SIDBI Schemes for SME's

8/6/2019 SIDBI Schemes for SME's

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A PRESENTATION



Overview of Indian MSMEs Contribution to Economic Growth, employment

creation, Poverty Reduction.

Entrepreneurship & Innovation wave.

Professionals becoming MSME entrepreneurs

Rural Development, balanced Regional

Development

Outsourcing, linkages with large units/ MNCs

increasing vertical integration. Growth of service sectors

Innovative, flexible, quick to adapt.



MSME - Contribution to Indian

EconomyNumber of Enterprises 13.4 million

Employment Generated > 32 million persons

Share in Manufacturing 39%

Share of total Exports 31%

Products > 8000



MSME Sector in Gujarat MSMEs - Strength of Gujarat¶s economy. As per GIDC, over 3,20,000 MSMEs in Gujarat. Generation of 700,000 jobs in the last decade (1996 -

2006).

Home to about 48 recognised clusters. Major clustersare: Ceramic Industry, Morbi Dye & Dye Stuff Industries, Ahmedabad Engineering Cluster, Rajkot Pharmaceutical cluster in Ahmedabad/Baroda

Gems Jewellary, Surat Textiles, Surat & Ahmedabad Brass parts, Jamnagar



Opportunities for MSMEs in present

scenario Explore new markets/ customers

Implement cost cutting and quality

improvement measures Improve energy efficiency

Improve long term competitiveness

Consolidation opportunities for wellperforming units by mergers/acquisitions.





Outsourcing

Opportunity for MSMEs Large corporates (domestic and offshore) would look

for increased outsourcing options in present downturnto cut costs.

Big Opportunities to MSMEs in following areas: Components/ subassemblies for manufacturing units

IT/ IT enabled services

Product research & development/Testing facilities

Services like

Customer management, Security services,Administration (salary, travel, HR, etc) and other Backoffice operations



Outsourcing :

Challenges for MSMEs Outsourcing involves greater integration and

association between corporate and MSME vendor.There is greater dependence of customer on vendor.

Key requirements for MSMEs to develop long term

relationships with outsourcing customers are: Operational capabilities Financial strength Adequate Physical infrastructure Corporate governance/ transparency in dealings Managerial capabilities Capability to innovate & offer alternate solution to

customers. External ratings.



Business development :

Marketing strategy MSMEs need to focus on following points for evolving

their marketing strategy :

Who are their existing/ potential customers?

What are their current & future needs How can they satisfy these needs?

Can they offer a new product/service that customer willvalue

Can they offer a competitive product/ service or costreduction proposition

Why should the customer buy from them Identify your USPs and find synergy with customer

needs

Should look for cluster based marketing strategy



Marketing for MSMEs : Issues Issues which will be critical for MSMEs in marketing

products and convincing customers Quality of products After sales service

Ability to service sudden large orders R&D capabilities Brand building Credibility (in terms of stability and financial

standing)

Various approaches possible Cluster approach Common facilities Consortium approach in Branding & marketing External ratings



Importance of finance for

business development In dynamic & globalised business environment several

opportunities are there for MSMEs. However, to utilise the opportunities, MSMEs may

have to

Arrange finance at short notice. Raise finance which is not in the form of conventional

products like secured term loans and WC limits. Arrange finance for intangible investments, MSMEs may not have assets to raise further loans.

MSMEs thus need to be well abreast of variousfinancial products and their sources.

Understanding of these products would also enableMSMEs to go for business development in a moreconfident manner.



We Empower MSMEs



SIDBI : MissionSIDBI : Mission

SIDBI : Vision³To emerge as a single window for meeting the financialand developmental needs of the MSME sector to make itstrong, vibrant and globally competitive, to positionSIDBI Brand as the preferred and customer - centricinstitution through modern technology platform andsetting up of institutions and funds to meet the variedcredit, equity and developmental needs of the MSMEsector.´

³To empower the Micro, Small and Medium Enterprises(MSME) for economic growth, employment generationand balanced regional development of our country.´



Indirect

AssistanceDirect

Assistance

Through

over 1000

PLIs with70,000

branches

Through

network of

SIDBI¶s 79

offices

covering 500

MSME

Clusters

SIDBI¶s Financial Assistance

We are Serving 46 Clusters inGujarat through 7 SIDBI Branches ±

One of highest in any state



PRODUCTS & SERVICESPRODUCTS & SERVICES

REFINANCE

WORKING CAPITAL

FINANCE

RECEIVABLE

FINANCE

MICRO

CREDIT

PROMOTIONAL &

DEVELOPMENTAL

ACTIVITIES

TECHNOLOGY

UPGRADATION,

CLUSTER

DEVELOPMENT

RISK

CAPITAL

DIRECT

FINANCE

SIDBI



SIDBI :Overview of assistance Indirect assistance ± Augmenting

resource base of PLIs to extendassistance to MSMEs

Direct assistance to MSMEs

Micro Finance

Promotional & Developmental initiatives

Funds committed to Gujarat under theabove schemes till date ± over Rs. 9,000crore



SIDBI :Direct finance products Term loans & working Capital

Special schemes ± Energy saving, DG set etc.

Non fund products ( LCs and BGs)

Receivable finance schemes for mitigating the receivable

problem of MSMEs About 5000 MSMEs benefited

Cash flow based assistance

Companies with firm future income like hardware rentals/license fee/ membership fees/ AMC.

Assistance against carbon credits and other intangibles.

Risk Capital Assistance Mezzanine assistance not linked to security

To complement promoters equity and secured loans

Equity assistance

to companies with niche products/ scalability potential



Receivable Finance

Scheme



Receivable Finance Scheme

Covers bills arising out of purchase of indigenouscomponents / parts / subassemblies / accessories /intermediates manufactured by MSMEs and servicesector activities like Job work / Road Transport /Advertising / Software etc.

SELLERS - MSME manufacturers / Service providers.

PURCHASERS - Corporate entity - good financialposition & track record

An innovation from SIDBI in early ninties



The Process

MSME

Supplies / Raises Bill

Purchaser

Accepts and

forwards to SIDBI

Discounted at SIDBI



A step further [NTREES]

[NSE Trade Receivable Engine for e-discounting Services]

Purchaser Uploads the Bill / Invoice over a

secured Platform [NSE]

Authentication

Discounted by SIDBIProceeds credited through RTGS





MSME financing

Most MSMEs funded by

Own equity limited. External equity difficult due to Limited exit options in smaller companies.

Investments turn illiquid even in performingcompanies. Lack of corporate structure/ lower corporate

governance. High cost of monitoring and enforcing contract

provisions.

High return expectation of equity providers. Reluctance to dilute ownership by promoters.

Secured loans restricted due to DER and security norms of Banks.

Lack of adequate collaterals with MSMEs.

own equity + ploughed back profits + secured loans



Gap in MSME Finace

Gap when available promoters resources and securedloans not available to meet the growth requirements of MSMEs.

Gap could be in

Capex and working capital for different categories of MSMEs

Intangible investments R&D, marketing, IPR, brand building, training,

corporatisation expenses, etc

Inorganic growth requirements, acquisitions, etc.

Gap in technology, new economy projects.

Gap could be in different stages of growth.



Risk Capital Not provided on the backing of

assets.

Security coverage not a factor inproviding risk capital assistance.

Equity Capital

Mezzanine/ quasi equity financial

products which have features of bothdebt and equity.



Risk Capital : Concept

EQUITY

Preference capital

Sub-ordinate debt

Convertible debt

SECURED DEBT

RiskCapital

Low

High

Ownership

Risk

Return

Security

High

Low

Mezzanine

capital



Eligibility :

The enterprise should be an MSME unit

Existing SIDBI customer / new (on selectivebasis).

Minimum borrower rating of SME4

In case of new customers, Overall Companyrating (under RAM) should be at least SME3.



Quantum of assistance minimum Rs.100 lakh

maximum Rs.1000 lakhTenure :

Upto 7 years

The repayment could be structuredflexibly based on the cash-flow of theenterprise.

Moratorium upto 4 years could be

provided for principal payments. For equity investments, the exit should

be proposed within the above period.



SIDBI Associates :SIDBI Associates :SIDBI Venture capital LtdSIDBI Venture capital Ltd

SIDBI set up SIDBI Venture Capital Co Ltd. (SVCL). Itoperates operates two funds aggregating to Rs 600crore.

Rs 100 crore National Fund for Software & IT (NFSIT)

Rs 500 crore SME Growth Fund. Proposed Rs 1000 crore India Opportunities Fund

SIDBI also Pioneered venture Capital for MSMEsthrough ³Fund of Funds´ and Direct assistance.SIDBIis core investor in 13 regional funds of MSMEs & 17 All

India funds for support to MSMEs.

SIDBI has provided Rs 46 crore to venture capital andinnovation funds for MSMEs in Gujarat.



SME Rating Agency of India Ltd. (SMERA)

Set up along with D&B and Banks.

First dedicated rating agency in India for MSMEs.

So far, rated more than 2344 MSMEs

Rating of 19 clusters and individual facilities

SIDBI awarded prestigious international award by ADFIAPin 2007

SIDBI Associates :SIDBI Associates :SME Rating Agency of India Ltd (SMERA)SME Rating Agency of India Ltd (SMERA)







SIDBI Associates :

India SME Technology Services Ltd. (ISTSL)

Technology matchmaking & transfer

Carbon credit / Clean Development Mechanism

Energy Audit

Bundling of Carbon Credits for sale to KfW CarbonFund

Planning energy efficiency programmes inBrass cluster of Jamnagar and Rajkot, steelrolling cluster in Ahmedabad and forging

clusters in Saurashtra. ISTSL already working with some MSMEs in

the state of Gujarat



Micro CreditMicro Credit-- An Instrument of Financial InclusionAn Instrument of Financial Inclusion

PioneeringPioneering thethe conceptconcept of of MFIMFI--SHGSHG LinkageLinkage

DevelopmentDevelopment & & SupportSupport forfor institutioninstitution buildingbuilding of of MFIsMFIs..AssociatedAssociated withwith overover 115115 MFIMFI partnerspartners

IntroducedIntroduced thethe conceptconcept of of ratingrating of of MFIsMFIs

BenefitingBenefiting moremore thanthan 55 mnmn personspersons

ExtendExtend Grants/TransformationGrants/Transformation LoansLoans



DEVELOPMENTAL INITIATIVESDEVELOPMENTAL INITIATIVES

EnterpriseEnterprise PromotionPromotion RuralRural IndustriesIndustries ProgrammeProgramme [RIP][RIP]

ImplementedImplemented inin moremore thanthan 100100 districtsdistricts inin 2424statesstates

Cumulatively,Cumulatively, almostalmost 3030,,600600 unitsunits promotedpromoted;;CapitalCapital formationformation of of overover RsRs.. 985985 millionmillion andandEmploymentEmployment generationgeneration of of moremore thanthan oneone lakhlakhpersonspersons..

EntrepreneurshipEntrepreneurship DevelopmentDevelopment ProgrammeProgramme (EDP)(EDP)

OverOver 26802680 EDPsEDPs / / OverOver 6666,,000000 participantsparticipantstrainedtrained.. SmallSmall IndustriesIndustries ManagementManagement ProgrammeProgramme (SIMAP)(SIMAP)

2121 SIMAPsSIMAPs supportedsupported.. 70007000 trainedtrained..



DEVELOPMENTAL INITIATIVESDEVELOPMENTAL INITIATIVES

Enterprise Strengthening

Skill-cum-Technology Upgradation Programme (STUP)

STUPs supported ± 1429.

Corpus support to 14 Institutions

(Including 3 IITS).

Cluster Development Programme (CDP)

Intervened in more than 55 MSME clusters

Marketing, technology, permanent exhibition centres,CETPs, common facility centres, etc.

North-East Initiative Micro enterprise loans, MFI activities, Project profiles

and RIPs



Development initiatives in Gujarat Over 156 EDPs sanctioned for the state of Gujarat

targetting over 7800 potential entrepreneurs.

Rural Industries Programme sanctioned in thedistricts of Kutch, Surendranagar, Kheda, Anand

Integrated EDP for Ceramic Products at SurendraNagar

Over Rs.2.7 billion committed so far through MFIsbased out of Gujarat state

Rs.50 million committed to National InnovationFoundation, Ahmedabad for promoting grass rootlevel innovations



Cluster initiatives of SIDBI

Assistance for common testing facility atJamnagar to benefit 2000 Micro brass units.

Assistance to ceramic units for switching togas fuel in Morbi.

Assistance to diamond units in Gujarat understructured arrangement.

Assistance for upgradation of industrial estates.



Cluster initiatives of SIDBI

SIDBI¶s interventions in following

clusters in Gujarat :-

Rajkot (Engg.)

Ahmedabad (Dyes & Chemicals)

Morbi ( Ceramics )



THANK YOU

Documents

SIDBI Schemes for SME's