I am taking this privilege of jotting down things that many may not prefer putting on paper.
Started this enterprise 2005 and grown – probably a little faster than I wanted it to – to the current levels. Growth too has come not because I wanted, but because the prevailing system drove me to. For example lender will say WC can’t be more than 20% as per norms(?). But I can’t run my industry with less than say 40% with justified reasons; what do u do? You are likely to get an idea to increase your top line and get your WC need. What about bottom line then? don’t ask me. And the promoter on his part is most likely use this WC for capital expenses also, many times, without understanding the intricacies/consequences.
Problems start from here. Why can’t the lender’s technical guys assess and provide for legitimately needed WC? I don’t say Promoter’s word alone should be taken for granted.
Next, Why should the promoter run from rating agency to rating agency for credit rating? Why can’t the bank do it? How is the agency better tooled or better qualified to do rating as compared to bank? Are they super professionals compared to bank’s own people?. Will they too share the responsibility with bank if and when an account goes bad?. Incidentally many of the – wilful or otherwise – defaulters are rated far better compared to the struggling ones.
And if rating agencies are that better equipped, how come “Kingfisher” logo (you may wish to call BRAND) got rated for thousands of crores and lender paid thousands of crores and see even one property could not be encashed so far; leave alone the bird which no one will ever take. The companies that owe tens of thousands of crores to public (mean vendors, contractors and such agencies) pending also get BBBs and AAAs (?) because, they pay emi /interest/LC on time to bank rest everyone screwed.
Those who take large loans (tens of thousands of crores) and swindle in large scale get cheaper finance and those who are yet to learn swindling get costly funds. In large enterprise promoters visitor’s list one may find a few chairmen or such likes from big lending institutions and in that of the smaller ones only creditors, tax collectors and few customer representatives.
Effectively, MSME segment as the employee class pay to subsidise the national wilful defaulters and of course the poor farmers whose loans need to be waived off periodically to give fresh loans so that the vote bank is nurtured properly.
However, did anyone give a thought to a funny designations in the industry segment..
- MSME is designated so by calculating certain investments in certain manner. Those numbers in today’s devaluated rupee doesn’t mean much to be frank. Also there are many smarties who can circumvent the rule with intrepretations.
- Now, the external rating agencies have a method and nomencla-tures for SME rating. Beyond those ratings such as “SME 2A” so on and so forth, it is the A, B, C. D etc.,
- So, effectively anyone beyond Sl. No.1, will be rated in line with the methods applied of the likes of Mallya’s, Ambani’s, Adani s etc.?
- But the facilities extended, in every respect has wide disparity including rates and charges.
Now comes certain qualifying criterion. I am not saying it should be abolished; but those which are blatant favours should be removed or else the country will have a feudalistic industry wherein few will hold the card for the entire jobs and slaves (names) will be working under them for peanuts. Mind it it is the msme sector that employs the maximum lesser educated population.
And this MSME sector (with exceptions) largely don’t get into misdeeds. Yes, there are sizeable number of entrepreneurs whose own resources are limited; but dare to take on the challenges in business. So look at them comprehensively and hold the hand firmly and see them through till the lender feel themselves safe and confident. That’s how you nurture your children too..isn’t it??
I am just lost at the very thought of lender calling itself “Partner in Progress”, but milking every bit from the borrower even when he/she is in dire straight. Are they only “Partner in Profit??” It is as if they brush every borrower with same colour. The Milking ones, the sucking Ones and the killing ones.Ok coming to our own case, bank give you what thy think is your NEED, not what you really NEED today, then what??
Typically in one case, the company had an order book in excess of 400 crores keeping aside LoI. But today from office boy to Promoter all are engaged in one job and that is borrowing to see each day through. They might have camouflaged losses incurred during successive years to keep their heads high and face straight; but having done it and with the lethargic approach of institutions every time, an otherwise healthy order book started looking like a burden.
Had the help been extended in time, all of these people will engage in what they are good at and what they are supposed to be doing. With a built-up reputation prevailing for the company so far, the deliveries prompt, realisations good (which already is now) and you are in reasonable shape within few months. Regaining the confidence alone will show more than desired results. A swollen order book can reduce debt (unless promoters become greedy and start thinking of thousands of crores loan and lakh crore business model) and thereby improve the cash flow to a huge extent which is the only basic problem NOW.
It is not story telling but at the end as above “they all can live happily ever after”.
After all this particular segment employs the maximum semi and unskilled hands and also converts them to skilled ones over a period of time.
Madhu K. Nair [23rd September 2017].