The Hindu Business Line : Credit crunch: MSMEs look at alternatives

New Delhi, Oct. 19 The reduced availability of finance is compelling India’s Micro, Small and Medium Enterprises (MSME) to scout for alternative source of finance for medium to long-term funding.

In a snap poll conducted by the Confederation of Indian Industries on MSMEs, 21 per cent of participants said that they are using venture capital funds as an alternative source to bank finance.

About 78 per cent of the respondents said they used private equity for alternative sources of finance for medium to long-term funding.

Citing increase in interest rates, availability of finance and power costs as the key factors impacting their profitability, 35 per cent of the enterprises polled stated that their margins would be eroded up to 10 per cent during the current year. Another 41 per cent felt that their profitability would be impacted up to 25 per cent during the current year.

6-month outlook

On the outlook for the next six months, majority of the CEOs polled do not expect production and exports to decline. Almost 31 per cent of the CEOs expect production to increase and an equal number expect it to remain at last year’s levels.

With regard to exports, only 24 per cent of them expect overseas business to decline during the current year; 29 per cent expect it to increase.

The remaining 47 per cent said exports will maintain the same levels as in fiscal 2007-08.

Expansion plans

In the current slowdown, only 33 per cent of the top executives expect to increase their production capacity, while a majority — 56 per cent of the participants — had no intention to expand in the second half of the current fiscal.

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