SME Times: Congratulations for winning the National Award 2008.

How do you see this achievement?
A. R. Sharma: The prize money of various awards are very less; it is like 'A drop in the ocean,' but the main thing is the motivation that this award gives to the winner. It motivates me and my organization to prove more. I hope that this National Award 2008 will help and inspire me and my organization members in taking our company to the next level. I know all of us have learned from our experiences.

SMEs have a challenge of non availability of funds. What's your opinion on this?
A. R. Sharma: SMEs require very small funding to run, even which they are not even getting from financial institutions. And that is why our industry is facing the challenge of liquidity. I think if bankers ask for collateral security it means that the banker doesn't have faith in their customers... this funda is totally wrong...absolutely wrong.

Another problem with bank finance is the norm of industry-specific categorization of companies. Like oil industry is in the negative list, they said, 'No more funding to oil industry we have very bitter experience.' To some extent all bankers have this same mindset.

Don't you think that bankers are setting up a risk development funds for their own safety?
A. R. Sharma: Yes, they are setting up a risk development fund, but they have also introduced many counters checks for ensuring the safety of the fund. Now they have realized that every industry is lucrative and every industry is competitive.

Now for any more than rupees ten crore fund there is two ratings necessary as per RBI norms. That means if you have rating one for an independent industry which will give the entire picture about your industry that makes the fund safer. Then if you are putting up an other industrial unit then you have to have independent appraisal from approved agency like NETCOM in Chandigarh or from GILT funds so we get an appraisal from that. And these agencies have introduced many counter checks to ensure the safety of the fund then. It beats me why these banks are asking for collateral securities of Rs 50 crore worth of non productive asset... that's the problem of funding to SMEs.

Do you think this is the biggest challenge SMEs are facing?
A. R. Sharma: Of course this is the biggest challenge of SMEs in India. Banks have not come out of their age-old norms. Because a small or medium entrepreneur can not float an IPO and public issues and all that. The cost or raising public issue is very high so they have the option of to go to bank. Although the government has introduced so many schemes for SMEs to ensure funding to them, still banks are not forthcoming in lending to SMEs.

The government has plans to open a exclusive SME Exchange. What is your comment on this?
A. R. Sharma: Let's see how it happen. Let's wait and watch. I think this will open a new channel of funding for us.

Do you agree that funding for marketing or branding is also a hurdle for SMEs?
A. R. Sharma: This is one of the problems that I am also facing because marketing or branding needs lots of investment. There are no such schemes, no government schemes for marketing and branding...nothing. No bank will provide funds for this. It is an intangible asset. No bank will get the collateral security for that so they are not ready to give to loan for brand building activity. And for branding and marketing you need to have huge money, which SMEs are not able afford.

SMEs right now are basically concentrating on their core strength that is production. Now if today you ask me, I am the India's largest producer of refined food cooking oil, instead of extending my market under my own brand called Ricela, I would prefer to tie-up with leading brand players of the industry like I am already supplying to Dhara, Saffola Gold, Sundrop Heart. Even I am already supplying to Pepsico for their Kurkure and Lay's productions. So for me because my core strength is production, I feel I should not look at spending on a marketing campaign, as of now.

It means SMEs are more into B2B marketing?
A. R. Sharma: Yes, it is B2B marketing which is best suited to the needs of SMEs and they are using this more now a days.

Is there any alternative for this?
A. R. Sharma: Alternatives are always there like the government has introduced the system of independent appraisal by the agencies, system of rating by independent agencies and if these systems are fine then why there is a need of collateral security. I think it is very difficult to change the mindsets of the bankers as per as the security aspects are concern.

What do you think is the best marketing tool for SMEs?
A. R. Sharma: Tie-ups with the people who have good marketing skills and have good brands. Join hands with them, it is the time for being interdependent.

Now the government has introduced the necessity of Nutrition labeling on the products. What is your opinion on this?
A. R. Sharma: Nutrition labeling is definitely be compulsory. This is one of the preemptive step that the Pepsico has taken. They were using palm oil highly saturated fat then this draft notification came out in the last year in Jan-Feb, I think, and we immediately started looking in that direction.

Please tell me about your organization. What is A.P. Organics Ltd.?
A. R. Sharma: A.P. Organics Ltd. was established in 1992 with the sole objective of producing and promoting “Rice Bran Oil” as World’s Healthiest Cooking Oil”, we are today India’s Highest Production Award Winning Group, located in district Sangrur in the Punjab Province of India, which enjoys the distinction of being one of largest rice producing districts in Asia. Our enterprise has obtained ISO 9001:2000 Certification.

Our mission is to be a leading global player in production and marketing of Health Oils, Functional Foods and Nutraceuticals. While marching ahead we seek to develop highly satisfied customers, business partners and employees. Also, we seek to contribute to the development of communities and protection of environment in which we operate.

Why Rice Bran Oil is considered better than other edible oils?
A. R. Sharma: Both Olive Oil and Canola Oil are not good for frying due to very low smoke point of Olive Oil and very high content of instable alpha linolenic acid in Canola Oil. Hence, these oils are not suitable in Indian context as we mainly use edible oils for frying and not for salad dressings. Rice Bran Oil besides having much better frying stability than Groundnut Oil & Sesame Oil, contains some unique micro-nutrients (Oryzanol & Tecotrienols) because of which it is known to reduce cholesterols better than any other edible oil.

Please give a financial brief of your organization?
A. R. Sharma: The investment on plant & machinery was Rs. 122 Lakh in the year 2002-03 which raised to Rs. 658 Lakh in the year 2005-06. The value of annual sale was Rs. 1124 Lakh in the year 2005-06. The net profit was Rs. 13.90 lakh in the year 2002-03 which increased to Rs. 42.40 lakh in the year 2005-06. The expenditure on R&D was Rs. 0.60 lakh in the year 2002-03 which increased to Rs. 2.0 lakh in the year 2005-06.

Our present capacity is 350 tons per day. We are going to increase the capacity to 600 tons per day this year by setting up a new plant near Ludhiana and expanding the capacity of existing facility at Dhuri. The capacity of the new plant would be 100 tons, while capacity of the existing plant would be increased to 500 tons per day from the current 350 tons/day.

The company posted a turnover of Rs 385 crore in 2007-08, that the same is expected to reach Rs 500 crore in the current fiscal.

What is your say on Bio-diesel?
A. R. Sharma: Let not burn edible oil for bio-diesel when there is shortage of edible oil itself.