MSME trends in 2023 and other top stories of the week
From major trends to look out for in 2023 to reasons why SMEs should plan IPOs, here's what SMBStory covered this week.
For India's micro, small, and medium enterprises (MSMEs), 2023 will be a pivotal year.
Over the last two years, the pandemic presented a minefield of challenges but also gave opportunities to evolve, grow and emerge stronger. MSMEs broke old conventions, embraced new trends, and adopted new technologies. They have begun to understand the potential of digitisation and branding, which are opening up new avenues.
With a significant number of IPOs expected in the sector, experts predict that MSMEs will make significant financial and technological strides in 2023.
2023’s major trends for MSMEs
MSMEs form the backbone of the Indian economy, accounting for 30% of the country’s GDP, 48% of overall exports, 95% of the country’s industrial units, and 40% employment of India’s workforce. In the truest sense, India's economy is powered by its 633.9 lakh MSME units.
Unlike the other business sectors, including startups and large legacy family businesses, MSMEs, for years, have lacked ‘glamour’. Although they have been slow in adapting to the changing industry needs, they have played a crucial role in shaping the development of Indian industries.
More than 10,000 companies are expected to list on the SME Exchange in the next five to ten years, says Amit Kumar, Founder of MSMEx—a micro advisory platform providing business advisory and consulting services. Digitisation is a key driver for the growth of the MSME industry.
While the adoption rate is slower compared to other sectors, the PayPal 'MSME Digital Readiness Survey 2022' revealed that 52% of small businesses saw a favourable influence of digitalisation on their business once economies reopened after two years of the pandemic.
Lending is likely to increase in 2023 and it will be driven by favourable regulations, the advent of digital technology and the increasing contribution of MSMEs in the overall growth story of the country, says Harsh Pokharna, Co-founder and CEO of OKCredit. Saket Dalmia, President of PHD Chamber of Commerce and Industry, adds the government's vision for becoming atmanirbhar and complementing the Make in India Scheme is encouraging MSMEs to build capabilities and access domestic markets.
Planning an IPO for SMEs: Opportunities and challenges
Initial Public Offering (IPO) has been a buzzword for the last two years thanks to startups, as 2021 and 2022 saw a listing of around 15 small businesses on the public exchanges. Experts believe that in the year ahead, many small and medium enterprises will list on the bourses as well.
SMEs operate with limited funds, making the availability of working capital a challenge. IPO gives these businesses much-needed capital access, turbocharging their growth.
HP Singh, Chairman and Managing Director of Satin Creditcare Network Limited, says that for SMEs the critical asset size (AUM), robust asset quality, scalable business model and a niche in the business segment that has an appeal to the external stakeholders are some of the important mandates one shall think upon while going for IPO listing.
He adds that subscription remains a challenge, especially for companies which don’t have backing from a big corporate house or a PE fund. Compliance is another challenge that an SME has to go through. Unlike a partnership or private limited company, for an IPO-listed company, corporate governance matters a lot.
Yash Bhuva, Executive Head of Sheetal Cool Products Limited (SCPL), an Amreli-based FMCG company, says that IPO enables more recognition and trust among the suppliers, distributors, consumers and other stakeholders of the business. “It becomes easier to expand and get access to funds,” he adds.
Other top picks of the week
Latin Quarters
India’s fashion market for women is vast. But, while it is good to have a variety of options, diluting a brand’s offerings might distract the target customers. This has been the strategy of Rahul Bhalla, Co-founder and CEO of Latin Quarters, while building the Delhi-based brand.
“We have been in the business for over 16 years now and are the go-to destination for women for their western fashion needs. And we want to remain that without diluting the brand’s core,” he says. While Latin Quarters is famously known for its dresses, the brand boasts 15 SKUs including tops, bottoms, shrugs, sweaters, skirts, jumpsuits, etc.
So, what's the biggest reason behind Latin Quarters’ success despite competition from homegrown and international brands? “Keeping up with time,” Rahul says. Rahul believes “innovating with evolving time,” has kept the brand growing year after year.
He highlighted that the company opened two stores in one and a half years. Now, Rahul expects to close FY23 with Rs 115 crore turnover and six stores coming up. The brand currently has stores in Delhi, Mumbai, Bengaluru, Pune, Kolkata, and many more.
Edited by Kanishk Singh