, even bank funding becomes

easy; SMEs are able to able to build

credibility amongst stakeholders including

the buyers and suppliers and the entire

business is able to develop and grow.

Delegates asking Questions During Interaction Session



Panel Discussion on

INITIATIVES FOR DEVELOPMENT OF SMEs

Panelist (L to R) – Director, Arthtech Consultants (P) Ltd, – Managing Director & CEO, India SME Asset

Reconstruction Co. Ltd, – Ex. Executive Director, Union Bank of India, Senior Regional Advisor, South

Asia, Standard Bank, – Executive Director, IDBI Bank Ltd, – Sr. Vice President –

(Technology Enterprise & Wholesale Business) Vodafone India Limited, Mumbai and – CMD, Datamatics Global Services Ltd.

Shri Shekhar Agharkar Shri P. Rudran

Shri S. C. Kalia Shri Ravindra Kumar

Shri S. K. V. Srinivasan Shri Viswanathan Ramaswamy

Dr. Lalit Kanodia

–

Shri Ravindra Kumar after giving a brief overview of panelists

highlighted the necessity to develop the SME Sector on a continuous

basis and initiated the discussion.

He also highlighted about the sickness in the SME Sector and stressed

the need to address the issue seriously. He suggested to the SMEs to

adopt technologies in all functional areas to improve the efficiency

and productivity.

Shri S. K. V. Srinivasan while addressing the

Summit noted that most of the large

enterprises in order to cut costs are retaining

the core functions while other functions are

being outsourced including manufacturing,

giving rise to vast array of opportunities for

SME sector. These SMEs can be classified in

to three types; first those who are tied up

with and are integrated with Corporate

Supply chain and these types are the ones

that do not have much issues with

functioning or managing operations,

accessing cash; Second type are the Stand

alone units, constituting 60-70% of all units

and are facing some issues with accessing

capital, equity and debt capital; and third are

tiny and micro units that are not able to

access bank finance as banks do not have

reach to the places where these units

operate. The third type of units are catered

by NBFCs or microfinance group.The Second type of units, that form the

important part of the value chain, he spoke

about three critical areas that these SMEs

lack:

Most of the SMEs look at the profits and

do not focus on the cash flows of the

company. He observed that though the

company might be making profits, in the

long run the unit might become sick due

to improper management of receivables.

Hence, it is important for entrepreneur

to focus more on cashflows than on

profits.

SMEs generally use obsolete technology,

which in turn hinders the introduction of

new products.

Unstructured information flow from

units which in turn affects their chances

of getting credit from banking sector.

He encouraged SMEs to use the services of

Credit rating agencies, which would enable

the them to get an overview of their

enterprises and put structure to the

organization, which would in turn give

confidence to the banks and make the

lending process simpler.

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Shri Ravindra Kumar - Senior Regional Advisor, South Asia, Standard Bank addressing the delegates

Shri S. K. V. Srinivasan – Executive Director, IDBI Bank Ltd addressing the delegates



Dr. Lalit Kanodia – CMD, Datamatics Global Services Ltd addressing the delegates

Shri S. C. Kalia – Ex. Executive Director, Union Bank of India addressing the delegates

Stressing on the importance of SMEs in an

economy, Dr. Lalit Kanodia said, “The future

of India lies in the hands of SMEs”. The

statistics reveal that in last 50 years, in US the

net creation of jobs by large enterprises has

been negative while SMEs have account for

80% of the jobs. The same case is applicable

in Japan and Korea. He observed that India

faces a larger problem of creation of jobs for

educated and uneducated youth.

He mentioned that China migrated 40 Crore

people from farm and rural areas to the

urban side. Further 2% of population of US

produces the entire consumption of food for

United States of America leaving the surplus

for exports. In India, 50% of workforce in

farm sector. If India successfully migrates

40% of the population from farm sector to

industry and with 2% of workforce getting

added annually, generating an employment

of 100 Crore in next 20 year would be

possible, which otherwise would be

daunting, observed Dr. Lalit Kanodia. In

India, only 2.5% of the jobs are available in

large sector, which indicates that SME sector

is the life-line of India. While talking on

industry structure in Japan and Korea, he

said that the entire industry is broken into

three tiers; very large enterprises, mid-scale

enterprises and small enterprises. They

developed conscious policies in order to

encourage outsourcing from large

companies to mid-scale companies, and

from mid-scale to small companies. While

outsourcing in these countries is treated as a

source of growth, in India by contrast

legislation states that any job which is

permanent in nature cannot be outsourced.

He concluded saying there has to be

enormous initiatives to be taken in order to

ensure that more jobs are created in the SME

sector and efforts need to be taken in order to

build a value chain from SMEs to medium

enterprise and from medium to large

enterprise.

Shri Shekhar Agharkar, while talking on

Family-owned businesses, said that Family

owned businesses (FOB) have two eco-

systems which are mutually dependent, one

is family and the other the business which

have inherent conflicting characteristics. In

order to make FOB professional it is

necessary for it set very high standards and it

adheres to ethics, constantly strive to ensure

better performance and at the same time

strive to achieve consistency and fairness in

rewards. Further he observed that normally

FOB do not want to dilute their controls to

non-family members. This approach is not

beneficial in the long run. He stressed that

when the FOB adhere to higher standards of

the ethics and transparency, it shows better

consistent performance which will bring

w i t h i t h i g h r e wa r d s . W i t h t h e

p r o f e s s i o n a l i s m i n f u s e d i n t o t h e

organisation, the bankers also gain

confidence offer more funds. He also

highlighted on the importance of getting

professionals like COO or CTO in order to get

expertise and put organization on a high

growth path.

Shri S. C. Kalia, while explaining the

importance the SME sector, highlighted on

statistics to establish the contribution of

SME sector towards Indian economy. Despite

umpteen numbers of Committees set up by

the Government, the Task Force of PMO, the

fact is that only 7% of the units get the bank

finance or institutional credit observed Shri

S. C. Kalia. He therefore encouraged the use

of market research and analysis of the issues

in order to come out with appropriate

solutions to increase bank finance to the

sector. Though there are number of

institutional frameworks formed in order to

assist SME sector, very few have been used

for the purpose they were formed. He further

observed that SMEs do not get their payment

from the Corporate and PSU within the

stipulated period which affects their

working capital adversely. However, no

concrete solution is being worked out to

ensure that SME units start getting their

payments on time. Neither has any

institution tried addressing these issues. Just

providing priority status to SME Sector and

increasing credit flow to the sector would not

prove sufficient unless basic issues facing the

sector are addressed and effective solutions

are reached. He further said that whatever

initiatives are being adopted, there has been

no impact valuation of those due to which it

has been difficult to identify the reasons for

failures

Shri Shekhar Agharkar – Director, Arthtech Consultants (P) Ltd addressing the delegates



Shri P. Rudran – MD & CEO, India SME Asset Reconstruction Co. Ltd addressing the delegates

Shri Viswanathan Ramaswamy – Sr. Vice President – (Technology Enterprise & Wholesale Business)Vodafone India Limited, Mumbai addressing the delegates

Addressing the Summit, Shri P. Rudran said

that though there has been significant

growth in lending towards the SME sector,

the sickness in the sector has also grown

significantly. The total NPAs are further

expected to rise by March 2012. He observed

that when some sort of incipient sickness is

seen in the unit, it is necessary to take

measures immediately as it is the right time

to arrest the sickness of SMEs. He further

commented that though Dr. Chakrabarty's

Report on Rehabilitation of Sick units made

several recommendations for preventing

sickness amongst SME units, many of the

r e c o m m e n d a t i o n s a r e y e t t o b e

i m p l e m e n t e d . W h i l e t a l k i n g o n

rehabilitation of sick units, he said that

though it is inevitable for an unit to become

sick, it is necessary to have set of mechanism

for the rehabilitation of sick units. At the

same time it is necessary for banks to make

conscious decision whether to allow

rehabilitation of sick units or allow them to

become sick and finally cease to exist. All

these decisions are based on diagnosis and

analysis to identify whether the unit is viable

for rehabilitation, observed Shri P. Rudran.

He further added that once the unit is found

to be fit for rehabilitation or revival, it

necessary for banks to speed up the revival

process, give necessary interest concessions,

payment deferrals, some additional funding

if required and some restructuring if

necessary. Though banks are taking initiative

for rehabilitating viable units, there is more

scope for improvement said Shri P. Rudran.

He concluded by saying that the real purpose

of setting Asset Reconstruction Company is

reconstruction and rehabilitation of sick

units and if these ARCs are utilized to the

fullest extent then there is huge scope in

improvement of number of units that get

rehabilitated.

Shri Viswanathan Ramaswamy during his

address said that information is very vital for

the sustenance & growth of an organization.

However, he said that amount of money

spent by SMEs, as a part of their expenditure,

is very low on technology or IT. It is

important for SMEs to look at IT as an

important element of their business. IT

systems become of utmost importance while

building credibility amongst overseas

company regarding the security and the

control of the information is of utmost

importance; and in order to increase the

efficiency with which they can collaborate

with their partners. This would help Indian

SMEs to project an image where they have

secured communication methodology

amongst international community. This can

be ensured by adopting a suitable

information system. The SMEs should adopt

both the internet and mobile information on

communication system. While adopting a

new IC Technology, the SMEs do not have the

same bargaining power as that of a

Corporate. The cloud computing addresses

these needs and it is available at an

affordable cost observed Shri Viswanathan

Ramaswamy. He also encouraged the SMEs

to exploit the social media for marketing and

sales, web based solutions and resort to e-

payments in order to cut-down costs.

He concluded saying there are number IT

solutions that are available at competitive

prices to cater to the needs of SMEs, to make

them competitive and enhance their image

in the international markets.

Delegates asking Questions During Interaction Session



MAHARASHTRA INDUSTRIAL AND

ECONOMIC DEVELOPMENT ASSOCIATION

SMALL & MEDIUM BUSINESS

DEVELOPMENT CHAMBER OF INDIA

®

IITC-INDIA

INDIA INTERNATIONAL

TRADE CENTRE (IITC-INDIA)

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INDIAN YOUNG

ENTREPRENEURS’ FORUM

Co-Organiser Co-Organiser Partner Partner Partner

Solutions Private Limited

®


EUROPE - INDIA


EISBC

Media Partner IT Partner


CO NNECTM A G A Z I N E & P O R T A LSME TRAINING

INSTITUTE OF INDIA

Partner Knowledge Partner Supported by Event Managed by

Contact For Participation

For Sponsorship, Speaking Opportunity and Membership Contact

Ms. Saakshi Kulkarni: Ms. Madhuri:


Tel: +91 - 22 - 6150 9800 / Tel: +91 - 22 - 6667 4444

Mobile: +91 - 98203 37228

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Overview of Packaging Industry

Overview of Indian Packaging Machinery and Equipment

Industry

Impact of Global Crisis on Packaging Industry

Growth Potential of the Industry

Current trends in Global Packaging Industry

Government Schemes & Incentives for Packaging Industry

Funding Options – Banks, VCs and PEs

Importance of Quality Assurance and Audits

Latest Technology in the Packaging Industry

Opportunities for Technology Transfer and Joint Ventures

Importance of Intellectual Property Rights, Copy Rights and

Trade Marks

Promotion and Branding Strategies

SUMMIT AGENDA

This Summit will bring together the stalwarts from packaging Industry to deliberate on challenges and opportunities of this

Sector. Also this will highlight the emerging business opportunity from food processing, pharmaceutical, dairy, beverages and

FMGC Sectors. The participants will get an opportunity to interact with leading CEOs and Entrepreneurs from packaging industry

and other sectors, Ministry of Commerce and industry, trade and investment promotion organizations, bankers, investors and

other financial investment agencies, policy and decision makers.

ABOUT THE SUMMIT

Packaging Machinery, equipment, Products, Items and

Materials manufacturers, packaging product buyers,

Importers, Suppliers, Traders and end users, Barcode designers

and manufacturers, CEOs and Entrepreneurs from

Pharmaceutical, Food Processing, FMCG, Manufacturing

Industry, Banks, Technology Providers, Technocrats, Heads of

Government Departments, Trade Promotion Organizations &

Associations, Associations for Packaging Industry, Consultants,

Exhibition Organisers, Students.

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Identify Emerging Business Opportunities

Updating knowledge on latest technologies

New Government Schemes and Incentives

Networking with potential buyers, suppliers and end-users

Opportunity to interact with Government Officials, other

manufacturers, Bankers, Consultants, Technology

Providers, Industry Experts and Overseas Companies

BENEFITS TO THE PARTICIPANTSWHO CAN PARTICIPATE?

PACKAGING INDUSTRY SUMMIT

International Event on

Sustainability and Competitiveness

PACKAGING INDUSTRY ASSOCIATION OF INDIA

Organises

May 2012 | Mumbai

Inauguration of the Summit

Friday, 13th January 2012 | Hotel Courtyard by Marriot, Mumbai

SME MANUFACTURING SUMMIT 2012Strategies and Initiatives for Sustainable Growth

(From L to R) – Managing Director, Pfizer Limited, – Executive Director, Central Bank of India,

– President, SME Chamber of India, – Chairman & Managing Director, Indian Overseas Bank,

– Member Secretary, National Manufacturing Competitiveness Council (NMCC), Government of India,

– Chief Operating Officer, Fermenta Biotech Limited, – President, The All India Plastic Manufacturers'

Association and – Former Secretary Ministry of Foreign Affairs during inauguration of the Summit

Shri. Kewal Handa Shri R .K. Dubey Shri

Chandrakant Salunkhe Shri M. Narendra

Shri Ajay Shankar Shri Prashant

Nagre Shri Jayesh Rambhia

Dr. Rajendra Abhyankar

Shri Ajay Shankar – Member Secretary, National Manufacturing

Competitiveness Council (NMCC), Government of India

inaugurating the Summit by lighting the lamp

Shri M. Narendra – Chairman & Managing Director, Indian

Overseas Bank inaugurating the Summit by lighting the lamp


SME Manufacturing Summit 2012 | www.smeconnect.in30 | March 2012 | Issue 1

Shri. Ajay Shankar highlighted on the key

reasons why India has been able to buoy the

European Financial Crisis. He specifically

mentioned as to how MSMEs play a vital role

in getting people out of poverty by providing

them with value added jobs, wages and other

supports which is only possible if MSMEs

grow faster than today.

H e gave a n ove r v i e w o f N a t i o n a l

Manufacturing Policy (NMP) that plans to

take manufacturing sector growth to 12-

14%, create 100 million jobs and increase

the share of the sector in India's GDP to 25%

from current 16% by 2022. For this it is

necessary to have a regulatory environment

that supports high birth rate of new

enterprises and also help SMEs to scale up

and grow very fast. It is only when these two

conditions are fulfilled can the true

economic growth can be achieved.

Highlighting the key factors that policy

makers, bankers and MSMEs have to look

into in order to ensure success of the sector,

he mentioned that regulatory environment

should be designed in a manner to improve

the ease of doing business and reduce the

transaction cost to allow the birth of new

enterprises and enable them grow faster.The 2nd factor he mentioned was land and

its price which is the biggest hindrance that

comes in way of new enterprises. It was for

this reason that National Manufacturing

Policy was made in order to create National

Manufacturing Zones with the help of the

state government.

Talking on the 3rd important factor of

Capital, Shri Ajay Shankar urged bankers to

take advantage of huge funding gap that exist

in the SME sector and also set aside some

funds for failure of those SMEs who are

trying new ideas. He also encouraged SMEs

to focus on developing skills of their existing

employees in order to retain them and make

themselves more competitive.

KEYNOTE SPEECH

Shri Ajay Shankar

Shri R.K. Dubey

Shri Chandrakant Salunkhe Shri M. Narendra

Shri Rajendra Abhyanka Shri Prashant Nagre

– Member Secretary, National Manufacturing Competitiveness Council (NMCC), Government of India delivering the

keynote address during inaugural session of the Summit. (Others from Left to Right on the dais) – Executive Director,

Central Bank of India, – President, SME Chamber of India, – Chairman & Managing

Director, Indian Overseas Bank, r – Former Secretary Ministry of Foreign Affairs, and –

Chief Operating Officer, Fermenta Biotech Limited

NMP Plans:

-

- 100 million jobs

-

25% by 2022.

Growth in Mfg sector

by

Will create

India's GDP to grow

12-14%

Shri Ajay Shankar – Member Secretary, National Manufacturing Competitiveness Council (NMCC)


Issue 1 | | 31March 2012SME Manufacturing Summit 2012 | www.smeconnect.in


“Manufacturing Sector is important to

the economy as they create large scale

employment & faci l i tate ski l l

development. This does not mean the

service sector is less important. On the

contrary, both manufacturing and

service sector should complement

each other”, emphasized Shri Salunkhe

during his welcome address.

Detailing the concept of the Summit, he

observed that SMEs especially from

Manufacturing Sector form a valuable link in

the supply chain of government, MNC and

other Corporate. They are the key drivers of

India's manufacturing output and product

innovation thereby positioning India as one

of the greatest innovation hubs in the world.The ongoing global crisis coupled with high

uncertainty on domestic and global front has

slowed down the manufacturing activity to a

great extent, forcing these SMEs to either

shutdown or slowdown their operations.

The crisis has pushed up the prices of

commodities and raw materials creating

inflationary pressures on the economy.This

has increased the input cost for these

enterprises which are already grappling

under the pressure caused by interest rate

hike by RBI. All these factors have reduced

economies of scale for SMEs who are unable

to raise their sales price in order to remain

competitive in the market.

Moreover, most of the manufacturing SMEs

use outdated technologies and old

machineries which further reduce their

competitive positioning. They also face

numerous other problems such as non-

availability of adequate and timely funds,

non-availability of skilled manpower, labour

unrest and lack of access to new and

affordable technology, lack of knowledge on

financial markets, poor infrastructure

facilities and inadequate market knowledge.

He noted that the success of Chinese

economy lies in their manufacturing

efficiency. If we have to remain competitive

in the world, the SME manufacturing sector

should get support from all the quarters.

He elaborated about various services offered

by the Chamber and the importance of

organising conferences aimed at the SME

manufacturing sector. He observed that

many of the SMEs do not have a good

brochure of their products and they should

focus on market promotion activities such as

an appealing and informative catalogue, a

dynamic website and a regular email

communication.

Interaction Between Dignitaries



The MSME Sector is one of the largest contributors to domestic

production and export earnings with its substantial industrial

output, employment generation and quality products & services.

The nation has witnessed the capacity of this sector to boost the

country's economic growth by acting as supply chain to large

corporate with its innovative products & services. Despite the growth

and business development, these small players do not have huge

margin to fall back and shock absorption powers, making them

vulnerable. The present market scenario indicates that the sector is

under stress with rising input and interest cost. However the Indian

MSME has shown greater flexibility and addictiveness towards

volatile market conditions affecting them to withstand and achieve

greater heights in the days to come.

SMEs are of special importance to developing countries for providing

economic benefits beyond the boundary of the individual enterprise

in terms of experimentation, learning and adaptability. These

characteristics are especially important in economies undergoing

radical transformation. SMEs play a vital role for the growth of

Indian economy by contributing 45% of industrial output, 40% of

exports, employing 60 million people, creating 1.3 million jobs every

year and produce more than 8000 quality products for the Indian and

international markets. SMEs contribution towards GDP in 2011 was

17% which is expected to increase to 22% by 2012. Approximately

30 million of MSME Units are active in India and 12 million persons

are expected to join the workforce in the next 3 years. SMEs are the

fountain head of several innovations in manufacturing and service

sectors, the major link in the supply chain to corporate and the PSUs.

Though the SMEs are more responsive and flexible to changes in the

marketplace, it is also less able to influence such developments /

changes. Limited access to capital market/finance, a low degree of

professionalism, difficulties in recruiting qualified personnel, high

dependency on clients and suppliers, lack of infrastructure, logistic &

marketing support and the absence of economies of scale are

identified as the core SME sector weaknesses and the main areas

where SMEs may require special attention.

should be the mantra of SME Units

on the backdrop of arrival of tough new completion from other

economies.

New market opportunities are

alluring and should not be missed but the units should be sure of

their core customer base first. Gaining better knowledge of

customer and improving communication with key customers

must become routines practice.

The internal market should ultimately

enhance labour mobility, making it easier to switch employers.

Wages and benefits are important to retain good staff, but so are

intangibles, such as training recognition, ability to provide input

and responsibility.

Compliance with industry norms are no

way connected with business readiness. The units must

constantly and continuously update their knowledge about

operating requirements and conditions. The local information

sources are lacking, check with MSME development agencies or

relevant industry associations.

Economic

developments tend to erode such competitive advantages over

time. Seek efficiencies in other cost areas, but in the longer term

quality, reliability and customer service will need to be equal or

better than that of competitors.

IT systems can provide an

advantage, but only when utilized effectively. Investment in IT

without training staff in how to use it is of futile nature. The units

should evolve themselves in adapting business processes and

organisational structures in tune with the advance in IT

platforms.

Some competitors from domestic and

international markets may operate in a better cost environment.

Hence their product quality, marketing and distribution channels

will improve over time. Don't underestimate the caliber of the

peers.

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Improving customer retention should be top strategic

priority “Secure the home”

Develop and secure the base:

Invest in your staff:

Knowledge is Wealth:

Low Labour Costs are a temporary relief:

Wise Investment in technology:

Watch your competitors:

.

Sector Importance

Sector Challenges

Scaling against the current for growth

Special Address by Shri M. Narendra – Chairman & Managing Director, Indian Overseas Bank



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Factoring your receivables:

Proper Financial Management:

Factoring helps entrepreneurs

manage their cash flow better and grow faster. In factoring, an

MSME sells its accounts receivables to a factoring firm for

immediate cash to finance its day to-day working capital

requirements; hence the challenges of working capital

management becomes much ease.

No business unit can survive

even with the best products and exemplary marketing

mechanism, if its financials are not adequately managed. Most of

the small and midsize business units face the hindrance of

managing its cash flow, justifying capital expenditures,

negotiating favourable deals with suppliers, balancing quality

and costs, and predicting market demand.

Apart from our traditional management of book keeping, working

capital management and cost control; the business unit must also

concentrate on the following areas for collective financial

management:

Monthly reporting system of P & L and Balance Sheet

Composite annual budge and monthly targets should be fixed

Continuous surveillance of items which affect the liquidity of the

business

Proper justification for expansion and asset creation should be

satisfactory enumerated by evaluating pro's and con's of such

action

Should always find new ways and means to reduce cost and

improve quality

Take professional guidance/suggestions of your Bankers

The MSME Units should develop strong conceptual and empirical

framework in encouraging good governance and business ethics.

The goodwill and brand created out of business ethics and CSR plays

a vital role in placing them in capital market. The reputation paves

the units easy way to be part of the proposed SME Exchange.

Governance and Ethics

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To impart knowledge and skills

SME & Entrepreneurship Development

Marketing & Promotion

Industrial Development

Export-Import Documentation

Business Process Management

Business plans and strategy

Self business evaluation knowledge

Finance and Investment

Technology Upgradation and IndustrialAutomation

Branding and Promotion Strategy

HR Management

Financial Management

Strategy for Identifying buyers and Importers

How to avail incentives and financial assistance?

Commercial CooperationAgreements

Joint Venture & Technology Transfer

Private Equity / Venture Capital Funds

Contract manufacturing tie-ups

Setting up new Industry &, Business

Quality Management

Production Management

Preparation of Business Plans and Project Reports

Domestic Market Development

Collateral Free Loans and Other Bank Finance

QualityAssurance and Productivity

Importance and benefits of Credit Ratings

Letter of Credit and Payment Settlements

Foreign Exchange Management

Logistic and Supply Chain Management

Lean Manufacturing Competitiveness Program

Procedures for Government and PSU Tenders

Importance of Intellectual Property Rights for SMEs

MAJOR OBJECTIVES & ACTIVITIES

SME

SME TRAINING INSTITUTE OF INDIA

SEMINAR | CONFERENCE | TRAINING | EDUCATION | WORKSHOP | INTERACTIONS

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Tel: +91 - 22 - 6677 0218 / 6667 4444 / 6150 9800 | Fax: 2927 1750 / 2825 0414

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: 3, Upper Gr. Flr., Samruddhi Venture Park, Marol MIDC, Nr Hotel Tunga Paradise, Andheri (E), Mumbai:- 93.Registered & Head Office



Dr. Rajendra Abhyankar, while addressing

the Summit said that SME sector has been the

motive force for the industrial development

of all the developed economies like Italy,

Belgium and the US; as well as the newly

rising economies like India, Brazil, Turkey

and Israel to name a few. It is also the back-

bone of our industrial growth.

He spoke on the advantages SME sector can

leverage during tough economic times: the

flexibility and adaptability of their

operations, relatively low requirement for

working capital, the possibility of providing

solutions for small or custom markets and its

ability to power local economy.

He shared deep insight of the European

financial crisis and its impact on economies

across the world and that of India. However

India has buoyed the crisis because Indian

rupee still remains convertible only on the

current account , and most important, its

ever-growing middle class protect it from

the vagaries of international business cycles,

observed Shri Abyankar. He further

commented on the status of the world

economy which indicates that the world

economy would find it difficult to come out of

downward trend at least till 2013. This will

depend greatly on how the US economy

behaves and whether the European Union is

able to bail itself out with the profligate and

creative accounting of national budgets by

countries like Ireland, Italy and Greece.

While talking about China, he said that even

China is facing a severe crunch as huge

financing is taking place in China outside the

banking sector by the cash-rich Chinese state

enterprises. However, settling these debts

will be difficult though China has started

settling at least 10 % of its trade through the

RNB. Similarly, the US's net debt position is

estimated to be US $ 14 trillion even though it

still remains the world's largest economy.

He stressed on the increasing role of politics

in the financial markets, which is in turn

affecting public spending that accounts for

440% of spending around the world which in

turn influences public policy. He observed

that politics is local, capital is global and

trade is regional and encouraged SMEs to

rely on and cultivate your domestic markets

during the crisis period.

Talking about economic situation of India he

said that from 2004 from a level of 4% of the

combined GDP deficit ( centre and States) it

has doubled to 10 % of GDP in 2009-10

fuelling inflation and keeping longer term

interests high due to the massive subsidies

on oil, fertilisers and food; farm loan waivers

;and ramping up of the rural employment

guarantee scheme. The entitlements

resulting from the Right to Education Act and

the Food Security Bill will push up the deficit

even further. The unchecked rupee

appreciation in the past two years has been

soaring trade and current account deficits

since 2010 increasing external vulnerability

and dragging down industrial growth.

Inflation is close to 9%. World energy prices

have increased sharply to over US $ 100 a

barrel leading to huge subsidies (1 lakh crore

in 2011-12). Massive irregularities and

scams in a number of sectors has been

negatively seen by foreign investors.He observed that all these factors have taken

a toll on India's resilient bounce-back from

the global financial crisis of 2008-09. With

economic growth at 6.9 % in second half

2011-12 and industrial growth having

contracted to 5% he said that India's GDP is

projected to grow by less than 7% in 2011-

2012.

H e c o n c l u d e d b y g i v i n g v a r i o u s

recommendations to SME sector in order to

h a n d l e t h e c r i s i s , wh i c h i n c l u d e :

concentrating on the growing sector like

security systems and equipments, energy-

saving equipment, replacement spares for

wide-range of equipment and gadget etc;

increasing the use of IT for advertising,

marketing and sales; upgrading and

developing the products; usage of high-end

technologies and looking at new markets in

India and abroad.

Address by Dr. Rajendra Abhyankar – Former Secretary Ministry of Foreign Affairs



Jayesh Rambhia gave

There are vast business

opportunities available in the Indian plastic

industry. China produces 56 million tones of

plastic per year. India uses just 8kg of plastic

per head per year as against the world

average of 28kgs. He said Indian plastic

i n d u s t r y i s p o i s e d t o d o u b l e i t s

consumptions in next 5 years. The

ownership of land is fragmented due to

division down the generation. Farmers want

lot of power and the subsidy on power will be

very help to increase the production. The

Government should consider 3 years

moratorium for payment by farmers. There

are tremendous amount of waste of food and

there are also environmental degradations.

He mentioned many of the challenges of

plastic industry. Acquiring land, cost of

finance, manpower (both skilled as well as

unskilled), lack of vision and strategy,

inefficient power supply, lack of productivity

and marketing efficiencies, lack of R&D,

government policies and incentives and

succession planning prove to be major

hindrances for the development of the

industry.

overview of the vast

opportunities that lie in the Indian plastic

industry.

Address by Shri Jayesh Rambhia – President, The All India Plastic Manufacturers' Association

Prashant Nagre, while commenting on the

process of economic growth, stressed the

importance of achieving resource efficiency

and importance of measuring the efficiency

in order to achieve competitiveness. He said

that especially in case of SMEs it is critical to

measures all the resources that go in to

business operations in order to control

different factors of production. It is only then

the SMEs will be able to deliver what is

expected and would be able to become

competitive. Further he mentioned that two

important factors that govern the success of

SMEs are their access to capital and access to

markets. While commenting on this he said

that policy makers have to design the

policies and schemes for this sector in such a

way that most of the SMEs are able to use

these and most of them would be benefitted

by those schemes and policies.

Address by Shri Prashant Nagre – Chief Operating Officer, Fermenta Biotech Limited

R K Dubey spoke on the

. He focused

mainly on the service sector SMEs that have

played an important role in shaping the

service sector of the country and so of Indian

economy. He also threw light on how banks

are taking initiatives to help SMEs in the

country

He also stressed that SMEs need to have right

skills for the job in order to succeed and

become competitive. It for this reason he

said, that his bank has signed an MOU with

NSDC in order impart training and skills

d e v e l o p m e n t s e s s i o n t o y o u n g

entrepreneurs.

Importance of SME

sector to the Indian economy

Address by Shri R .K. Dubey - Executive Director, Central Bank of India

Kewal Handa, spoke about the importance of

Indian SMEs in the economic development of

the country. However while highlighting the

key weaknesses and challenges for the

sector, he said that Indian SME sector is

broadly unaware of the technology solutions

and tools available to cater to the marketing

needs. He highlighted on the importance of

internet and social networking as effective

marketing tools as opposed to using

telephone directory to call the concerned

clients. He further said that SMEs have to

look or various means in order to cut down

on the middle man in order to maintain the

value of their products manufactured and

sustain their profitability. He encouraged the

bankers to step up their funding to the sector

so to reduce its dependence on alternate

sources of funding and reduce the sectors

cost of funding. He also encouraged them to

create PE Funds for SMEs as it brings the cost

of funding to zero.

He also mentioned the importance of quality

for SME manufacturers and how critical it is

to maintain the quality consistency at every

product cycle. He also highlighted the

importance of having appropriate supply

chain management, developing new

products, having right organizational

structure, branding the products and having

excellent corporate governance and

business ethics in place as the key factors for

SMEs in order to succeed in the long run.

Address by Shri Kewal Handa – Managing Director, Pfizer India Limited



Panelist (L to R) – Secretary General, SME Chamber of India, – Managing Partner, Universal

Connections, – Senior Regional Advisor, South Asia, Standard Bank, – Managing Partner,

Access Asset Managers, – Managing Director, Brickwork Ratings (India) Pvt. Ltd, – Advocate and

Solicitor, Gandhi and Associates

Shri V. K. Venkatachalam Shri Ajit Shah

Shri Ravindra Kumar Smt. Sangeeta Modi

Shri Vivek Kulkarni Shri Vishal Gandhi

Talking on Europe crisis, Shri Ravindra

Kumar gave a brief overview of Europe's

socio-economic landscape, which has

undergone a paradigm shift over last 10-12

years, which he attributed to be one of the

major reasons for current crisis. With the

collapse of Europe's social structure, its

demographic profile has witnessed a steep

decline. With a large number of ageing

population, the number working people in

Europe is declining rapidly. Further, he

mentioned that the European countries are

spending 39 trillion Euros towards

unemployment and pension support which

works out to more than 50% of the annual

GDP of the world. Europe by–large has

always been environmental friendly zone,

which has led it to shift most of its industries

mainly pharmaceutical and chemical

industries to developing countries like China

and India. As a result, the industrial

production of the zone as well as and the

contribution of industries in the Europe GDP

has been decreasing rapidly. All these

factors, said Shri. Ravindra, has led to the

current financial crisis in Europe.

While explaining the key difference between

2008 crisis and 2011 crisis, Shri Ravindra

said, that 2008 crisis was mainly due to

collapse of world securities market while

2011 crisis is due to collapse of Europe's

socio-economic systems of Europe. Further

he stressed that though financial bailout

looks to be a good short-term solution, the

long term solution lies in building socio-

economic systems of Europe which will take

4-5 years. In India context, the impact of

crisis if felt because of declining exports

leading to decline of industrial production;

and the subsequent weakening of Rupee

against the Dollar. However, he said, that

strengthening of Dollar was not because of

its own strengths but mainly due to the

weakening of other major currencies in the

world.

He observed that, though India had always

maintained a healthy trade balance with

Europe, last 4-5 months have seen a steep

decline in exports to Europe mainly because

of decline in demand from the Euro Zone. He

warned SMEs to be vigilant while trading

with Europe mainly to ensure that their

payments are protected and are coming on

time, they are backed by banks LCs. He also

encouraged SMEs to have a robust capital

and currency management and also explore

alternate markets other than Europe like

Asia, Latin America and Middle East.

Shri Ravindra Kumar

“Eurozone Crisis and Impact on Indian Manufacturing Sector and Exports”

- Senior Regional Advisor, South Asia, Standard Bank addressing the delegates on

Panel Discussion on

CHALLENGES AND OPPORTUNITIES FOR SMEs



Shri Vivek Kulkarni

“India's Industry and SMEs in 2020-Strategies and Initiatives

Managing Director, Brickwork Ratings (India) Pvt. Ltd. addressing the delegates on–

Highlighting the emergence of the

information technology and its usefulness,

he suggested the SMEs to take advantage of

the social media like Google and Facebook

for promotional activities. Instead of

spending lakhs of rupees to advertise in the

newspapers, advertising in social media will

cost only a fraction. He noted that only 6% of

the SME Units have their own website. The

age of an average Indian is 26 years which is

20 years younger than an average age of a

Japanese (46 years). Japanese spend around

85% of their money in health care especially

during their last years of existence.He noted that within next 2 decades 25% of

the world workers will be Indians. India is

also the second largest importer of arms,

with 50 billion USD defence purchases

during last decade. One of the oldest family

owned business is in Japan, which is in

existence for 1400 years. This is possible as

they are into the business of building

Buddhist temples. This shows that the SMEs

should concentrate of stable sectors. Any

investment in IT Sector may become

obsolete soon due to rapid technological

development and innovations. The family

owned business should also select the leader

purely on their merits and leadership

qualities. In India MTR Food Chain in

Bangalore is one of the oldest family owned

business. SMEs are often perceived as risky

clients by the banks. It is assumed that their

revenue and profit margin are low.

The venture capital funds flow to India is put

at 10 billion USD. It is noted that not many

SMEs got the funds from VC. Although the

VCs are willing to invest in SMEs they cannot

find out the right borrower without the help

of an intermediary. Here comes the benefit

of networking opportunities which are

amply provided in the Conferences of this

sort, commented Smt. Sangeeta Modi.

She said that the VC investors generally do

not look to be paid back out of the cash flows

of the enterprise but would like to be paid

through repurchases or new investors while

exiting. Hence VCs are more focused on

growth of an enterprise and takes necessary

steps to ensure the same. She concluded

saying that recently there has been greater

focus on India by the overseas VCs especially

on SMEs in India which gives SMEs a greater

opportunity to attract VCs provided they

make a valuable business proposition.

Smt. Sangeeta Modi “Private Equity /

Venture Capital Funding Opportunity for SMEs”

Managing Partner, Access Managers addressing the delegates on–

Before entering into any type of joint

ventures with an overseas company, Mr.

Vishal Gandhi advised SMEs to carry out due

diligence processes. This includes; obtaining

details about suitability of technology, the

risk related to the contracts, whether any

legal matters are involved, in case of failure

what actions need to be taken, how to

terminate the contract, the obligations of

both the parties to deliver the promises,

recovering the damages, joint deliverables,

aspects about quality of the product and

marketing support etc. There should not be

any ambiguity in the terms and conditions.Further he advised that incase SME happens

to be a minority partner in the joint venture,

then they have need to have clarity on who

will bring how much funds in case of future

expansion, how to fund the ventures

whether through equity or debt etc.In case of equal partnership, he said, there

may be a deadlock situation if one party

wants to exit. In such a case there would be

issues with regards who will buy the shares

and at what price. There may also be issues

related to who will become the CEO, the CFO

and other Board Members, the reward for

top executives, IPR matters, Ownership of IP,

handling misappropriations, rights of the

share holders, the jurisdiction, process of

resolving disputes, arbitration procedures

etc.

Shri Vishal Gandhi

“International Joint Ventures – Protecting your Company's Interests”

– Advocate and Solicitor, Gandhi and Associates addressing the delegates on



Shri Ajit Shah highlighted on the fact that

though; since independence there have been

different ruling political parties, the Central

Government has always focused its attention

on promoting exports. He emphasized that

today's GDP growth rate of India can be

attributed to strong manufacturing sector

that has led to an increase in export activity.

While quoting one of the minister at the

r e c e n t c o n f e r e n c e , h e s a i d t h e

manufacturers must concentrate on quality

of the products, upgradation of technology

and other factors that lead to competitive

manufacturing.

He explained in detail Export-Promotion of

Capital Goods (EPCG) scheme that was

l a u n c h e d i n o r d e r t o e n a b l e t h e

manufacturers import capital goods from

overseas market while meeting the export

obligation. The purpose of the scheme he

said is to improve India's image in the world

market. However, there are yet lots of

improvements to be made in order to make

Made in India products acceptable in the

world market, highlighted Shri Ajit Shah.

World demands quality products and it is

only through the use of capital goods that

quality products can be manufactured.

H e s a i d u n d e r t h e E P CG s c h e m e ,

manufacturer or the merchant trader along

with the manufacturer can import capital

goods by paying 0% duty or a nominal duty

of 3%. However the manufacturer has an

export obligation of 8 times of the duty saved

to be completed in 8 years. While talking on

the features of this scheme, he said, that

incase the manufacturers meets the export

obligation within half the period, that is

within 4 years then 25% of manufacturer's

export obligation is released. 2nd best

f e a t u re o f t h e s c h e m e i s t h a t i s

manufacturers is doing EPCG under

Advanced License scheme where he has to

import raw-material, then EPCG has no

export obligation to be fulfilled.

Shri Ajit Shah “Manufacturing

Policy - Importance and Benefit” & “Incentives and Support for SME Manufacturers for exports”.

Managing Partner, Universal Connections addressing the delegates on–

Delegates at the Summit

Panelists during the discussion



While explaining the importance of

innovation in the current economic and

competitive environment, Shri P K

Balakrishnan stressed that companies will

find it difficult to survive if they fail to

innovate. Innovation is not inventing, he said.

It is about doing the same process or

producing a same product in a new way in

order to add value to the final product.

He gave various examples like McDonalds

that focuses on delivery and the quality of

food products that are served, Flipkart.com

that led the online shopping innovation in

India etc.

He also mentioned the Indian low cost airline

model that was highly successful because of

the focus on human elements and not only on

the markets. In order to make innovations

successful, he advised SMEs to hire right

employees, train them effectively and trust

them, in order to create a culture of

innovation in the company.

Shri P. K. Balakrishnan “Innovative

Strategies - An imperative for SMEs”

– Managing Director, Cogito Ergo Sum addressing the delegates on

Panel Discussion on

STRATEGIES FOR BETTER GROWTH

Panelist (L to R) - President, SME Chamber of India, – Manager, Business Development,

CARE Ratings, – Partner, Desai & Diwanji, – Managing Director, Cogito Ergo Sum,

– Secretary General, SME Chamber of India, – Chief Mentor –Market Research, Business Strategy and

Design, – Chief Strategist, Business Strategy and Design and – Managing Director, HR Anexi Pvt. Ltd

Shri Chandrakant Salunkhe Shri Avinash Chandra

Ms. Aslesha Gowariker Shri P. K. Balakrishnan Shri V. K.

Venkatachalam Shri Sarang Panchal

Shri Rajeev Ruia Shri Ashish Arora

Ms. Aslesha Gowariker “Investment and

Funding Opportunity for SMEs

– Partner, Desai & Diwanji addressing the delegates on

While talking on Indian SME Sector, Ms.

Aslesha Gowarikar said, though Indian SME

sector has been growing rapidly, there is still

a large scope for improvement that can be

done in the sector. She gave an overview of

different funding options available for SMEs

at different stages of their growth. She said

that PE and VC investments though good for

growth, the returns at one stage doesn't

increase at the same rate. This is where IPOs

and other capital markets come to play

which also serve as excellent exit options for

VCs. While highlighting on different foreign

investment routes, she said Foreign Direct

Investment, governed by DIPP and Dept. of

Industry. Focusing on FDI investment cap,

she said that initially there was a cap of 25%

for FDI investment in SME sector which has

now been removed completely. The only

caps that now remain in India's FDI policy

are the sectoral caps in India. She also gave

an overview of Foreign Venture Capital

Investment (FVCI) route through which

overseas VCs can directly invest in India. She

also threw light on Foreign Institutional

Investors (FIIs) and recently introduced

Qualified Foreign Investor (QFI). She

concluded by explaining the rule, regulations

and process of attracting various categories

of foreign investments.



Mr. Sarang Panchal, highlighted on the

importance of market research and its

relevance for SMEs in order to have a good

understanding of their markets, customers,

products, competitors and the demand for

their products. It would also help them

understand and analyze the supply chain of

their products that would in turn help them

make their processes efficient and give them

a competitive advantage over their

competitors . He also stressed the

importance of products testing after

launching of the products and collection of

market feedback about the products. He said,

this would help the companies to fine tune

their products to suit the market needs. The

products have to be made as appealing as

possible. Qualitative research will help and

enterprise to develop market acceptable

products without reducing the prices. Great

quality and good price should be the Mantra.

While launching appropriate care should be

taken for distribution and effective

communication to get timely feedback. After

the product is stabilised, the enterprise has

to ascertain what image is created in the

market and if there is any adversity they

should consider re-launch of the product. To

ensure customer loyalty it is important to

understand what the customer is looking for

in our products and services, what action

should be taken and at what time. There

s h o u l d b e a p ro p e r m e t h o d o l o g y.

Questionnaires should be distributed, the

results analysed, the information is

interrupted and disseminated and final

action is taken. Segmentation on the market

is very important because the customers are

not homogenous.

Shri Sarang Panchal

“Market Research – The Smart Entrepreneur's Secret Weapon”

– Chief Mentor, Market Research, Business Strategy and Design addressing the

delegates on

Ashish Arora during his speech mentioned

how important it is for companies to manage

their human resources effectively in order to

bring out the potential from each employee.

It is estimated that in some companies, the

wastage due to mismanagement amounts to

about 10% of the total expenditure on

human resources.

He observed that the entrepreneurs

especially from the SME Sector should have a

360 degree view of the entire operations to

have a good control over the internal factors

and make business more competitive. He

also stressed on the importance of

outsourcing of non-core activities so that the

entrepreneurs can focus on the core

activities in order drive the performance of

the business. This will allow the business to

be flexible and will allow the SMEs to

channelize themselves for expansion and

growth. He commented that in the

competitive world it is necessary to build

team dynamics and encourage team work in

order to bring out good results. Also he

stressed on the importance of training and

development of key employees in order to

retain the talent in the company.

The enterprises should develop a

partnership approach with their employees

by wealth sharing. The payment should be

a l w a y s c o m m e n s u r a t e w i t h t h e

performance.“Owners value is the Company's value”.

Shri Ashish Arora “Efficient H.R.

Management in production industry”

– Managing Director, HR Anexi Pvt. Ltd. addressing the delegates on

Rajeev Ruia during his speech explained the

importance of branding for SMEs in the

competitive world where customers trust

more on the branded products than on

unbranded ones. He said that as the situation

changes SMEs would have to re-imagine and

re-invent in order to stay afloat. He advised

SMEs to treat branding or Brand as an asset

and not as a liability. It is only then it would

be possible for SMEs to satisfy their

customers' expectations and enable them to

benchmark their products with the global

brands by following globally accepted best

practices and methods. There should be a

clear vision statement stating quantitative

and qualitative aspects. It should not

generalized or vague. Positioning is to be

done taking into consideration the tangible

and intangible aspects. “Values are stronger

than steel”. There are different brands for

products and personalities.

Shri Rajeev Ruia “Re-

Imagine Your Brand's Success”

– Chief Strategist, Business Strategy and Design addressing the delegates on



D. K. Dubey said that it is because of their

efficient management systems including

production and quality, Toyota has become a

debt free company for last 50 years. He said

that for SMEs to succeed in the long run, it is

important for them to sense the business

opportunity and respond quickly. It

highlights the importance of infusing

efficiency in operations.

Most of the organizations when faced with

unseen external circumstances panic and

take reactive approach. Efficient companies

take proactive actions by launching new

innovative products, or innovating their

systems and processes or by entering into

new markets/opportunities.

He commented that people, purpose and

processes are very important aspects in a

business and it is only after innovating any

one of these it would be possible for business

to make a quantum leap. He also explained

the Japanese term for innovation “Kaizen”

means to make it better. He further said the

Japanese believe that in order to modify the

process the best way to start is by going to

the work place (GENBA), see the actual

condition (GENBUTSU) and understand the

facts and take action (GENJITSU).

He also stressed on the importance of

collecting data in order to identify the root

cause of problems and defects and taking

necessary remedial actions in order to cure

the defect at the root itself. For effectively

solving a problem, he said it is important to

involve all the concerned people especially

those who work on the targeted problem and

the decision makers.

There are no permanent solutions. There

will always be new problems for which we

have to find a new solution.

To solve a problem, we should involve the

people who take decision at the place of

work. There should also be fool proof or

defect proof mechanism in products and

processes so that there are no chances of

committing a mistake.

Shri D. K. Dubey – “Improving

quality, productivity and customer satisfaction in SMEs”

Vice President, TQM International Pvt. Ltd. addressing the delegates on

Panelist (L to R) – Manager, Business Development, CARE Ratings, – MD, Acma Computers Ltd,

– Consultant, International Trade Law and IPR, – Sr. Manager – Sales, Renaissance Infra Realty

Pvt. Ltd., - President, SME Chamber of India, - Regional Head, Sage Software India (P)

Ltd, - Head - Business Solutions, Tasa Infosolutions Pvt. Ltd. and – Vice President, TQM International

Pvt. Ltd.

Shri Avinash Chandra Shri Biren Selarka

Smt. Sarojini Patil Shri Mukesh Dubey

Shri Chandrakant Salunkhe Shri Vishal Kanal

Shri Nikhil Kothari Mr. D. K. Dubey

Panel Discussion on

SUPPORT SERVICES FOR BETTER GROWTH



Shri Mukesh Dubey

“Support Services for Better Growth”

– Sr. Manager – Sales, Renaissance Infra Realty Pvt. Ltd. addressing the delegates

on

Talking about of SMEs, he highlighted the

various issues of SMEs like inadequate

infrastructure – roads, transportation, load

shedding, water supply shortage, support of

finance and subsidies and manufacturing

facilities and their locations do not meet the

requirement of the industry. SMEs do not

have much of a choice and use the area that is

available for them which results in setting up

their factory or unit in a haphazard manner.

He mentioned about various other political

and economic situation that affect the

growth of SMEs.

While describing the activities of his

company, he said that company focuses on

providing adequate infrastructure for the

industry in order to enable SMEs resolve a

majority of their issues. He spoke about the

various clusters that his company is building

for the purpose of the industrial support and

development.

He concluded by talking about his

commitment to the development of SME

sector.

Shri Vishal Kanal Shri Nikhil Kothari

"Importance of Integrated ERP & CRM for SME Manufacturing Sector”

– Regional Head, Sage Software India (P) Ltd. and - Head - Business

Solutions, Tasa Infosolutions Pvt. Ltd addressing the delegates onaddressing the delegates on

Shri Vishal Kanal explained the importance

of ERP and CRM for small and big companies

to streamline their processes and

operations. It integrates internal and

external data for simplicity of operation. This

is of primary importance for investors who

look into the efficiency of the business

operations, technology employed by the

company, productivity and growth

projections for taking investment decisions.

Nikhil Kothari while briefing about his

organization mentioned different ERP and

CRM products that are available for SMEs. He

a l s o m e n t i o n e d a b o u t s o f t w a r e

customization in order to suit particular

business needs. He gave an overview of

various software solutions available for

manufacturing industry that can be

incorporated in the existing business

process in order to make the business more

efficient.

While talking about ERP he said that for

SMEs the ERP solutions are made so as to use

as per their size and scale up as and the

business operations scale up. He explained

in detail how ERP will function for each of the

departments and the value it will add to the

department.

Shri Vishal Kanal

Shri Nikhil Kothari

Shri Avinash Chandra – Manager, Business Development, CARE

Ratings addressing the delegates

Talking on SME Sector, Shri Avinash Chandra emphasized on the importance of having third

party assessment and rating by SMEs.

The big giants like Wal-Mart prefer to have suppliers who have been assessed by a 3rd party.

He said, that overseas buyers, though, have found a very little trust in Indian suppliers, have

given a complete commitment once they have found trust in Indian suppliers.

He concluded saying that Indian SMEs have the potential to become better and more

competitive and win overseas orders.



Explaining the need of IT infrastructure in

the company, in spoke about various reasons

what company looks while building IT

infrastructure. These include; increasing the

overall effectiveness, improve efficiency of

t h e o p e r a t i o n s , r e d u c e o v e r a l l

manufacturing and production cost, protect

data, minimum investment, increase sales

and profit.

While talking about various issues related to

IT like slow network connection, issues

related to servers and internet and many

other; he said that it is because of these

issues companies find it difficult to increase

overall staff efficiency, reduce the cost,

protect their data and increase their sales. He

stressed that for SMEs to make themselves

more competitive and enable them grow,

SMEs need to treat IT as an investment and

not as an expense. He encouraged SMEs to

have some fixed IT budget in order to reap

benefits of IT and not merely use it for

accounting and finance part of the business.

It is also important for the company to align

the business goals and operations with IT in

order to maximize the returns. He also

explained how IT can held to expand

business, manage brands and attract more

customers. He briefed about the entire

process for building IT infrastructure right

from IT Health-check, through IT Audit

Reports which gives a detail of IT

infrastructure of the company depending on

which the entire IT Infrastructure to be in

line with business goals and operations.

Shri Biren Selarka – Managing Director, Acma Computers Ltd.

Utilizing IT for Business Growth”addressing the delegates on “

Smt. Sarojini Patil – Consultant, International Trade Law and IPR

“Importance of IPR, Copy Rights and Trade Marks”

addressing the delegates on

A lot of innovations, research and

developments go into designing and

manufacturing the product including

packaging in order to make it cost effective,

appealing and acceptable to the customers.

It is important to understand the value of

these efforts and protect them from the

competitors who might copy them which

may result in the loss of business or erosion

of profits.

Defining Intellectual Property, Ms Sarojini

Patil said that IP can be defined as a new

creation or new inventions and have

originality associated with it. She explained

various places where IPR, Copy Rights and

Trade Marks are used in order to protect the

creation or invention of the organization.

The intellectual property consists of

trademarks, logo, design, copyrights,

prototypes, patents , trade secrets ,

photographs and inventions. She explained

various ways by which these are registered

in India and abroad.

She discussed various acts, boards, rules and

regulations that govern each of IPR,

Copyrights and Trade Marks. She explained

in detail different advantages of having a IP,

patent, or copyrights, Trademarks and how

they can be assigned or licensed. They also

serve as a important tool to tap in to vast

market and also to build brand loyalty

amongst customers.




June 2012 | Mumbai

Annual Flagship Event

2nd Edition

INDIA SME LEADERSHIP SUMMIT

®

IITC-INDIA

INDIA INTERNATIONAL TRADE CENTRE

(IITC-INDIA)



Jointly Organise

Knowledge Partner Supported bySupported by


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Economic Growth of India – “Role of SMEs”

Manufacturing Policy – Impact on SMEs

Role of SMEs for Nation Growth

Responsibility of Bankers for SME Development

Emerging Market Opportunity – Government Initiatives

Initiatives for unlocking the potential of Indian Entrepreneurship

Economic Growth & Transformation of India – Position of SMEs

SME Sector – Challenges and Opportunities

Effective Leadership – Strategy for development

Developing effective organizational teams to compete with global market

Enhancing Performance for productivity and profitability

Transforming SMEs into Large Companies – Strategy Implementation

Good Governance and Business ethics for better growth

Business Opportunities for Indian SMEs

SMEs & Global Competitiveness: Strategies for Survival and Growth

Importance of Technology to improve Leadership quality in SMEs

IndustrialAutomation and Innovation – Path for new business avenues

Global Financial Crisis and Slow Down – Impact on SMEs

Tracking New Business Opportunities for encouraging more

entrepreneurship

TOPICS TO BE COVERED


Conference on

EMPOWERING SMEs FOR INCLUSIVE GROWTH - STRATEGIES & INITIATIVESOn the Occasion of the Centenary Celebration of the Central Bank of India

Tuesday, 20th December 2011 | Hotel Trident, Nariman Point, Mumbai

Inauguration of the Conference

Dr. K. C. Chakrabarty – Deputy Governor, Reserve Bank of India inaugurating the Conference. Others from (L to R)

– MD & CEO, Asia Pragati Capfin Pvt Ltd, – President, SME Chamber of India, –

CMD, Central bank of India and – Executive Director, Central Bank of India

Shri A. Ramesh

Kumar Shri Chandrakant Salunkhe Shri M. V. Tanksale

Smt. Vijayalakshmi R. Iyer

Dr. K. C. Chakrabarty

Shri A. Ramesh Kumar

Shri Chandrakant Salunkhe Shri M. V.

Tanksale Smt Vijayalakshmi R. Iyer

– Deputy Governor, Reserve Bank of India releasing the SME CONNECT - Magazine December 2011 issue. Others

(Left to Right) – MD & CEO, Asia Pragati Capfin Pvt Ltd and Chairman (Northern Region) SME Chamber of India,

– President, Small & Medium Business Development Chamber of India (SME Chamber of India),

– CMD, Central bank of India and – Executive Director, Central Bank of India

Release of “SME Connect” Magazine

Conference on “Empowering SMEs for Inclusive Growth” | www.smeconnect.in46 | March 2012 | Issue 1

Dr. K. C. Chakrabarty in his keynote speech

congratulated the efforts of Central Bank of

India for promoting small and medium

entrepreneurship in India and played a

sterling role in the industrial development of

the Bombay Presidency region. He stressed

on the fact that for India to achieve a growth

rate of 8-10 percent for the next couple of

decades, it is necessary to nurture MSME

sector to make it stronger.

He emphasized on according high priority to

t h i s s e c t o r e s p e c i a l ly d u r i n g t h e

recessionary period in order make them

more competitive as the micro enterprise of

today will be big enterprise of tomorrow and

will further go on to become MNC eventually,

observed Dr. Chakrabarty.

While stressing on the importance of

availability of timely and adequate finance,

he commented that though the credit flow to

the sector has shown an increasing trend,

still availability of timely and adequate

finance remains to the major issue facing the

sector. He stated that, 4th Census of MSME

sector, September 2009 revealed that out of

all the SME units (both registered as well as

unregistered), only 5.18% of the units had

availed of finance through institutional

sourced, 2.05% had finance from non-

institutional sources and a majority of units

i.e. 92.77% had no finance or depended on

self-finance. He also explained the

importance of giving collateral security to

the bank. He stressed on the importance of

availability of good infrastructure,

appropriate technology and skilled

manpower as primary requisite for building

competitive MSMEs and also to help them

overcome the crisis. It is necessary to built

the ability of SMEs, especially those involved

in innovations and new technologies) to

access alternative sources of capital like

angel funds/risk capital. For this purpose,

removing fiscal/regulatory impediments to

use such funds by the MSMEs should be

considered on priority. He also highlighted

on the flow of equity capital to this sector

stating that at present, there is almost

negligible flow of equity capital into this

sector. Absence of equity capital may pose a

serious challenge to development of

knowledge-based industries, particularly

those promoted by the first-generation

entrepreneurs with the requisite expertise

and knowledge.

While focusing on issues facing the sector, he

said that considerable delay in settlement of

dues/payment of bills by the large-scale

buyers adversely affects the fund cycle of and

business operation of MSME units. He also

observed that growing sickness in the sector

has been a major area of concern as it is

leading to increased closure of units and

unemployment. The causes of sickness are

both internal and external. The major causes

are limited financial resources, lack of

organisational, financial and management

skills and expertise, non-availability of

power supply, shortage of raw materials,

marketing difficulties, delayed and

inadequate credit, obsolete technology,

inadequate infrastructure, etc. He also

stressed on the importance of developing an

exit route for non-viable units to manage

sickness.

In order to achieve inclusive growth across

the country, Government of India along with

Reserve Bank of India have taken various

measures and have endorsed quantitative

access targets over the last year to achieve

financial inclusion. Few of these targets

include usage of Information and

Communication Technology (ICT) – based

models including Business and also tapping

untapped markets. He also explained the

importance of collateral free loans under

CGTMSE. MSE loan policy, Restructuring /

rehabilitation Policy and Non-discretionary

One Time Settlement Scheme.

Dr. K. C. Chakrabarty – Deputy Governor, Reserve Bank of India delivering keynote address


Issue 1 | | 47March 2012Conference on “Empowering SMEs for Inclusive Growth” | www.smeconnect.in

Delegates Interacting with Dr. K. C. Chakrabarty

Delegates at the Conference

While elaborating on the role of Banks and

Industrial Associations, Dr. Chakrabarty

stressed on the importance for banks to tone

their risk assessments and risk management

capacities and make provisions in event of

failure of such enterprising MSMEs. He also

encouraged banks to recognize vast

potential that exists in responsible lending to

MSE Segment. With increasing competition,

introduction of new products and stringent

regulatory environment, the role of banks

needs to change from mere lenders to

partners in business.

He stressed that, in order to equip the

MSMEs with the capacity to manage their

businesses effectively and efficiently

comprehensive guidance and training on

setting up new units as well as providing

continuous education on different aspects of

successful management of existing business

enterprises must be provided. Also in order

to make the sick units viable, he said, timely

and effective rehabilitation by way of

renegotiations of terms of loans, induction of

fresh dose of funds, business restructuring,

change of management etc. may become

necessary. The process should not only be

quick, efficient, cheap and fair to all

stakeholders but also acceptable to and

implementable by all, with necessary

m o n i t o r i n g a r r a n g e m e n t s f o r

implementation of the same.

He also highlighted on four typical mistakes

entrepreneurs make which are foreseeable

and avoidable. Firstly, majority of successful

new inventions or products do not succeed

in the market for which they were originally

designed. So one has to keep options open

and not be dogmatic about pushing a product

in a market for which initially designed or

targeted. Secondly, entrepreneurs focus

more on profits. Hence it is necessary for

them to understand that profits are

secondary and it is the cash flow that

matters. Thirdly, when a business grows, it is

necessary to create a management team.

Young entrepreneurs often cannot afford to

bring in an external management team. So, it

i s n e c e s s a r y to i d e n t i f y t h e c o re

competencies of the people working with

you. This planning should take place well in

advance. Lastly, when the business is a

success the entrepreneur needs identify the

needs of the business.

Dr. Chakrabarty concluded by saying that

banks in order to serve new rural credit

needs, innovative channels for credit

delivery will have to be found.



“Without the Banks, the SMEs cannot grow

and without the SMEs the economy cannot

grow” said Shri Chandrakant Salunkhe,

while driving home the point of the

importance of the relationship between the

SME Sector and the Banks.

The theme of this Conference is financial

inclusion. In India, only about 7% of the

entrepreneurs have access to bank credit.

While the SMEs in the Metros and major

cities enjoy financing from the banks, the

vast majority of the entrepreneurs in the

rural areas still depend on their own money

or from the relatives for initial funding to

start their business. The major portion of

the funds is arranged by the local money

lenders at exorbitant interest rates. Although

they have expertise in their technical

function, they lack knowledge in managing

the finance. Over a period of time due to

extremely poor financial management,

competit ion and huge outstanding

receivables, many of these Units become sick

and eventually close down.

If the SME Sector, which drives the economy,

has to survive, the banks have to take a very

serious view of including those micro and

small units under the banking sector.

Through this Conference, the Chamber aims

to highlight the urgent need for policy

initiatives at the higher level and operational

activities at the grass root level of the

banking sector.

Therefore, it is very important to develop

good rapport between the Banks and the

SME Sector. He emphasized that the

upcoming BSE SME Exchange will be of great

help to the SMEs to mobilise capital from the

market.

The Chamber has initiated CFO and Financial

Advisory Services to provide necessary

guidance to SMEs to manage their finances

effectively. With their linkages with many

Government and private agencies, the

Chamber provides enormous business

opportunities in EU and other countries for

the development of Trade, Investment and

Business Alliances.

Mr. Salunkhe assured the SMEs that while the

banks provide only finance, the Chamber

provides assistance and support in all areas

such as marketing, branding, exports,

venture capital, private equity technology

transfer, contact manufacturing tie-ups, joint

ventures, global business connectivity and

education and training.

SMEs employ unskilled people, train them in

various activities and make them skilled

labours. After some time they migrate to the

Corporate. This way SMEs are the training

ground for skill development and provider of

employment to the underprivileged.

Mr. Salunkhe highlighted the delay in

payments by the corporate to the SME Sector

which affects the cash flow of the small units.

He appealed to the banking sector to provide

necessary ad-hoc limits to tide over

difficulties and also provide extra time to

repay the loan installments. Quoting the

entry of more credit Bureaus, he has

expressed his apprehension that there may

be conflicting reports by different Bureaus

about an individual or SMEs.

He concluded that the Banks should support

the SMEs in rural areas more than their

counterparts in urban areas, then only

inclusive growth can be attained.

With the setting up of SME Exchange, he has

reiterated his confidence that the deserving

SMEs will have no problem in fund raising for

their expansion and diversification.


Without the Banks the

SMEs cannot grow and

without the SMEs the

economy cannot grow



Shri M. V. Tanksale – Chairman & Managing Director, Central bank of India addressing the delegates

It was the realization of the dream of Shri

Sorabji Pochkhanawala, a visionary and a

philanthropist who deserves rich tributes.

Central Bank is proud because this Bank was

the first commercial bank which was wholly

owned and managed by Indians” mentioned

Shri Tanksale.

While emphasizing the role played by the

SME Sector for economic growth of the

nation, he elaborated the services provided

by Central Bank of India for the development

of this Sector. As far as the banks are

concerned, financing the SMEs are no longer

treated as a mere compliance formality. For

them, SMEs are their bread and butter and

the banks have a lot to contribute towards

the SMEs said Mr. Tanksale.

About the challenges faced by the SMEs on

timely and adequate credit availability from

the banks, he emphasised that SMEs are their

partners and he suggested that SMEs should

be transparent in their deals with the banks.

Even though NBFC products are highly

priced, the SMEs still prefer them due to their

speed in processing the proposals. Saying

this, he highlighted how banks can step up

their lending process and ensure smooth

flow of credit to SME sector.

He appealed to the SMEs that the Bank

expects from them is to keep the channel of

communication open at the time of

difficulties so that the bank can extend timely

support and advise to tide over the problems.

Sensitizing the entrepreneurs in this respect

coupled with solution finding approach by

the banks would be beneficial to both.

Citing the increased imports from China of

many common articles, he advised the SMEs

to adopt necessary manufacturing processes

to produce quality products at a competitive

rate to reduce the import burden.

Banks generally concentrate on debt funds

and do not enter into providing equity funds.

Every bank has adopted a district as a lead

bank. Financial Service Limited a subsidiary

of the Bank provides counseling for SMEs.

He appealed to the SMEs to look at the total

cost of funds and not to concentrate only on

the price of credit. Identifying the low

productivity workers and give them training

is more important for SMEs.

In conclusion Mr. Tanksale said that all the

stake holders, the concerned Government

Departments, Banks, Financial Institutions

and other organisations interested in the

development of SME Sector need to focus on

providing a conducive environment with

necessary infrastructure which will promote

the growth of the SME Sector.



PANEL DISCUSSION

(Panelists L to R) – CEO, BSE SME Exchange , – Chief Executive, Indian Banks'

Association (IBA), – President, SME Chamber of India, – MD & CEO, Asia Pragati

Capfin Pvt Ltd and Chairman (Northern Region) SME Chamber of India, – CMD, Central Bank of India,

– MD, Credit Information Bureau (India) Limited and – Executive Director, Central Bank of India

Shri Lakshman Gugulothu Dr. K. Ramakrishnan

Shri Chandrakant Salunkhe Shri. Ramesh Kumar

Shri M. V. Tanksale Shri Arun

Thukral Smt Vijayalakshmi R. Iyer

during the panel discussion

Smt. V. R. Iyer spoke about segmenting SMEs

them into Micro and Small Units and again

situated in rural and urban areas on order to

avail them of the appropriate benefits as

micro and small units are professionals, not

financially savvy and require more

handholding and counseling. Further, while

talking about medium size companies she

said that these companies are more

professional and understand better about

the formalities required from the banks

point of view. Despite of the size of SMEs all

of them require thorough counseling in

order to make them more competitive.

Big companies, she said, are the ones who are

p r o f e s s i o n a l a n d u n d e r s t a n d t h e

requirements of the bankers, who have

specialized divisions like, the finance &

taxation and they are able to work both on

the branch model as well as on the e-banking

model.

She observed that SME Units often do not

work for sustainability. They often go in for

expansion without waiting for the approvals

of the banks for funds, which in turn affects

the cash flow, and so do the operation of the

enterprise. In such situation, the bankers

also become little more suspicious and the

entire process of lending becomes difficult.

She advised SMEs that the in order to help

the banks in a better way they should come

forward and discuss their problems at every

stage as the banks are always willing to

handhold and support them.

Second aspect she emphasized that if the

SME Units really want to progress, they

should go through the rating process by the

rating agencies which will help both the

banks and the Entrepreneurs to understand

where the weakness lies and take remedial

measures.

Smt Vijayalakshmi R. Iyer – Executive Director, Central Bank of India addressing the delegates



Dr. K. Ramakrishnan – Chief Executive, Indian Banks' Association (IBA) addressing the delegates

Speaking about strategies

, Dr. Ramakrishnan gave an

overview and importance of Indian SME

sector which serves as a great opportunity

for the bankers. Globalization and economic

liberalization has led to intense competition

for Indian SMEs from lost cost centres, cheap

imports has in turn put them in the transition

phase trying to adopt themselves in the new

business environment. However, those

companies that have strong technological

base, international business outlook,

competitive spirit and willingness to

restructure and reinvent themselves have

withstood several challenges and survived

various threats. These are the four essential

pre-requisites for SMEs in order survive and

sustain in the changing environment, said Dr.

Ramakrishnan. He expressed that for SMEs

to survive, bankers should take initiative to

identify talents, nourish entrepreneurial

abilities, facilitate enactment of rules by

Government in order to promote these

enterprises and create market for SMEs in

order to ensure smooth functioning of these

enterprises.

He highlighted SMEs fail mainly because of

their over-dependence of single customer

and not trying to have multiple customers.

Having multiple customers helps because in

an event if orders stop from one customer

there are other customers to whom SMEs can

supply. He concluded saying about various

initiatives taken by banks and other

organizations in order to develop and

support SMEs for their growth.

“Banking

Systems could use for empowerment

of SMEs”

Talking about CIBIL, Shri Arun Thukral said

that CIBIL is the first Credit Information

Bureau in India and the only reason for the

Bureau to exist was to improve the

penetration of credit in the country, whether

it is about individual or business entities.

The credit penetration is low in India

because of the lack of information and

infrastructure in India.

For banks to take lending decision about

SMEs, they have very limited information

about Small and Medium Enterprises. SMEs

often do not maintain the accounts well

which in turn affects the financial data and

banks find it difficult to understand the

financial history of the company. With the

help of Credit Bureaus banks find it easy to

obtain, analyze and understand the financial

history of SMEs in addition to the documents

provided by them. It enables banks to take

informed decision and lend appropriately to

the SMEs depending on their financial

discipline. This would help improve the

credit penetration in the country.

The Bankers with the help of credit report

can identify the disciplined SMEs and if the

credit history is good, they are able to take

informed decision. He also clarified that if a

customer is not happy with the CIBIL report

they can approach their Customer Redressal

Cell to rectify the shortcomings.

He concluded saying that though there are

multiple credit bureaus they all will share

the same data from the banks. Hence, there

are little chances obtaining a positive rating

from one agencies and negative rating from

the other. He also reiterated that CIBIL does

not resort to value judgments on the

transactions. They are also coming out with

new format of reporting. The intention is not

to find fault with the people but to provide

the credit history as received from the

member banks. This also serves the purpose

of assisting SMEs improve their credit

history in order to getting adequate lending

from Banks and at appropriate cost.

Shri Arun Thukral – MD, Credit Information Bureau (India) Limited

Shri Ramesh Kumar highlighted lots of issues

that need to be addressed in the quest for

empowering SMEs for better growth. SMEs

are the biggest provider of employment not

only in India but across the world. In India

alone the number of SMEs have risen from 7

million to 30 million, over the last 15 to 17

years, the total contribution of SMEs to the

exports & employment has been somewhat

stagnant to 40 to 45%. Looking at the global

scenario, developing, Eastern European,

Czech Republic, 99.5% is the contribution

from the SME Sector. France, 99.7%, Italy,

99.9%, UK 99.3%,USA 98.5%,which are the

number of SMEs from the total number of

enterprises in the country. He noted that

that even in case of highly developed

economy as well as developing economy,

SMEs contribution has been overwhelming.

Because the SMEs are the ones which create

a competitive and efficient market, they are

the largest providers of employment; they

help in technological innovation and deliver

a large variety of new products. They are

more adaptable and flexible in changing

times. The easy entry and exit to SMEs across

the world makes the productive system

much more flexible. They create more

market pressure because low overhead and

they can meet demands.

Shri Ramesh Kumar – MD & CEO, Asia Pragati Capfin Pvt Ltd. addressing the delegates



Shri Lakshman Gugulothu – CEO, BSE SME Exchange addressing the delegates

Talking on SME Exchange, Shri Lakshman

Gugulothu mentioned about Bombay Stock

Exchange unique initiative in order to

provide alternate mode of finance for SMEs

at all levels. Already 40 SMEs have signed up

and 40 IPOs are lined up and the exchange

would start is full-fledged operations in next

couple of months said Shri Lakshman

Gugulothu. He said that SMEs would be

highly benefitted by listing in SME Exchange

as 100% underwriting is available. Equity

capital from the market through IPO is the

best way to raise funds. There are no

collaterals and no servicing cost. It is

perpetual capital and ideal for the growth of

SMEs.

While mentioning about eligibility for

applying to SME Exchange, he said that in

order to be eligible for listing the SMEs need

to have a good track record and valuation. He

observed that there are several SMEs that do

not declare profits for taxation purpose

which in turns affects their valuation. Cash

flow and bottom line are very important

factors. Therefore, SMEs should show more

turnover and profit to take advantage of

listing.

He also encouraged SMEs to resort to

automation, ERP, B2B portals, networking

online marketing, branding and effective

marketing management in order to become

competitive and improve their turnovers

and profits. They should develop a

trusteeship approach and be transparent in

their systems and processes. Good corporate

governance will usher the unstructured

SMEs into corporate culture.

He concluded stressing that; getting listed in

SME Exchange does not substitute role of

banks for SMEs. An enterprise requires both

debt and equity are complimentary to each

other as the investors will only in those SMEs

that have good debt-equity ratios.

Therefore, both the exchange and the banks

are important for the SMEs.


Delegates asking questions and queries to the panelists during the open forum discussion at the Summit

Open Discussion Forum



www.smeconnect.in54 | March 2012 | Issue 1

CO NNECTArticle

Building Integrated Relationships with SMEs –Going beyond Lending

Small & Medium Enterprises (SMEs)

account for a sizeable share in

employment generation and economic

development of developing and developed

countries alike. In India, SMEs account for

over 95% of all industrial units, 45% of India's

industrial output, 40% of exports and

employs over 70% of India's working

population. These figures clearly indicate the

importance of the sector for the economic

development of the country.

How these SMEs finance their operations has

been a subject of significant interest to

policymakers and researchers alike. There

are plenty of facts to prove that most of the

large companies today started small and have

contributed immensely to the economy of

country. As a result, viability of SME units is

very crucial for any economy that wishes to

prosper.

SMEs, however, are faced with various

challenges like high cost of raw materials,

high inflation levels, lack of market access,

and high interest rates amongst many others.

These concerns are further compounded by

evidence showing that these units tend to be

more financially constrained than large firms

and that lack of access to adequate, timely and

cost effective finance proves to be a major

hindrance to their growth. In particular, SMEs

find it very difficult to obtain external

financing from banks or from capital markets

given their size and opaque nature.

In fact, India's 4th Census of MSME sector,

September 2009 revealed that out of all the

SME units (both registered as well as

unregistered), only 5.18% of the units had

availed finance through institutional sources,

2.05% had availed finance from non-

institutional sources and a majority of units

i.e. 92.77% had no access to finance or

depended on self-finance. The survey of

10,000 companies in 80 countries shows that

39% of small firms, 38% of medium firms and

29% large firms found obtaining finance to be

the biggest obstacle in their growth.

Whether its Indian banks or banks in any

other country, they have treated SMEs as

very risky customers to lend money. Surveys

and studies conducted on SMEs indicate that

inadequate financing of SMEs is largely

rooted in the supply-side features that view

SMEs to be risky business. This has made the

financial institutions biased against offering

finance to SMEs; consequently affecting the

bank finance and credit flow to the SME

Sector.

There are various factors that banks

consider as obstacles while funding SMEs.

The most important is the opaque nature of

these units or the information asymmetry

arising from the unwillingness of the SMEs to

disclose the entire information. All banks,

whether funding large or small units alike,

are obligated to perform thorough analysis

of project reports in order to understand the

viability of the projects and the risks

associated with it. However, in most of the

cases of SMEs, banks find it difficult to

ascertain the viability of the project in terms

of capacity or ability of the SMEs to repay the

credit and/or their willingness to repay the

credit. This mainly arises due to the lack of

proper project configuration by SMEs as well

as their hesitation to disclose all the required

information. This opaqueness undermines

the lending, particularly from those

institutions who want to engage in more

impersonal or arms-length financing and

requires hard, objective and transparent

information.

Secondly, it's observed that banks in several

cases would lend less to the SMEs or charge

high interest rates on the credit forwarded.

This is mainly because, relative to large

firms, small units tend to be more informal

particularly in developing countries.

Informality particularly implies in terms of

the conditional liabilities that the firms owns

to the government departments, its own

employees, or its suppliers and have not

recorded in their financial reports. This not

only makes opaqueness worst, but also

increases the riskiness of these units

because of the possible threats from tax and

labour departments. This creates obstacles

for them to avail adequate credit. If the firms

do not report the complete status of their

financial activity on their financial

statements, it is then the banks, especially

the Indian banks, choose to be risk averse.

Sensing the risks involved in lending to such

SMEs, they do not lend to SMEs as much as

they would otherwise or charge a higher risk

premium.

All these factors too limit the access of SMEs

to the capital markets as capital markets do

not serve as a medium to compensate the

inability of the banks to lend to the SME

sector. Further, capital market financing

rests completely on high accounting and

disclosure requirements and are subject to

high legal, compliance and regulatory

structures that SMEs may lack on account of

their opaque nature.

Banks' perspective on Financing to SMEs

Omesh KandalkarResearch Analyst &

Business Development

SME Chamber of India

Banks perceive SMEs as their risky clients

mainly because of their opaque nature and

lack of informational disclosure. Banks try to

mitigate their risk exposure by demanding

collateral security which most of the SMEs

especially the start-ups find it difficult to

provide. The studies and surveys conducted

have shown that building successful

relationships with SMEs prove to be obvious,

if not the only, way to deal with opaqueness

of SMEs. In order to build successful

relationships, it is necessary for banks to

think beyond lending or lending through

collateral. It is important for the banks to

realize it is only by creating a supportive

environment can they drive the growth in

this segment and thereby reduce their risk

exposure. This has given rise to the

d e v e l o p m e n t o f n e w c o n c e p t o f

to SMEs.

In order to forge excellent relationships with

SMEs it is important for banks to consider:

The kinds of services that would be more

useful for SMEs

Kind of information support that would

be most useful for SMEs based on bank's

experience and information resources

Actions that need to be taken to

strengthen SMEs and how to make best

use of bank overall expertise and

resources

In order to engage in the process of

relationship lending it is crucial for the banks

to become strategic partner. The banks can

assign 'personal banker' or 'relationship

manager' to a group of SME clients. Personal

Bankers, though, would primarily be

responsible for collecting, documenting and

forwarding the loan applications for

approval; will also serve as knowledge

providers in order to ensure the survival and

long-term success of their clients'

businesses. They will work closely with their

SME customers, understanding their needs

and challenges, identifying the areas where

their clients' business needs strengthening

and offer suggestions to resolve the

situations; which may include bringing in a

financial advisor, a project management or

marketing consultant or a networking

expert. Bankers can also help SMEs avoid

dire economic crisis as they are in a position

to recognize economic and commercial

trends early.

SMEs require same information as that

required by the large companies; however,

they lack necessary expertise and time to

filter through the large mass of information.

However, few entrepreneurs are talented

enough to collect required information

through contacts and various services, yet

many others find it difficult to see the value

of the information to their businesses. This is

where banks can play a major role by making

use of insights gained through their

experience, extensive information resources

and large network; and provide SMEs with

the required information at the right time.

The information can be provided in

numerous ways; few of them being monthly

newsletters or booklet series where

information is obtained from different

sources and offers practical advice to SMEs

on day-to-day operations. The information

may include but may not be limited to cash

flow planning and management, advice on

preparing attractive business plans,

measuring performance, marketing and

branding of business, products and services;

c re d i t a n d fo re i g n e xc h a n g e r i s k

management and other areas where the

business owners lack expertise.

Banks can also remodel their KYC norms to

include the operational details of their

clients' business, the strengths, weakness

and risks of the business, solutions

recommended in order to improve their

clients' businesses and results obtained

from monitoring the progress of the

business due to the recommended solutions.

All this cumulated data will form the bank's

database containing client's personal record

and aggregated information. This would

prove to be of immense use while processing

client's new loan application, reducing the

loan approval time and increasing the

percentage of loans sanctioned.

Banks can keep in contact with their SME

customers through various channels like

personal meeting, telephone, fax, internet

and computer. Usage of IT by the banks can

help them to channelize the information of

their clients in order to speed-up decision-

making and give SMEs more focused advice.Other services the Banks can provide SMEs

include investment advice, Initial Public

Offerings (IPOs), cross-border payment

collections, and special lines of credit for

foreign exchange transactions.

'relationship lending'

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How can Banks improve their Relationships with SMEs?

© CARGULLO / ALRROYA

ArticleCO NNECT


Integrating financial markets and provide

fair return of the stakeholders are and will

remain major challenges for banks to engage

in relationship lending. Relationship lending

has various implications on the way banks

lend to SMEs.

First, while banks can compensate for

opaqueness through relationship lending;

relationship lending implies cost that makes

dealing with SMEs less attractive and in turn

raises the required returns from SME loans.

The high cost associated with the

relationship lending is mainly due to the

labour intensive process of collecting SME

information. It also incurs the cost of training

the senior management and staff of the

banks. Personal banker would have to be

further trained in order to provide necessary

advice to their clients when needed. This

consumes lots of time and money.

From the SMEs perspectives, though the

entrepreneurs are clear about their business

directions, are innovative and understand

their marketplace, yet they are faced with

own set of challenges and are more

vulnerable than the large enterprises. SMEs,

in order to reap full benefits of banks

support, have to get out of their traditional

methods of managing business. They have to

improve their management systems and

adopt modern management techniques.

They would also have to use the acceptable

accounting standards, maintain their books

of account and should reflect the realistic

picture of their operations and financial

conditions. This would be the biggest

challenge, as SMEs would have to get out of

their comfort zone and change their way of

thinking or way doing work

The biggest challenge for banks to engage in

relationship lending is the made to order

nature of loans, which would make it difficult

for them to quantify and transmit this huge

information through the centralized

c o m m u n i c a t i o n c h a n n e l , w i t h t h e

headquarter located miles away. It is

probably due this reason that large banks

have chosen to lend to the old, established

and large SMEs having strong financial ratios

leaving the new ones to small and niche

banks that are close to relevant sector,

community or neighbourhood.

Challenges for Banks and Entrepreneurs

Conclusion

While it is important for SMEs to maintain

sound financial management systems like

large corporations, it is also equally

important for banks to adopt sound banking

principles in order to face the realities and

hazards of the business environment. Also

there are few large banks that are changing

their relationships with SMEs by innovating

their client relationship model. The strategic

partnership between banks and SMEs will

continue to expand with banks realizing the

importance of this sector for their growth.

Innovative ways of forwarding credit to SME

clients will develop as banks would find

innovative ways of mitigating their risk

exposure to the sector.

Further, the emerging collaborations

between large companies and SMEs will

enable SMEs to receive substantial

management and information support from

the private sector as a part of their business

interaction. It is also advisable that both

banks and small companies explore the kind

of information that is useful for each partner,

the ways in which the information can be

made accessible and how best they can make

use of their people and resources. It is

through these efforts the banks and SMEs

can forge strong partnerships, which would

in turn guide national governments support

the information needs of these small units.

The role of IT infrastructure cannot be ruled

out while forging such strong bonds,

especially in an event when SMEs expand

their operations overseas; as it enables

dynamic exchange of information and ideas

across the border.

Without adequate support from banks, SMEs

would not be able to acquire or absorb new

technologies nor would they become

capable to compete in international markets

or form business relations with large firms.

At the same time, banks would continue to

consider SMEs as risky businesses unless

their concerns are addressed by SMEs.

Solving this dilemma is possible only if SMEs

are assisted by public initiatives with

banking industry taking the charge. The

strategic partnerships evolving between

banks and SMEs can only strengthen the

SMEs and thus will in turn contribute to

national economies.

CO NNECTArticle


INNOVATIVE STRATEGIES – AN IMPERATIVE FOR SMEs

In today's world economy, globalisation of product and

service markets is accelerating. Indian companies - in

particular SMEs - face increasing competition from

companies belonging to China, Korea, Vietnam, Brazil,

Eastern Europe et al. In this challenging environment,

competitiveness at the company level depends crucially on

the speed with which new innovative products can be

brought to the market place and new cost-saving

improvements made.

and this is the only Brahma Sutra!

Again, the creation of wealth and

employment depends to a very large extent

on the alacrity with which scientific and

technological breakthroughs are converted

into commercia l proposit ions and

applications.

More than ever before, Innovation today is a

strategic imperative. It is a critical driver for

growth, competitiveness, and shareholders

value. Innovation, therefore is the integral

part of any company's success – be it in

service or manufacturing and regardless of

the vertical domains. In India today, if SME

companies want to survive, they must stay

steps ahead of the competition from these

emerging block. The emergence of

challenges from these rapidly developing

economies have transformed the playing

field with high quality, inexpensive products

flooding the world markets. To stay in the

game, Indian SME must significantly

differen itself through Innovation.Older order changes yielding

place to new! Art of staying ahead of curve!

tiate

Do not make the mistake of understanding

Innovation as simply development of new

product. It is a whole process of business

itself – business can look upstream or

downstream for new applications, envisage

business models, enterprise structure, value

chain, service, mode of delivery, brand, novel

customer experience, and what not. Actually

there is no limit for this broad outlook on

innovation.

Innovation can be clearly divided into two –

one consists of tangible features like new

product or services which can be

quantifiable; while the other one is

intangible features like new ways of delivery,

new process or ways of doing business, new

production process resulting in high quality,

or perhaps low cost manufacturing, new use

or application of product or process or even

attitude of the company towards the society

etc. The intangible perhaps cannot be

quantified sometimes, but it has major

impact on quantifiable results and hence the

overall performance and bottom line of the

company.

Innovation, as an ability to reap the rewards

of scientific achievement, requires much

more than the efficiency to turn a new idea

into a commercial product. Efficient flows of

technology are not just enough –rightly

structured finance and business skills are

also needed. What is perhaps more

important is the mind-set and innovative

culture within the company.Change is the only constant factor in life.

Every SME needs a dynamic, self-sustaining

culture of innovation. We have to learn this

from the Europe which has a strong

innovation culture built in their SME.

Incidentally, SMEs account for over 99% of

all European businesses and in many fields

provide the channels along which new

technologies develop. In sectors such as

biotech & IT, extremely small techier firms

are principal builders of new technology

companies. Their ability to exploit new

technologies, and to respond quickly to

changing market needs, gives SMEs a pivotal

role in the success of the European economy

for the last three decades. Creation of new

ventures spun-off from large companies and

research institutions, and easy transfer of

technical knowhow are also often cited as

reasons for SME development in those

countries.

What is innovation?

CO NNECTArticle


© CARGULLO / ALRROYA

Single most important factor is to encourage

ideas within without reservation. No idea is a

dump idea. Ideas come when the company

e n c o u r a g e a n d d e v e l o p d e e p e r

understanding of its customers, their needs,

increasing managerial focus toward

customer relations, and establish company

culture that supports innovation.

Closely following the ideation process, is

creating structured process for benefitting

from ideas generated. This process

discipline would help not just to generate,

but develop and bring it to market and go

back to perfection levels at the shortest

possible time.

Hiring right employees is a critical factor.

Skilled work force make significant leap in

innovative process. But it is not easy to come

by and SME need to relook at themselves and

learn to hire, train and retain the skilled

work force.

And finally Leadership matters. Vocal

support of innovation by leadership helps

build innovative culture. Most importantly

Leaders should be committed as in the case

of Mr. Rattan Tata for Nano creation and

develop a structured process for the

innovation to happen. It has to be from top

down and right through. Top-down

approach gives recommendations to line

managers and team leaders who has

organizational authority and has access to

budget. While the Bottom-up way has to

focus on the individual worker who has

limited formal power, but has opportunity to

change the culture of an enterprise from

inside.

What are the critical drivers for developing a strong innovation culture?

Ultimately

Matters !

LEADERSHIP

This again needs a

changed mind-set.

3600

approach is the

final mantra !

The role of Government is crucial to innovative culture. One cannot

underestimate the need for Government support and

encouragement for this. China for instance, has given incredible

support to businesses into innovation. Chinese government has

rightly understood that innovation drives relative success of the

country and not just the companies. Hence, it has committed large

funds and economic incentives, besides creating 15 year growth plan

for Science & Technology. While India is completely aware of these

facts and also clearly understood that countries with innovative

companies and industries tend to have larger gross domestic product

per capita, our measures and implementation are as usual slow as in

other critical sectors like infrastructure. Given the importance of

innovation to SME and the nation as a whole, Government from all

levels should come forward as enabler and support innovation in a

big way. It is therefore, suggested that our policies and efforts should

be sincere and should be above partisan politics and with a deep

intent for grabbing a larger pie of the global market.

We do not want to miss the bus this time again, and the industry

bodies like SME chamber should continue to encourage the

component companies and innovatively motivate all interest groups

constantly towards the golden result.

ArticleCO NNECT


CONSERVE ENERGYby Adopting to Total Lubrication Management

CONSERVE ENERGYby Adopting to Total Lubrication Management

It is a simple fact: Good Machine Lubrication can lead to energy savings and an improved

corporate profitability. This ought to interest any plant management, who is looking for

ways to reduce operating costs, and is especially significant at a time when operating in

competitive global economy, besides Energy-conservation is a national cause.

This article describes how manufacturing plants can use

which is a recommended best practice to reduce their energy

consumption, emissions and operating costs – all at the same time.

Electric utility bills of the plants are far larger than the maintenance and lubrication costs. So,

while controlling or reducing maintenance and lubrication costs is important, reducing

electric utility usage is critical. There are tremendous opportunities that exist to use an

improved lubrication reliability programme to decrease plant energy costs, thereby

increasing corporate profitability.

“Total Lubrication

Management” (TLM)

K. B. Mathur

Director - Global Technical Services

Email: [email protected]

ENERGY FOR WORK

During conversion from one form of energy to another, some useable

energy is lost. These energy losses can be extremely costly. The

science of physics reveals that lubrication can play a role in reducing

these losses by reducing friction. Placed between two moving

surfaces, a lubricant decreases the co-efficient of friction. Naturally,

this would also mean the more a lubricant decreases friction, the less

energy a well lubricated machine consumes.

ENERGY

PRODUCTION

Work To Move Machine Work to Overcome Friction

LUBRICANT FORMULATION

All lubricants consist of Base Oil of required

Viscosity, blended with special chemicals

called “Additives”. These additives are

carefully selected by the Oil Suppliers,

keeping in view the end use application –

such as Engine Oils, Gear Oils, Transmission

Oil, Hydraulic Oils, Compressor Oils, etc. etc.

A lot of research work is done by the oil

companies before oil is approved for an

application. All lubricants are approved by

OEMS after field tests under stringent test

conditions. Lots of research work is done by

oil companies and OEM before a lubricant is

approved to be offered to users or reach the

market. However, just buying an expensive

lubricant also does not ensure maximum

lubricant performance and energy savings.

The lubricant must be the right one for the

appl icat ion and must be properly

maintained for its quality in order for it to

provide maximum machine performance.

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Select correct grade and viscosity of lubricants for the specific

application and ensure this grade has OEM acceptance.

Store oil in good environment to keep it uncontaminated.

Greases should be stored indoors to avoid day/night temperature

fluctuations. This can lead to soap-oil separation, making grease

unfit for usage. Good house-keeping at lubricants storage is the

most important and is at fulcrum of entire activity.

Adopt colour coding to eliminate any possibility of mix-up in oils

leading to contamination.

Use good and clean lubrication equipment to ensure feeding

uncontaminated lubricants to machines.

Keep oil clean by providing “Breathers” on machines oil sump and

inspect oil filters on machines oil systems regularly.

Test oils regularly for oil condition and machine condition, i.e.

contamination, additive depletion, wear debris and elemental

analysis, etc.

Regular Training to Lubrication staff for correct lubrication

techniques. All lubrication staff should be in skilled category.

Enforce excellent house-keeping at oil storage, handling and

dispensing area.

Keep oil points at machine 'clean' to ensure that no dust or dirt

particles go in the machine sump along with oil.

Adopt target based oil management system. Ensure that atleast

95% oil is drained out from the sump, before feeding new oil into

the sump, failing which, may be adding new oil into 'muck' in the

oil sump or machine system

So, how does the end-user know what to do? The answer is to adopt to Total Lubrication Management (TLM). The basic recommended

parameters of TLM implementation are:

Always remember that - So, keep it clean and free from any contamination.“OIL IN MACHINE IS LIKE BLOOD IN HUMAN BODY”

CO NNECTArticle


LUBRICATION AND ENERGY SAVINGS

It is possible to measure energy savings in a

variety of ways, including production output,

temperature changes or reduction in

electrical energy consumption. Another

measurement is maintenance costs and fuel

consumption.

When using any mechanical equipment, it is

possible to evaluate the equipment's energy

efficiency by recoding its production output.

For example, if a machine is capable of

producing a certain number of parts in a

given amount of time and the lubricant is

kept clean as per recommended cleanliness

standards and lubrication systems are

improved. This shall be resulting in a higher

volume of production in the same amount of

time, than the machine has become more

energy efficient and productive.

Monitoring temperature changes is another

way to optimize lubrication programme

performance. Increased friction in a

machine moving parts results in higher

operating temperatures. Friction is a result

of metal-to-metal contact that occurs

between two surfaces moving relative to

another. Even between highly machined

surfaces, under microscopic view, asperity

contact occurs.

The greater the amount of metal to metal

contact, the greater is the amount of friction.

As a result, more energy is required to move

the surfaces relative to one another. This

friction results in higher electrical power

costs. Lubricants and good lubrication

system can reduce that friction. Therefore,

when friction is reduced, less electricity is

required to drive a gearbox, compressor,

pump or other equipment, and this leads to

Energy Conservation in the Industry.

Tracking electrical consumption is a highly

reliable way to evaluate improvements in

plant energy use. In fact, various

organizations have been able to document

improvements in electrical energy efficiency

after implementation of lubrication

management programmes. Companies that

upgrade their lubrication and reliability

practices have been able to report 5 – 10%

reduction in power consumption, more than

enough to pay for implementing good

lubrication programme by professional

service providers. Average documented

savings were 10% in gear boxes, 12% in air

compressors and 4% in electric motors.

Electric motors power most plant

m a c h i n e r y, i n c l u d i n g g e a r b o x e s ,

compressors, refrigeration systems, pumps,

hydraulic systems and ball mills. The

following equation can determine the

amount of electricity used by an electric

motor:

which all the plants are meeting as per

requirement of Electricity Board.

Both are common metric measurements of

electrical current measured using a

voltmeter or ammeter. For a three-phase

motor, 1.73 is a standard factor. Data logging

equipment is available that allows one to

measure and collect data for either amperes,

volts or both. Yet, most electrical consumers

pay for electricity by kilowatt-hour (kWh)

per month. The following formula is

commonly used to determine the electrical

charge per month (ECM):

Air compressors are an excellent source for

energy savings. Compressed air is one of the

most widely used form of energy in a

manufacturing plant, and approximately

70% of all manufacturers have a compressed

air system. These systems power a variety of

equipment, including machine tools,

material handling and separation equipment

and spray painting equipment. According to

a study, compressed air systems account for

10% of all electricity and roughly 16% of

industrial motor system energy use. This

adds up to large amount of expenditure per

year in energy costs. Energy audits

conducted suggest that more than 50% of

compressed air systems at industrial

f a c i l i t i e s h ave s i g n i f i c a n t e n e r g y

conservation opportunities.

Production output

Temperature Changes

Electrical Energy reduction

a) kW = V/1000 x A x 1.73 (where V is

volts and A is amperes)

b) kW = 3 VI. Cos Ø – corresponding Cos

Ø at 0.9

c) ECM = kW x h x EC (where h is hours of

service and EC is the electrical charge.

√

Energy Conservation is very important to

Industry, as important as conserving natural

resources, reducing emissions and

improving profitability. Governments and

corporate management in the industry alike

are looking for ways to reduce energy

consumption.

It is possible to make dramatic gains in

energy efficiency by reducing friction, and

one of the best ways to do that is to “employ

good lubrication practices”, including the

use of high-performance lubricants and the

adoption of lubrication reliability best

practices.

Adopt to Total Lubrication Management for

Energy Conservation, Manufacturing cost

Reduction and Improve Productivity and

Profitability.

CONCLUSIONS

ArticleCO NNECT

www.smeconnect.in Issue 1 | | 61March 2012

Singing of Memorandum of Understandingbetween

Friday, 2nd March 2012 |SME Chamber of India Conference Hall, Andheri (E), Mumbai

Mr. Chandrakant Salunkhe Mr. Avijit Nayak Director– President, and CBS

Pacific Limited, Hong Kong Singing Memorandum of Understanding between Small & Medium Business Development Chamber of India

(SME Chamber of India and CBS Pacific Limited, Hongkong

Small & Medium Business Development Chamber of India –



and

Visit of Estonia Delegation

(From Left to Right) - Investment Project Manager, Estonian Investment Agency, Enterprise Estonia, -

Economy Expert, Arengufond Estonian Development Fund, - Charge d Affairs, Embassy of the Republic of Estonia,

- Head, Economic Policy Division, Economic Development Department, Ministry of Economic Affairs and Communications,

Estonia, Mr. Chandrakant Salunkhe – President, SME Chamber of India & Europe – India SME Business Council, - Director

& CEO, Gyansam Consultancy Private Limited, and – Secretary General, SME Chamber of India

Mr. Nadim Taoubi Mr. Siim Sikkut

Mr. Margus Sarglepp

Mr. Raul Allikivi

Mr. Sameer Joshi

Mr. V. K. Venkatachalam

Wednesday, 7th March 2012 |SME Chamber of India Conference Hall, Andheri (E), Mumbai

CO NNECTNews


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