ET Make in India SME Regional Summit: Madurai Edition – 7th November

Key Concepts

• MSME Ecosystem: The network of micro, small, and medium enterprises, including their supporting industries, policies, and financial institutions.
• Make in India: A government initiative to encourage manufacturing and economic growth within India.
• GI Tag (Geographical Indication Tag): A sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
• Financial Discipline: Prudent management of finances, including distinguishing between short-term and long-term funding.
• Digital Adoption: The integration of digital tools and technologies in business operations and financing.
• Parametric Cover: An insurance product that pays out based on a pre-defined trigger event, rather than actual loss assessment.
• Business Continuity: The ability of a business to continue operating during and after a disruptive event.
• Supply Chain Finance: A financial solution that helps optimize cash flow for businesses within a supply chain.
• Cash Flow Based Lending: A lending approach that prioritizes a borrower's cash flow generation over traditional collateral.

Madurai Edition of the ETSME Regional Summit: A Comprehensive Summary

This summary details the key discussions and insights from the ET Make in India theme regional summit held in Madurai, focusing on the MSME ecosystem, industry opportunities, and financial and insurance support.

Madurai: A Dynamic Hub for MSMEs

Madurai, referred to as "Thoonga Nagaram" (the city that never sleeps), is highlighted as a vibrant economic center in South India. Its rich cultural heritage, architectural grandeur, and literary legacy are complemented by a strong MSME base across diverse sectors. The city's strategic location and connectivity provide significant advantages for industries such as:

• Textiles: Known for its handloom sector, particularly the lightweight and vibrant Sunuri saris with a GI tag, characterized by natural dyes and single dot patterns.
• Automobile: A significant sector with a presence in Madurai.
• Rubber: Madurai is one of the few rubber-growing areas in South India, leading to the production of gloves, sporting goods, mats, and automobile rubber components.
• Chemicals: A key industry in the region.
• Granite: Another prominent sector contributing to Madurai's economy.
• Agro-based Industries: With a focus on food processing.
• Logistics: Supported by the city's connectivity.
• Information Technology (IT): An emerging sector with growing potential.
• Energy: Including renewable energy solutions.

Specific Product Highlights:

• Madurai Mali: A unique jasmine variety that was the first flower in Tamil Nadu to receive a GI tag in 2013, recognized for its heady fragrance, specific size and shape, and thicker petals influenced by the local soil and climate.
• Thin Wall Containers and Notebooks: Madurai is a top supplier of these products to Tamil Nadu.

IDBI Bank's Strategic Initiatives for MSME Growth

Mr. Nagaraj Gala, Executive Director of IDBI Bank, detailed the bank's comprehensive strategy to support MSMEs in Madurai and Southern Tamil Nadu.

Targeted Cluster-Based Approach:

• IDBI Bank recognizes the specialized nature of MSME clusters in the region (e.g., printing, fibers, home textiles, small engineering) and has designed tailored products and services to meet their unique requirements.
• The bank has expanded its presence, converting existing branches into MSME branches and deploying specialists to guide businesses.

Product Offerings:

• Comprehensive Financial Solutions: IDBI offers a wide range of products including term loans, working capital, cash management services, collection mechanisms, forex requirements, and currency risk management.
• Focus on Cash Flows: Moving beyond traditional lending, IDBI emphasizes cash flow-based lending, particularly for industries like food processing where funding needs are seasonal.
• Technology Upgradation and Renewable Energy: The bank provides funding for technology upgradation (e.g., textile companies) and renewable energy solutions (solar, wind) to help MSMEs reduce power costs.
• Startup Support: Recognizing the significant growth in startups (a 10x increase in Madurai from 2021 to 2022), IDBI offers products for new businesses.

Alignment with Tamil Nadu's Economic Goals:

• IDBI Bank is aligning its strategy with Tamil Nadu's goal of becoming a $1 trillion economy by 2030, acknowledging MSMEs as a crucial component of this growth.
• The bank aims to be a dominant lender in the state, leveraging its long-standing presence and understanding of the local market.

Support for Women-Led MSMEs:

• IDBI Bank actively supports women entrepreneurs, who constitute a significant portion of startups in Tamil Nadu (50% nationally, 55% in Madurai).
• The bank leverages government schemes like capital subsidies (30% for women) and enhanced CGTMSC coverage.
• Women entrepreneurs are seen as better borrowers with lower Non-Performing Assets (NPAs).

Digital Transformation in MSME Financing:

• IDBI Bank is facilitating digital adoption for MSMEs by offering simple, readily available, and easy-to-use digital tools without significant upfront investment.
• Products like "Quick I Pay" enable seamless cash collection for businesses like schools and hospitals, providing real-time dashboards for financial tracking.
• Dedicated teams assist MSMEs in adopting the latest digital tools.

Key Precautions for MSMEs in a Volatile Environment:

• Financial Discipline: Crucial to avoid diverting short-term funds for long-term purposes.
• Digital Adoption and E-commerce: Essential for business growth and expanding market reach.
• Networking: Attending events and engaging in networking opportunities to build relationships and explore collaborations.
• Employee Investment: Recognizing employees as the backbone of the business and investing in their development.

Government and Policy Enablement for MSMEs in Madurai

A panel discussion involving Mr. S. Ganesan (GM, District Industries Center, Madurai) and Mr. T. Thulalkumar (Senior Branch Manager, NSIC, Madurai) highlighted government support mechanisms.

Key Government Initiatives and Support:

• District Industries Center (DIC) Role: DIC plays a crucial role in supporting MSMEs by facilitating manufacturing and trading, from raw material procurement to financing and finished product sales.
• NSIC (National Small Industries Corporation) Support:
  • Raw Material Assistance: NSIC provides raw material assistance, including single-point registration for free procurement and 100% earnest money deposit exemption for central government tenders.
  • Marketing Support: Offers discounts on raw materials and organizes marketing events.
  • Scheme Implementation: Implements schemes like the Prime Minister Employment Generation Program (PMEGP) with subsidies ranging from 15% to 30%, and the PMFME (Prime Minister Micro Food Processing Enterprises) scheme with loans up to ₹30 lakhs and a subsidy of ₹10 lakhs.
  • Entrepreneurship Development: Supports new and existing entrepreneurs through various schemes, including those for food processing, technology upgradation, and renewable energy.
• State Government Schemes:
  • Capital Subsidy: Offers a 25% capital subsidy, enhanced to 30% for women entrepreneurs.
  • CGTMSC Enhancement: The state government enhances the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSC) coverage for women-promoted businesses.
  • Concessional Interest Rates: Banks often provide concessionary rates (25-50 basis points) for women-promoted ventures.
• Focus on Clusters: The government recognizes the unique requirements of different industrial clusters in Tamil Nadu (e.g., food processing, textiles, rubber).
• Promoting Manufacturing: Encouraging the shift from trading to manufacturing, particularly in the food industry.
• Startup Support: Government incentives and support for startups, with a significant number being women-led.

Specific Schemes Mentioned:

• UAGP (Unemployed Assistance Gujarat Program): For new businesses, with a maximum loan of ₹153.7 lakhs.
• PMEGP (Prime Minister Employment Generation Program): For manufacturing and service sectors, with a maximum loan of ₹50 lakhs and subsidies of 15% to 30%.
• PMFME (Prime Minister Micro Food Processing Enterprises): For micro food processing enterprises, with loans up to ₹30 lakhs and a subsidy of ₹10 lakhs.
• Entrepreneurship Development Program: Providing guidance on project reports, bank support, and government certifications.

New India Assurance: Empowering MSMEs Through Comprehensive Insurance

Mr. S. Dinakaran, General Manager of The New India Assurance Company Limited, emphasized the critical role of insurance in business continuity and risk mitigation.

Common Business Risks for MSMEs:

• Location Risks: Flood, cyclone, fire, and earthquake risks depending on the geographical location.
• Occupational Risks: Machine breakdown, employee injury, fire, and lightning during operations.
• Electronic Equipment Risks: Damage to electronic equipment used in factories.
• Environmental Risks: Pollution leading to public liability claims.
• Climate Change Risks: Increasing frequency and intensity of extreme weather events.
• Business Interruption Risks: Disruption of operations due to unforeseen incidents, leading to significant financial losses.

New India Assurance's Solutions:

• Specialized MSME Products:
  • New India Bharat Laghu and New India Bharat Sukma: Package policies designed for MSMEs, with coverage options based on risk value (₹5 crore and ₹5-50 crore).
  • BMBA (Business, Machinery, Building, Assets): A new product specifically for the MSME sector, covering 10 risks, with fire and special perils policy being compulsory.
• Optional Covers: Burglary, theft, breakdown, business interruption, money in transit, and fidelity guarantee can be added.
• Simplified Business Interruption Calculation: A straightforward method of calculating business interruption claims based on a daily declared value.
• Support for Women Entrepreneurs:
  • Mahila Udyam Policy: A specialized policy designed for women entrepreneurs, covering fire perils, personal accident for the owner, and business interruption.
  • Encouraging Women Empowerment: New India Assurance actively promotes women in leadership roles and supports women-led businesses.
• Risk Protection and Prevention: Insurance is positioned not just as protection but also as a tool for prevention and business continuity.
• Claim Settlement Efficiency: New India Assurance boasts a low claim rejection rate (0.02%) and is recognized for its grievance redressal.
• Parametric Cover: A recent innovation offering payouts based on pre-defined trigger events (e.g., temperature exceeding a certain threshold), simplifying the claims process.
• Special Discounts: Offering special discounts for MSMEs, including those utilizing renewable energy.

Evolving Insurance Landscape:

• New India Assurance is adapting to evolving risks like climate change and cyber threats by innovating and introducing new products.
• The company emphasizes the importance of insurance penetration, noting that only 1% of the Indian market is covered by general insurance.

Madurai's Rise as a Modern Business Hub: Panel Discussion

A panel featuring industry leaders discussed Madurai's transformation beyond its traditional image.

Key Themes and Challenges:

• Shifting Consumer Preferences: Evolving tastes and demands, influenced by social media and global trends.
• Digital Influence: The significant impact of social media and digital platforms on marketing and customer expectations.
• Fusion of Authenticity and Modernity: Balancing traditional tastes with global concepts in sectors like food and textiles.
• Challenges in Exports: Competition from countries like China and Bangladesh due to lower manufacturing costs, higher shipping costs, and policy differences.
• Infrastructure Development: The need for improved infrastructure, including better road connectivity, logistics, and industrial parks.
• Red Tape and Bureaucracy: The need to streamline government approvals and reduce bureaucratic hurdles for businesses.
• Technology Adoption: The importance of adopting new technologies, including AI, for efficiency and competitiveness.
• Workforce Dynamics: The availability and work ethic of the local workforce, and the need for skilled labor.
• Financial Support: Access to working capital, collateral-free loans, and government subsidies.
• Insurance as a Business Tool: Moving beyond compliance to using insurance for business continuity.

Opportunities and Future Outlook:

• Growth in Food Processing and Textiles: Madurai's strengths in these sectors are expected to continue.
• IT and Service Sectors: Emerging opportunities in IT parks and service-oriented businesses.
• Government Support: Continued focus on developing industrial corridors and providing incentives.
• Innovation in Products: Development of new products like millet-based foods and advanced textiles.
• Entrepreneurial Spirit: The resilience and adaptability of entrepreneurs in Madurai.

Success Story: Shri Kaliswari Fireworks Private Limited

Mr. Shanuga Natraj, Director of Shri Kaliswari Fireworks Private Limited, shared the inspiring journey of Sivakasi's transformation into a fireworks manufacturing hub.

Origins and Evolution:

• From Tobacco to Matchboxes: The story began with tobacco farming in Sivakasi, which faced excise issues.
• Inspiration from Kolkata: Two young entrepreneurs, inspired by a matchbox manufacturing unit in Kolkata, traveled there to learn the trade.
• Founding of National Match Works: They established the first match industry in Sivakasi in 1922-23.
• Diversification into Fireworks: Recognizing the potential, the industry diversified into fireworks manufacturing, leveraging the local climate and skilled workforce.
• "Little Japan" of India: Sivakasi earned this moniker due to its skilled workforce and the development of multiple industries (matchboxes, fireworks, printing) in a small town.

Key Milestones and Strategies:

• Focus on Quality and Safety: Kaliswari Fireworks prioritized safety and quality, especially for products used by children, leading to a strong brand reputation.
• Brand Building: The "Cog" brand was meticulously developed, becoming synonymous with Kaliswari Fireworks in North India.
• Adapting to Challenges: The company navigated environmental concerns, cracker bans, and competition from cheap imports by focusing on innovation and market expansion.
• Handmade Industry Strength: Despite challenges, the handmade nature of fireworks ensures continued demand, with supply often lagging behind.
• Embracing Opportunities: Viewing threats as opportunities and adapting to market dynamics.

Advice for Aspiring Entrepreneurs:

• Respect History and Elders: Understand the journey and learn from the experiences of predecessors.
• Embrace Technology: While respecting traditional methods, adapt to new technologies like AI.
• Focus on Core Values: Maintain a strong emphasis on quality, safety, and customer satisfaction.
• Resilience and Passion: Combine passion with resilience to overcome challenges.

IDBI Bank's Product Offerings for MSMEs (Concluding Session)

Mr. S. Arunachalam, General Manager, Credit Solutions, IDBI Bank, provided an overview of the bank's MSME-focused offerings.

IDBI Bank's Commitment to MSMEs:

• Pioneering MSME Lending: IDBI Bank has a long history of supporting MSMEs, evolving its offerings significantly over decades.
• Significant Presence in Tamil Nadu: The bank has lent over 10% of its total MSME portfolio in Tamil Nadu, highlighting its commitment to the state.
• Tailored Solutions: Offering customized products for various segments, including traders, manufacturers, service providers, and food processing industries.

Key Product Offerings:

• iMSME: A fully digital loan journey for up to ₹25 lakhs, enabling online applications and quick disbursal without physical paperwork. This is being scaled up to higher loan amounts.
• Capacity Building: Partnering with institutions to share knowledge and gather feedback from MSMEs.
• Cash Flow Based Lending:
  • Tread Platform: Discounting trade bills, including MSME-to-MSME transactions.
  • Supply Chain Finance: Facilitating paperless discounting of invoices for dealers of large corporates.
• Export Finance: Offering a range of products for exporters, including packing credit and bill discounting.
• CGTMC Coverage: Providing collateral-free loans up to ₹10 crores.
• Specific Segment Products:
  • Sakage Vapar: For trading entities, up to ₹7.5 crores.
  • Manufacturing Loans: Up to ₹10 crores, with potential for lower collateral based on creditworthiness.
  • GST Plus: Loans up to ₹55 crores, assessed based on the last 12 months of GST filings.
  • Finance Against Agro Commodities: Funding against warehouse receipts (WHR) for agro-based industries.
  • Property Power: Flexible funding against the entrepreneur's property, with less stringent feedback requirements.
  • Sanjivan Loans: For the medical fraternity, up to ₹10 crores.
  • Service Segment Loans: For professionals and self-employed individuals, up to ₹7.5 crores.
  • Equipment Finance: Collateral-free loans up to ₹5 crores for machinery upgrades.
• Non-Parameterized Products: For higher funding requirements beyond packaged products, requiring detailed appraisal.

Conclusion:

The Madurai edition of the ETSME regional summit underscored the region's significant potential as an MSME hub. IDBI Bank and New India Assurance showcased their commitment to supporting this growth through tailored financial and insurance solutions, while government initiatives and industry leaders highlighted the evolving landscape and opportunities for businesses in Madurai and beyond. The event emphasized the importance of financial discipline, digital adoption, innovation, and strategic partnerships for MSMEs to thrive in a dynamic economic environment.