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Over a quarter of MSMEs lost over 3% market share due to Covid: Crisil
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IANS | 27 Jun, 2022
More than a quarter of India's micro, small and medium enterprises
(MSMEs) lost over three per cent market share due to the Covid-19
pandemic, said Crisil Ltd on Monday.
According to Crisil
Research's SME Report 2022, half of them suffered a contraction in
their earnings before interest, tax, depreciation and amortisation
(Ebitda) margins because of a sharp rise in commodity prices last
fiscal, compared with the pre-pandemic (fiscal 2020) level.
The
Crisil report covered 69 sectors and 147 clusters that logged aggregate
revenue of Rs 47 lakh crore, representing 20-25 per cent of the gross
domestic product (implying two-thirds coverage of the MSME universe).
"SMEs
in several sectors saw market share loss of over three per cent and
Ebitda margin erosion compared with fiscal 2020 last fiscal. For
instance, the pandemic-induced supply chain disruptions impacted small
pesticides manufacturers more," Pushan Sharma, Director, Crisil
Research, said.
According to Sharma, the large pesticide makers
leveraged their global presence to procure raw materials, so eating up a
huge chunk of the SME pie.
Edible oil SMEs lost market share
because an increase in hygiene quotient because of the pandemic meant
less buyers for oil sold loose.
Pesticides and edible oil SMEs
suffered margin contraction of 100 bps and 200 bps, respectively, due to
partial pass-through - at less than 60 per cent - of increase in raw
material costs, Sharma said.
A handful of sectors, such as steel
pig iron, gained share where only SMEs could capitalise on revival in
infrastructure demand, as large plants captively consume their output,
Crisil said.
As a majority of tobacco selling points remained
closed due to health concerns, tobacco processing SMEs, which largely
sell loose tobacco and bidi, gained market share.
Surging input costs weighed heavy on sectors that operate in low-margin products and have limited pass-through.
Crisil
sees sectors such as transport operators, edible oil, gems and
jewellery to be the most vulnerable to Ebitda losses owing to wafer thin
margin of less than three per cent and limited input cost pass-through
of under 60 per cent.
Despite a rise in freight rates, Ebitda
margin of small fleet transport operators was impacted by 50 bps in
fiscal 2022, over fiscal 2020, due to limited cost pass-through of
rising fuel cost that forms about half of the total cost.
Elizabeth Master, Associate Director, Crisil Research, said: "Amid the
pandemic and ongoing geopolitical crisis, sectors such as textiles and
pharmaceuticals have offered a ray of hope for exports. Cotton yarn
exports have benefited from the US ban on Xinjiang, China-made items,
apart from the China+1 policy."
The readymade garment industry,
with 70 per cent MSME share, gained from supply constraints in China,
and from emerging global opportunities.
Pharma exports soared on pandemic-related demand, even as the domestic industry was struggling with lower volume demand.
Going
forward, Tirupur-based MSME garment manufacturers could benefit from
export orders diverted from an economically floundering Sri Lanka,
Master said.
In the milieu, MSMEs should see revenue increase
9-11 per cent this fiscal to 1.25 times the fiscal 2020 level, though
Ebitda margin is likely to remain range-bound at 5-5.5 per cent.
While
the industry Ebitda margin is expected to touch the pre-pandemic level
this fiscal, MSMEs in more than half the sectors will buck the trend.
The
performance is also underwhelming in the context of overall corporate
India, which is expected to log a 10-14 per cent increase in revenue and
Ebitda margin of 19-20 per cent.
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