From your perspective, how you see the micro, small and medium enterprise (MSME) sector in India?
Harshil Mehta: The Micro, Small and Medium Enterprise (MSMEs) sector has been playing a crucial role in the inclusive growth of India. The sector is supporting over millions of jobs through millions of units in the rural and semi-urban areas of the country through the usage of low capital and technology as well as traditional or inherited skill and local resources.

The MSME sector has emerged as the backbone of the Indian economy and is steadily contributing to the Country’s Gross Domestic Product (GDP), Over 45% of the manufacturing output and over 40% of the exports. MSMEs are currently engaged in the manufacturing of over thousands of products ranging from traditional to hi-tech items and have sustained a steady growth rate for the past few years despite global economic slowdown.

The sector, however, needs a positive business environment to achieve the next phase of growth. Financing is another major challenge for MSMEs wanting to expand their business, invest in upgrading its workers skills and buy capital equipment. Realising these challenges, the Government has come-up with initiatives like the Credit Linked Capital Subsidy Scheme, The National Manufacturing Competitiveness Programme, Credit Guarantee Fund Scheme and the Performance and Credit Rating Scheme to make finance easily accessible to MSMEs and equip them with technology based tools.

Despite this, MSMEs continue to struggle to get loans from financial institutions on easier terms due to the perceived risk associated with their business, lack of collaterals etc. We are of the view that this is an area where other stakeholders notably, NBFCs like DHFL and private banks must play an expanded role to realise the vision of creating a vibrant and progressive MSME sector.

What are the key offerings of DHFL to the SME sector?
Harshil Mehta: Under SME financing, we provide loans to SMEs engaged in wholesale, retail, manufacturing and services. These loans are backed by property as the main security. The company also provides unsecured business loans to SMEs that need short term working capital. This is besides loans for plant and machinery to manufacturing units and medical equipment loans to doctors, hospitals etc.

Some of the key offerings of DHFL to the SME sector include:

Property Term Loans- To meet all business expansion and working capital requirements

Plant and Machinery Loans - To meet fund requirements for the purchase of Plant & Machinery

Medical Equipment Loans – To meet fund requirements for Medical Equipment

Business Loans – Unsecured loans to meet working capital requirements

It has been observed that SMEs largely avail loans from NBFCs for expansion. Why SMEs go for DHFL? And what are your plans to tap this untapped segment?
Harshil Mehta: DHFL’s heritage in undertaking financial inclusion for over 3 decades, strong distribution network and experience of working successfully in the tier 2 and tier 3 cities of India makes us an ideal financial partner for SMEs.

Under SME financing, we provide loans to meet diverse finance needs of SMEs engaged in wholesale, retail, manufacturing and services. These loans are backed by property as the main security. We also provide unsecured business loans to SMEs that need short term working capital. This is besides loans for plant and machinery to manufacturing units and medical equipment loans to doctors, hospitals etc.

We have an in-house team of professionals who are well versed with the nuances of the industry. This gives us an edge over competitors and helps us in mitigating risks effectively. Our SME lending vertical is well supported by a management team dedicated to the SME business for excellent operations management and quicker turnaround of customer concerns.

Our SME clients today have the support of a strong marketing and distribution network spread across over 358 locations across India, in addition to presence in UK and UAE. This is further supported by the dedicated processing centres for greater efficiency and risk management. The Company also has the assistance of an in-house credit and legal team for appraising each application as well as an in-house team of civil engineers for technical evaluation.

To achieve customer delight, we have put in place a strong CRM department to address customer queries. We are also in the process of building an in-house team of sales professionals across locations to reach out to right kind of customers and give them a better experience besides reducing turnaround time on loan applications. This is enabling us to offer competitive rates to customers as the reduction in intermediary costs is passed on to customers in the form of lower borrowing cost.

We are coming up with innovative products and services for SME borrowers to increase our market share in the SME Lending segment. This is besides investing in developing digital channels so that customers can directly access the firm’s lending services without having to come to a branch.

Recently the Reserve Bank of India has allowed banks to restructure MSME loans with a limit of Rs 25 crore. What is your comment on this.
Harshil Mehta: The recent decision of Reserve Bank of India's nod to restructure loans to the micro, small and medium enterprises (MSMEs) is a logical step given that corporates are delaying making payments to the MSME sector due to squeezed margins with falling exports. We are hopeful that this step will give new lease of life to MSMEs by giving them access to additional funding for six months and even working capital loans in exceptional cases to revive the account.

How you see the government's 'Make in India' and 'Start-up India' movement?
Harshil Mehta: MSMEs have a key role to play in the revival of the manufacturing sector and increase its share in GDP from existing 17% to 25%. In this context, government’s 'Make in India' and 'Start-up India' movement are significant steps to catalyse entrepreneurship and restart private investment into the economy which is witnessing slowdown in investments from corporate India in the face of risk aversion.

As MSMEs ensure free flow of raw materials for finished goods and have a key role to play in the success 'Make in India' initiative, it is imperative to encourage such MSMEs to make the growth process more inclusive. This will cut reliance on imports, spur jobs and raise the income of millions.

This can be done by strengthening the operating environment for the micro, small and medium enterprises sector which will come with easier access to finance, redefining investment limits, encouraging technology adaptation and facilitative regulation.

The Government has identified structural and regulatory reforms that need to be undertaken to make the "Start-up India" movement a success. These include income tax exemption, easing compliance through reduction of regulations and redefining 'start-up' business.

The Government is already providing 80% waiver on patent filing fees by start-ups. It has also created a centralised system under the 'Start-up India Hub’ which assists start-ups by providing advisory services on financing, business structuring and improving management skills.

Waiver on income tax profits for a period of three years and exemption from capital gain taxes which are invested in the 'fund-of-funds’ are other encouraging steps taken under the Start-up India movement.

Promoting start-ups by improving ease of doing business is clearly a priority for both the programs. A significant benefit that start-ups are entitled under the "Start-up India" movement is the waiver from labour inspections for 3 years. 'Make in India' and 'Start-up India' movement are consistent with the government’s vision to make India an economic superpower.

What are your plans to stand-up for these movements and how?
Harshil Mehta: We at DHFL understand the pivotal role that SMEs can play in making India a top manufacturing hub. Our unique business model focuses on making finance accessible to SMEs besides playing an invisible role in making SMEs competitive through advisory services.

We are also coming up with innovative products and services for SME borrowers.

Industry body CII had partnered with leading banks including DHFL to help their SME members. Will you please shed some light on this?
Harshil Mehta: CII in conjunction with corporate India has been working towards creating an ecosystem for SMEs to help them access finance conveniently. It has launched CII Finance Facilitation Centre to ensure that SMEs are provided with credit at cost effective rates, to meet their demand for working capital as well as for expansion and diversification.

It has also embarked on the awareness drive among SMEs with the launch of Online SME Finance Facilitation Centre (CII FFC) to address issues related to delay and credit delivery to such companies. This initiative will enhance their understanding of various schemes offered by banks and financial institutions as well as the procedures and documentation required for processing credit from banks.

The Centre is providing advisory and credit facilitation support to SMEs. It is operating as a one-stop-shop, aggregating financing options from multiple large financial institutions. SMEs can apply for their fund requirements through an online portal and can have access to multiple Banks and NBFC through this Centre. CII FFC has partnered with leading Banks and NBFC including DHFL for the same.

DHFL seems to be more focused toward SME sector in India. Why?
Harshil Mehta: We have diversified into the SME lending segment as part of our larger vision to emerge as a one-stop shop to meet the diverse financial needs of customers, extending beyond home loans. Our heritage in undertaking financial inclusion for over 3 decades, strong distribution network and experience of working successfully in the tier 2 and tier 3 cities of India also makes the SME lending business a natural and synergistic extension to our existing home loan portfolio.

We are of the view that both businesses will benefit from DHFL’s knowledge of the Indian retail financial services market thereby creating significant long-term value for our shareholders.

What is DHFL's SME customer base at present and how you see your SME loan portfolio in future?
Harshil Mehta: Our SME lending business currently stands at Rs 1,200 crore contributing 2% to the AUM. We intend to grow this vertical at 25-30% year-on-year to increase it to Rs 5,000 crore in the next 3 years. We have a customer base of 1,200 small manufacturing companies, which are into fabrication, printing, auto spare part making and plastic moulding businesses. We also serve small hospitals by providing finance for their equipment requirements and expect high growth from tier 2 and tier 3 towns.

Would you like to advise something to SMEs while getting loan?
Harshil Mehta: Finance is an extremely important component of any business. It is, therefore, extremely important to choose the right business to boost the prospects of a company or any enterprise aiming to grow or move on to a new phase of development. Today, SMEs have various avenues for getting business loans with the coming up of alternative funding options.

Experts can help in steering through the complex loan application and analysis process by giving proper explanation of all the options available which will help in assessing the pros and cons of each product and the financial institution for the financial partner suited for the business needs.