Small businesses face brunt of Covid second wave

Surabhi Mumbai | Updated on July 07, 2021

Many look to adopt digital modes, some take fresh loans

Small businesses are looking at new ways to survive amidst the economic distress and subdued demand after the second wave of the Covid-19 pandemic.

Industry data suggests that while grocery stores and pharmacies are thriving, businesses in other sectors are continuing to face headwinds and many are adopting digital modes are seeking fresh loans to restart operations or new businesses.

Kiranas and pharmacies are flourishing but others like salons, cloth merchants, are still subdued,” said Ketan Patel, CEO, Mswipe.

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According to him, about 25 per cent of restaurants and shops of smaller merchants will not come back as they face their own unique problems.

Data with the Reserve Bank of India shows flux in point-of-sale terminals by banks, which declined to 45,24,724 by April end 2021 from 47,20,077 in March.

Industry experts, however, said that this drop may be temporary due to the lockdowns and would bounce back once again as business activity normalises.

Embracing technology

However, more businesses are now embracing digital payments and technology.

According to data with Razorpay, over 15 lakh MSMEs adopted digital payment solutions for the first time between March 2020 and May 2021.

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“Close to 30 per cent of the sign-ups we have are existing brick-and-mortar businesses. They have realised they need an online presence or need to go omni channel. They are not the bottom of the pyramid kirana stores but slightly more sophisticated retail stores, looking to go omni channel, that is online plus offline,” said Vedanarayan Vedantham, SME Business Head, Razorpay.

“There has been huge growth in SMEs not only embracing digital payments but also processing more transactions,” he said.

UPI transactions grew 346 per cent, becoming the most preferred payment mode for businesses, overtaking debit and credit cards, netbanking and others, according to Razorpay.

Uptick in credit demand

Lenders say that sectors such as hospitality, education and textiles are the worst affected. There is a steady demand for credit from most segments post the lockdowns but they expect a robust recovery given that the lockdowns were not as strict as last year.

“Every time there is a lockdown, the tenacity of small business is lower so their cash flow gets affected. But the good thing is that their recovery is V-shaped and they go back to normalcy very quickly,” said Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital.

The company had disbursed ₹130-odd crore in March 2021. In June, it was operational for 12 days but was back to almost March numbers. “The need for credit at this point is higher than ever,” Nath said.

“About 65 per cent of the businesses will be moderately impacted while 25 per cent continue to do well. By July end we plan to be disbursing loans between ₹55 crore and ₹60 crore per month, at the same levels in February and March 2021,” said Manish Lunia, Co-Founder, FlexiLoans.

To help out small merchants, the Centre has also included retail and wholesale trade as MSME and extended to them the benefit of priority sector lending.

Published on July 07, 2021

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