The Epicentre of An Existential Crisis

The epicentre of an existential crisis
June 2020
© 2020 CRISIL Ltd. All rights reserved.

1
Analytical contacts
June 10, 2020
Prasad Koparkar Binaifer Jehani Bhushan Parekh
Senior Director and Head Business Head Director
Growth Innovation and Excellence Hub CRISIL SME Solutions CRISIL SME Solutions
prasad.koparkar@crisil.com binaifer.jehani@crisil.com bhushan.parekh@crisil.com

Elizabeth Master Manasi Kulkarni Mubasshir Bakir
Associate Director Associate Director Associate Director
CRISIL Research CRISIL SME Solutions CRISIL SME Solutions
elizabeth.master@crisil.com manasi.kulkarni@crisil.com mubasshir.bakir@crisil.com
Abbas Master Namrata Bhavsar Pooja Karan

Manager Manager Associate Manager
CRISIL SME Solutions CRISIL SME Solutions CRISIL SME Solutions
abbas.master@crisil.com namrata.singh1@crisil.com pooja.karan@crisil.com
2
Key messages
● The micro, small and medium enterprises (MSME) sector’s revenue growth will plunge into deep
red this fiscal because of the Covid-19 pandemic
● Earnings before interest, taxes, depreciation and amortisation (Ebitda) margins will decline despite

lower commodity prices
● Higher stress in financials visible in micro units compared with small and medium firms
● Consumer discretionary, construction and export-linked MSMEs will be the most impacted
● Credit growth to MSMEs, an under-penetrated sector, will decelerate this fiscal
● Asset quality pressures to rise despite moratorium, because of slack demand
● Entrepreneurs from key sectors see varied pace of revival – those most affected do not expect a
rebound before next fiscal, while a few are optimistic about the upcoming festive season
3
MSME financials to take a severe hit this fiscal
Covid-19 to push revenue growth into deep red Ebitda margin to shrink as weak demand offsets
decline in commodity prices
4-5%
7.0%
4-5%

FY17-20E FY21F
FY17-20E FY21F
Interest service coverage ratio (ISCR) to drop

despite moratorium benefit
2.4
1-1.5
(17-21%)
FY17-20E FY21F
“Note: Common sample of 11,400 entities, ISCR = EBITDA / Interest “
Source: CRISIL Research, Quantix
4
Financials of micro enterprises under greater stress
Micro 32%
1,900 -7% 3.3 285
firms

Small 45%
405 2% 7.4 205
firms
Medium 23%
9,100
6% 7.3 175
firms
MSME Revenue growth, Ebitda margin, Gross current asset days, Financial
loan book mix FY17-20 FY17-20 FY17-20 Outlook, FY21
Note: Micro: revenue of < Rs 5 crore and investment < Rs 1 crore

Small: Revenue of Rs 5 to 50 crore and investment of Rs 1-10 crore Deep negative Highly negative Negative
Medium: Revenue of Rs 50 to 250 crore and investment of Rs 10–50 crore
5
Consumer discretionary, construction and exports hit hard
Auto-components Construction: real estate Textiles: RMG Gems and jewellery Transport operators
MSME share
Linkage to global economy

Supply chain

Goods trade
Commodity prices
Linkage to domestic economy

People flow
Domestic consumption
Revenue CAGR (FY17-20) 5% 1% (2)% (4)% (4)%
Revenue growth (FY21) (16-18)% (40-50)% (28-30)% (33-35)% (13-15)%
Ebitda margin (FY17-20) 7-7.5% 8-9% 6-7% 3.5-4% 3.5-4%
Ebitda margin (FY21) 4-5% 2-4% 2-3% 2-2.5% 0-0.5%
Source: CRISIL Research, Quantix Highly negative Moderately negative Neutral Positive
6
Small EPC contractors, textiles and ceramics players bleed
Short-term impact on business
High
Sea food, poultry, hotels, leather, light Construction: real estate, gems and jewellery,
Chemicals
engineering, ship-breaking textiles: RMG, ceramics, textiles: spinning,
cashew processing

Moderate
Heavy engineering, textiles: furnishing, steel re-

Air freight and courier, construction: roads, rollers, media: movies and entertainment,
packaged foods, auto components, transport Edible oil, pesticides
media: advertising
operators
Minimal
Hospitals; pharma: bulk drugs;

Milk and dairy products, electronics, packaging, Rice milling, wheat milling
pharma: formulations
security services
revenue outlook
Minimal impact Moderate impact High impact

FY21
Vulnerability of credit profile

(Weighted average of ICR, D/E and working capital days for FY17-19)
7
Incremental working capital requirement to rise the most for
MSMEs with higher share of B2B sales and exports
Key business model characteristics Liquidity characteristics and impact
Export revenue Clientele Import dependency Working capital Impact expected on
share (%) category for raw materials cycle (days) working capital
Gems and jewellery 50 B2B and B2C High 165-170
Textiles (RMG) 25 Largely B2B Low 120-125

Construction (real estate) 0 B2B Low 150-155
Sea food 30 B2B and B2C Low 85-90
Poultry 0 B2B and B2C Low 85-90
Dairy 60-65% B2C

<5 Low 75-80
35-40% B2B
Auto components 5-10 B2B Moderate 96-98
Packaging and printing 0 B2B Low 100-105
Packaged foods <5 Largely B2C Low 90-95
Transport operators 0 B2B Low 85-90
Rice milling 20 B2C Low 100-110
High negative working Moderate negative Low negative working

Source: CRISIL Research capital impact working capital impact capital impact
8
Credit growth slows despite an under-penetrated market; asset
quality pressures to rise amid moratorium and weak demand
16% CAGR 8% CAGR 10% CAGR 6% CAGR
Demonetisation Streamlining of GST, Covid-19 impact
Underbanked
Caution among bankers due to rising recovery from
Aggressive lending
NPAs amid slower capex demonetisation
Rs lakh crore 9.5 9.4
8.6
7.9 7.8 7.8
7.2

7.0
25 6.4 22% 25%
20 20%
13%
15 12% 15%
11% 10% 9%
10 8% 10%
6.5% 6%
5 5%
8 9 11 12 13 14 16 17 18 19
0 0%
FY12E FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E FY21P
MSME lending % y-o-y growth (RHS) SME gross NPA % of leading bank
14% 18% 21% 20%
Trend of rising market
share of NBFCs to reverse FY15 FY17 FY19 FY21
86% 82% 79% 80%

:Source: CRISIL Research
NBFC MSME share % Banks MSME share %
9
Growth in NBFC credit to MSMEs to be among the most tepid
Share in
28% 25% 13% 11% 2% 14% 3% 2% 2%
overall book
FY19 FY20E FY21E

56%

28%
24% 24%
18%
15% 15% 16%
12%
8% 8% 8% 8% 8%
5% 4% 5%
-12%
Infra (exc Housing Auto Wholesale Microfinance MSME Gold CE CD

PFC, REC)
Source: RBI, NHB, company data, CRISIL Research
10
Unsecured book, informal-segment borrowers most at risk
Non-banking segments GNPA (%) GNPA (%) GNPA (%) Asset quality
FY18 FY19 FY20E outlook (FY21)
Wholesale finance 1.0% 2.0% 4.0%

Microfinance 3.2% 1.3% 1.5%
MSME finance 2.7% 3.3% 4.2%
Auto finance 6.6% 5.2% 5.6%
Infrastructure finance 8.2% 8.4% 8.6%
Housing finance 0.5% 0.7% 0.9%
Gold finance 3.4% 2.1% 2.3%
Note: Red represents a more than 200 bps deterioration in asset quality; amber represents more than 50 bps but less than 200 bps deterioration; green represents more than 0 and
less than 50 bps asset quality deterioration
Source: CRISIL Research
11
Digital lending is a small but enlarging pie in MSME lending
Traditional MSME Fintech

Unsecured lending MSME lending
28%
loans
Others 7% Sourcing and High probability of error Auto-populated using

onboarding given manual data entry external sources
Traditional parameters excel Traditional & non-traditional

Auto loans 5% Credit assessment
based calculations behavioral data
Documentation, loan Difficult to track due to Document uploaded and

MSME 4% structuring manual entry of document stored electronically
Via cheque increasing Once approved, instant

Motgage loans 1% Disbursement
turnaround time online disbursement
0% 10% 20% 30% Collection and Manual tracking of early Lender gets trigger in case of
monitoring warning signals sign of default
“Note: Based on disbursements as of fiscal 2019”
Source: CRISIL Research

12
About 70% of 40,000 companies have cash to cover
employee cost for only two quarters, most being MSMEs
Turnover Share in Share in Share in Cash coverage to cover
(crore) count revenue employee cost employee cost
Rs 0-100 70% 6% 8% 5-6 months

Rs 100-250 15% 7% 7% 8-9 months
Rs 250-1,000 11% 15% 16% 8-9 months
4% 29% 34% 8-9 months

Rs 1000-10,000
<1% 10-11 months

Rs >10,000 43% 36%
42,000 companies Rs 130 lakh crore Rs 11 lakh crore 0.7

*Cash coverage to employee is months till total cash and bank balance will last to only pay employee cost. It doesn’t take into account other liabilities and fixed costs.
Source: Company reports, CRISIL Research
13
Government support in the right direction
 Support MSME  Modus operandi and

Rs 5,000
lending growth Rs 3 lakh more details about this
crore facility
crore scheme awaited
announced
collateral-
for small
free loan
vendors

Government
support to
MSMEs
Rs 1,500
crore
Six-month interest
 Interest burden for FY21 moratorium subvention
to decline 25-30% for Mudra
Rs 20,000 Sishu loans
compared with FY20 crore  Mudra loans constitute over
subordinate 14-15% of MSME lending in India
debt for
stressed
MSMEs
 Infusion by the government to

CGTMSE highest in the past two
decades
 Represents 60% of cumulative corpus
since FY01
14
Ear to the ground
A look at what’s happening in the upstream supply chain
Construction:
Real estate

Automobile
components
Textiles:
Readymade
garments (RMG)
15
Discretionary sectors mauled during the lockdown
Demand impact Top two challenges Measures
1] Consumer sentiment 2] Operational constraints Near-term focus area
 Offering price discounts

 80-85% decline in enquiries  New schemes with
 Sentiment towards projects in advanced stage better than easy EMI option
High initial-stage projects  Offering freebies such

 Just 40% sites in the green and orange zones operated in May, as free car parking,
Construction: that too, at ~30% capacity utilisation stamp duty waiver and
Real estate modular kitchen
 ~25% respondents shared concerns on order cancellation

 ~40% respondents informed about order deferral by original  Meeting existing orders
equipment manufacturers (OEMs)  Adopting lean
Moderate manufacturing process
 Units in the green and orange zones operated at ~35%
Auto utilisation in May
components
 Kids’ wear saw more demand that women’s and men’s wear
 ~70% reported cancellations in export orders  Meeting existing orders
 Units in the green and orange zones operated at ~40% utilisation  Adopting digital selling
Moderate in May
Textiles:
RMG
16
Supply-side challenges spurted during April-May
Plan to hire
more local
% of migrant labour to tide
Labour Logistics Raw material
labour over migrant
availability issues availability
(approx) labour crisis

Construction: 65%-75%
Real estate
 Metro cities High Moderate Low Yes
 Non-metro cities High High Moderate
Auto components 25%-35% Low Moderate Moderate No
Textiles – 50%-60% High Moderate Moderate Yes

RMG
0%-30% 30%-60% 60%-100%
Percentages indicate respondents
17
Majority face liquidity stress, are desperate for funds
Need for
Moratorium Stretched Inventory Measures to mitigate
Sectors external
availed receivables build-up liquidity crisis
funds
1 2
Construction Infusion from Unsecured loans Immediate
(real estate) 30-60 days High promoters from related parties

Auto Cash and bank Unsecured loans 2-3 months
30-60 days Moderate balances from related parties
components
Textiles (RMG) Cash and bank Unsecured loans 1-2 months

> 60 days High balances from related parties
• 80% plunge in monthly • Raw material inventory • High inventory pile-up

collections pile-up due to lockdown due to unsold summer
• Increase in cancellations • Majority receivables wear
in the residential segment outstanding for • Majority of receivables
manufacturers supplying outstanding from
to the aftermarket exporters
0%-30% 30%-60% 60%-100%
18
Demand expected to bounce back from the third quarter
Q2 FY21 Q3 FY21 Q4 FY21 FY22
Construction: Real estate
Metros 33%
46% 21%
Non-metros 34% 11% 55%

Auto components
aftermarket 28% 40% 15% 17%
Passenger vehicles 22% 17% 48% 13%
28% 29% 43% 0%

Two-wheelers
5% 25% 20% 50%

Commercial vehicles
Textiles – RMG
18% 30% 45% 7%

Export
15% 45% 35% 5%

Domestic
Above 40% responses 21% - 40% responses Below 20% responses
19
Deep dive into upstream supply chain
Construction:
Real estate

Automobile
components
Textiles: RMG
20
Overall demand down, advanced-stage projects less roiled
East and west zones relatively better off than other

% of respondents reporting segment-wise demand
• Overall, 80-85% fall in demand
regions; demand mostly in affordable segment
seen across segments
2% 18% 8% 20%
41% 9% 20%
16%
10% 20% 10% • Due to uncertainties and project
9%
14% 31%
delays, buyer preference tilted
73%
towards advanced-stage

72% 64%
57% 81% 66% 59% projects
Automobile components
North East West South Micro Small Medium

• Affordable projects account for
Affordable Mid segment Premium Affordable Mid segment Premium majority of the demand
While enquiries have dipped ~80%, advanced-stage projects

are seeing some demand versus initial-stage projects Majority are first-time buyers • Most of the demand is coming
from end-users
13%
•
19%,
Investors, speculators are clearly
Textiles (RMG)
out of market. North, an investor-

driven market, has seen a sharp
decline
81% 87%
Advanced stage projects Initial stage projects First-time buyers Investors
21
Bigger players more desperate to attract buyers
Small and medium companies offering higher discounts than micro ones
8%
31% 44% 17% 10%
7% • Small and medium-sized companies are offering
36% higher discounts compared with micro ones
37%

42%
32% 7%
3%
26%
• Majority of premium and mid-segment respondents
No discount Upto 2% 3% to 5% 5% to 7% More than 10% are offering higher discounts compared with those
Micro Small Medium in the affordable segment
Discounts in mid- and premium segments higher than in affordable

• Because of decline in demand, developers are
25% willing to offer various schemes and options such
42% 17% 8% as easy instalments, stamp duty waiver, and
Textiles (RMG)
8%
41% 8%
4% freebies such as free car parking
42%
23% 8%
34% 35% 5%
No discount Upto 2% 3% to 5% 5% to 7% More than 10%

Affordable Mid segment Premium
22
Mid- and premium segments see better sales growth
expectations this year
Majority of respondents indicated Respondents in premium segment are expected to have

increase in sales growth higher positive sales growth
this year
64%
58%
52%

51%
48%
47% 47%
43% 43% 43% 43% 43%
36% 38%
39% 36% 36%
32% 32% 33% 32% 33%
31% 30% 31% 29%
26% 25% 25%
23% 22%
20% 21%
17%
14%
12% 11%
9%
25%
Residential Mix use Micro Small Medium North East West South Affordable Mid Premium
Textiles (RMG)
segment
Increase No change Decrease Increase No change Decrease
39% of respondents have positive sales Premium segment believes there will be positive sales growth due to better buyer profile
growth expectation for FY21, while 36% Micro-sized companies foresee sharper decline in sales growth
have negative sales growth expectations

23
Short-term supply shock may spur price fluctuations
Micro companies facing more raw material availability issues

compared with small and medium-sized companies
80% 82% 88% Micro companies facing major challenges in raw

74%
material availability because of their low inventory-
20% 18%
26% holding capacity and bargaining power with suppliers
12%

compared with small and medium peers
North East West South

Available Not available
85% 73% Steel and cement, the major components for real estate
27%
construction are witnessing price fluctuations in some
15%
micro markets
Metro Non metro
Supply of finishing material for construction sites also
Textiles (RMG)
80% 94%
45% 55% seeing disruption because of transportation and logistic

20%
6% challenges during lockdown
Micro Small Medium

24
Migrant labour unavailability an overarching worry
Construction is highly labour-intensive, and real estate projects Labour availability: Major challenge across cities
face major labour availability issues
Non-local labour constitutes 65-75% of the workforce at typical

12% 8%
projects, which is the major reason for labour unavailability
Majority of respondents expect increase in labour cost, 92%

88%

i.e. per-day wages

Metro Non metro
Yes No
3-5% increase in labour cost seen as hiring gangs with more

wages or local labour gangs may lead to an increase in wages Labour composition mix expected to change
~42% of the developers plan to hire additional labour gangs and

~43% plan to allow gangs to work in shifts, maintaining social 31%
Textiles (RMG)
distancing
Minimum assured wages via MNREGA may result in labourers 69%

unwilling to travel far from their homes, which could put
developers in a spot of bother
Yes No
25
Small realtors see more liquidity stress; booking cancellations
worsen pain for affordable segment
Booking cancellations have increased Booking cancellations higher • Micro and small realtors are
for micro companies in the affordable segment
seeing a wider stretch in their
Medium 47% 53% Premium 29% 71% receivables compared with
medium-sized ones
Small 69% 31% Mid segment 40% 60%

• Booking cancellations have
Micro 77% 23% Affordable 83% 17% increased for the affordable
segment mainly due to the
Cancellations increased (yes) Cancellations increased (yes) current job uncertainty
Cancellations increased (no) Cancellations increased (no) among lower- and middle-
class buyers
Stretched receivables – by turnover
Medium 41% 59% • The residential segment is

Textiles (RMG)
witnessing an increase in
Small 77% 23% cancellations compared with
the mixed-use segment
Micro 78% 22%
Receivables stretched Receivables not stretched
26
Receivables stretch more for micro companies and non-metros
Inventory build-up Stretched receivables Inventory build-up Stretched receivables
Metro High 30-45 days Micro Moderate 30-60 days

Non-metro Moderate 30-60 days Small High 30-60 days

Textiles (RMG)
Medium High 30-45 days
More than 2/3rd of respondents are in immediate need of funds to meet their financing requirements
0%-30% 30%-60% 60%-100%

27
Demand recovery expectations vary based on segment,
product mix and turnover
Q2 - FY 21 Q3 - FY 21 Q4 - FY 21 FY 22
Recovery expectations
Q3FY21
Segment Residential 31% 21% 48% Majority of respondents indicate that
realtors in mixed-use segment are
Mix use 47% 11% 42% better placed than the ones operating

only in residential segment
Product mix Affordable 23% 19% 58%

Q3FY21
Majority of respondents indicate that
Mid-segment 59% 14% 27%
mid- and premium segments are better
placed than the affordable segment
Premium 57% 9% 34%
Textiles (RMG)
Turnover Micro 30% 21% 49% Q3FY21

Majority of respondents indicate that
Small 41% 21% 38% micro and small companies are better
placed than medium-sized companies
Medium 18% 18% 64%
Above 40% responses 21-40% responses Below 20% responses

28
Aatmanirbhar Bharat scheme and further expectations
Construction - real estate
Schemes realtors voted as the most impactful
Extension of loan moratorium

Extension of RERA deadlines
EPF support for business and workers
Schemes in which realtors expect more action

Textiles (RMG)
Further extension of loan moratorium
Reduction in stamp duty and registration charges
29
Demand decline a challenge across segments but Tier-III
suppliers, medium enterprises less downbeat (1/2)
Construction: real estate
Demand voted as major challenge; diversity in revenue stream will Micro enterprises most concerned about demand
come to their rescue
85%
% respondents
% respondents
60% 58%
50% 60%
43%

Tier I Tier II Tier III Micro Small Medium
Demand voted as a major challenge
Major Tier-I suppliers project sharper decline in sales compared

Small enterprises expect the sharpest decline in sales
with smaller ones in the OEM supply chain
% respondents projecting
72%
45% 45%
Textiles (RMG)
42% 60%
dip in sales
35%
dip in sales
30% 30% 28% 42% 46%

25%
20% 25%
12% 15% 14% 14%
Tier I Tier II Tier III Micro Small Medium

0-10% dip in sales 10-15% dip in sales More than 15% dip in sales 0-10% dip in sales 10-15% dip in sales More than 15% dip in sales
30
Despite competition from unorganised units, auto-component
makers supplying to the aftermarket are optimistic (2/2)
Manufacturers supplying to OEMs expect a decline Component suppliers to two-wheelers to see better demand than
in demand from end-user industry their peers who supply to other segments
70%
81% 60%
% respondents
% respondents
55%
60%

OEM After market Passenger vehicle Commercial vehicle Two wheelers

Demand voted as a major challenge Demand voted as a major challenge
Aftermarket players project a moderate decline in sales Component suppliers to commercial vehicles see a tough time
despite stiff competition from unorganised players due to sales decline
45% 50%
45%
Textiles (RMG)
40% 40% 40%

30% 30% 35%
30% 30%
dip in sales
dip in sales
25% 25%
15% 20%
OEM After market Passenger vehicle Commercial vehicle Two wheelers
31
Cluster-based manufacturers better off on most counts
Almost all issues equally excruciating for non-cluster Aftermarket players likely to see slightly less supply disruption
component manufacturers than OEM-focussed peers
40%
% respondents
60% 60% 35%
% respondents
52%
40% 25%
35% 34% 21% 20% 20%

Raw material availability Transportation issue Depedence on migrant Raw material availability Transportation issue Depedence on migrant
issue labours issue labours
Cluster Non-cluster After market OEM
Raw material availability a major issue for micro enterprises, Raw material issue in the south overshadow
medium firms flag transportation as a bigger worry all other issues across zones
44% 40% 43% 43% 80%
% respondents
% respondents
33% 36% 34% 60% 60% 60%

Textiles (RMG)
25% 35% 45% 45% 55% 35% 45%

30% 33%
14%
Raw material availability Transportation issue Depedence on migrant

Raw material availability Transportation issue Depedence on migrant issue labours
issue labours
Micro Small Medium North East West South
32
Auto-component suppliers to the aftermarket may
see their working capital being stretched (1/3)
Supplier to OEM Supplier to aftermarket Comment
Inventory pile-up mostly pertains to

Stretched
45-60 days 45-60 days raw material and manufacturers are
inventory

currently drawing on it
Suppliers to OEMs have less stretch

Stretched
30-45 days 45-60 days in receivables since OEMs are more
receivables
organized than aftermarket entities
Textiles (RMG)
Increase by Increase by
more than 15% 9% 56% The overall impact of stretched
more than 15%
Increase in receivables and inventory has
Increase by 10- Increase by 10-
working capital 15% 34% 15% resulted in a ~20% increase in
15%
requirement
Increase by 0- Increase by 0- working capital requirement of
10% 57% 29%
10% aftermarket suppliers
*Stretched inventory and receivable numbers are an average of all responses
Percentages indicate respondents projecting increase in working capital
33
Tier-III suppliers facing lengthier stretch in receivables (2/3)
Tier-I Tier-II Tier-III Comment
Inventory pile-up is mostly at

Stretched Tier-II and Tier-III component

15-30 days 30-45 days 30-45 days
inventory suppliers
Substantial receivables of
Tier-III component suppliers
Stretched
15-30 days 30-45 days 45-60 days stuck with firms in other
receivables
industries because of varied
usage of their products
Increase by
Textiles (RMG)
28% Increase by Increase by

Increase in more than 15% more than 15% 30% 35%
more than 15% Working capital requirement
working Increase by 10- Increase by 10- Increase by 10- of Tier-III suppliers has
capital 15% 35% 15% 33% 15% 40%
increased 10-20%
requirement Increase by 0- Increase by 0- Increase by 0-
25%
37% 10% 37% 10%
10%
*Stretched inventory and receivable are average days of all responses

34
Micro and small enterprises face the lengthiest stretch in
receivables and inventory (3/3)
Micro Small Medium
Stretched inventory 45-60 days 45-60 days 15-30 days

Stretched receivables 45-60 days 45-60 days 15-30 days
42%
Textiles (RMG)
more than 15% 50% Increase by 10-

more than 15% 14%
15%
Increase in working Increase by 10- Increase by 10-
capital requirement 14% 15%
15% 15%
Increase by 0-
Increase by 0- Increase by 0- 86%
44% 35% 10%
10% 10%
*Stretched inventory and receivable are average days of all responses

35
Improvement in demand expectation a function of
market and turnover category
Q2 - FY 21 Q3 - FY 21 Q4 - FY 21 FY 22
OEM Aftermarket suppliers project a

Market
major recovery in Q3 of this fiscal
aftermarket

Tier-I
Supplier
Tier-II Tier-I suppliers project a complete
level
recovery by Q4 of this fiscal
Tier-III
Passenger vehicle • CV makers project almost 50%

Segments recovery after Q4 of this fiscal
catering Commercial vehicle • Two-wheeler makers project a
to (CV) complete recovery by Q4 of
Two-wheeler current fiscal
Textiles (RMG)
Micro Medium enterprises project

Turnover recovery by Q2 of current fiscal and
category complete recovery by Q4
Small
Medium
Above 40% responses 21% - 40% responses Below 20% responses
36
Aatmanirbhar Bharat scheme and further expectations
Three schemes for MSMEs that have been voted as most impactful
Extension of loan moratorium

Credit guarantee scheme
EPF support for business and workers
Two factors auto-component makers voted as most essential for revival of demand
Textiles (RMG)
GST rate cuts
Quick introduction of scrappage policy
37
Demand fell across segments after lockdown but sentiment
for kids’ wear shows resilience (1/2)
Kids’ wear players don’t see demand as a major challenge Medium enterprises don’t see demand as a major challenge
89%
78% 84%
% respondents
% respondents
59% 64%
40%
30%

Men Women Kids Mix Micro Small Medium

Men’s wear segment foresees greater decline in sales vs others Micro enterprises foresee steeper decline in sales vs others
50% 71%
47% 62%
% respondents projecting dip
40% 40%
35% 35%
Textiles (RMG)
29% 30%
dip in sales
24% 25% 25% 33% 35% 32%
20% 24%
in sales
18% 20%
5%
Men's wear Women's wear Kid's wear Mix Micro Small Medium
38
Exporters, non-branded players more worried about demand
than firms focussed on domestic market (2/2)
RMG manufacturers catering to export market Branded players do not see demand as a major challenge
see demand as a challenge
71%
72%
66%
% respondents
% respondents
63%

Domestic Export Branded Non-branded

Demand voted as a major challenge Demand voted as a major challenge
Exporters foresee higher decline in sales Non-branded players foresee higher decline in sales
55% 71%

42% 56%
Textiles (RMG)
27% 30% 28%

in sales
in sales
18% 23% 24%
20%
6%
Export Domestic Non-branded Branded

39
Firms in clusters better placed to overcome supply chain
challenges than standalone players
Supply chain of non-cluster players highly impacted Supply chain of players operating in metros highly impacted
but they have less reliance on migrant labour
70% 60%
% respondents
55% 55%
% respondents
55% 50%
45% 40%
30% 30%
27%
20%

Raw material availability Transportation issue Dependence on migrant Raw material availability Transportation issue Dependence on migrant
issue faced labours issue faced labours
Cluster Non-cluster Metro Non-metro
Supply chain of micro enterprises highly impacted Supply chain impacted significantly in the east zone, while in the west
zone, impact is more due to high dependence on migrant labour
60% 60% 70%
55% 68%
% of respondents
% respondents
45% 42% 55% 55%

50%47%
35% 45%
40% 40%
Textiles (RMG)
30% 32% 35% 35%

25% 30%
Raw material availability Transportation issue Dependence on migrant Raw material availability Transportation issue Dependence on migrant
issue faced labours issue faced labours
Micro Small Medium North East West South
40
Exporters and non-branded apparel manufacturers see
stretch in working capital (1/3)
Non-
Export Domestic Branded
branded
Stretched Stretched
45-60 days 30-45 days 30-45 days 45-60 days
inventory inventory

Stretched Stretched
receivables receivables
Increase by Increase by 30%
more than more than 15%
45% more than 30% more than 15%
15% 15% Increase in 15%
Increase in
working Increase by Increase by
working Increase by Increase by 10-
35% 35% 60%
55% capital 15%
capital 10-15% 10-15% 10-15%
Textiles (RMG)
requirement requirement
Increase by 0- Increase by 0- Increase by 0- Increase by 0-
20% 15% 55% 10%
10% 10% 10% 10%
41
Manufacturers of men’s and women’s wears see
stretch in working capital (2/3)
Men’s wear Women’s wear Kids’ wear Mix

Stretched

inventory
Stretched 45-60 days 45-60 days 30-45 days 30-45 days

receivables
Increase by more Increase by more

Increase by Increase by more 20%
40% 45% 20% than 15%
Textiles (RMG)
more than 15% than 15% than 15%

Increase in
working Increase by 10- Increase by 10-
Increase by 10- 35% Increase by 10- 40%
30% 15% 35% 15%
capital 15% 15%
requirement
Increase by 0- Increase by 0-10% 20% Increase by 0-10% 40%
30% Increase by 0-10% 45%
10%

42
Working capital stretch for micro enterprises (3/3)
Micro Small Medium

Stretched inventory 30-45 days 30-45 days 30-45 days
Stretched receivables 45-60 days 30-45 days 30-45 days
Increase by more than Increase by more

Increase by more than 17% 8%
Textiles (RMG)
45% 15% than 15%

15%
Increase in working
capital requirement Increase by 10-15% 43% Increase by 10-15% 47%
Increase by 10-15% 30%
Increase by 0-10% 40% Increase by 0-10% 45%

Increase by 0-10% 25%
*Stretched inventory and receivables are average days of all responses
43
Demand bounceback a function of markets, product profile
and turnover category
Q2 - FY21 Q3 - FY21 Q4 - FY21 FY22
Players catering to the domestic market

Export 18% 30% 45%
Market 7% expect recovery in the third quarter of
Domestic 15% 45% 35% fiscal 2021, due to likely demand pick-up
5%
in the festive season

Branded players are optimistic about

Product Branded 30% 30% 40% 0% recovering by the fourth quarter as they
category have more online visibility compared with
Non-branded 15% 45% 25% 15%
non-branded players
Men's wear 10% 20% 60% 10% • Kids’ wear segment hints at major
recovery in the third quarter of fiscal
Product Women's wear 10% 30% 55% 5% 2021, considering current demand
profile
Kids’ wear 30% 50% 20% 0%
• Players with diverse products project
recovery by the fourth quarter
Textiles (RMG)
Mix 25% 40% 35% 0%
Medium enterprises project major

Micro 20% 30% 35% 15% recovery by the third quarter of fiscal
Turnover 2021, because of demand pick-up in the
Small 22% 35% 31% 12%
category festive season and more online presence
Medium 30% 46% 24% 0% compared with micro and small
enterprises
Above 40% responses 21-40% responses Below 20% responses
44
Aatmanirbhar Bharat schemes and expectations
Three schemes RMG MSMEs voted to be the most impactful
Collateral-free MSME loans

Further extension of loan moratorium
Two factors RMG MSMEs voted as crucial to demand revival

Textiles (RMG)
GST rate cut
Extra duty drawback on exports
45
Ear to the ground
The downstream supply chain
Auto dealers

FMCG distributors
46
Demand trends divergent during April-May
Sales impact Key challenges (severity) Near-term measures
Consumer Operational
sentiment constraints
FMCG distributors
FMCG distributors Low Low Moderate
 Increase supply to
Packaged foods Increase  Initial surge in demand during pharmacies
lockdown, then 5-10% decline in  Increase penetration

Home care Increase sales volume and identify new
 Consumer preference shifting to
Demand*
Food grains Increase retailers
local brands due to short supply of
Confectionary Decline branded products
Personal care Decline  Limited operational hours
hampering supply to retailers
Cosmetics Decline
Auto dealers
Beverages Moderate
 Focus on digital sales
Auto dealers High High High  Online marketing and
usage of social media
 Nil sales in April 2020 platforms
Two-wheelers Decline
Demand*
 Low discretionary spend by consumers

Passenger vehicles Decline  ~50% reduction in enquiries and
doubling of sales conversion cycle
Commercial vehicles Decline
 Majority of dealers were shut and
restarted operations in May
* Demand compared with pre-lockdown 0%-30% 30%-60% 60%-100%

47
Supply constraints affect FMCG distributors
Supply constraints Liquidity crisis
Product Manpower Logistics Working capital Moratorium

availability availability issue management availed
FMCG distributors High High Low Low

• Production • Migrant • Delays in • Cash
cuts workforce obtaining transaction 45%
• Preferring • Reluctance to permits • Reduced credit
supply to resume work period
e-commerce due to safety • Low inventory
and modern concerns due to quick
trade • Shortage of churn
loaders
Auto dealers Moderate Low No impact Moderate
• Shutdown of • Limited staff • Lower inventory

manufacturing working due to build-up
plants during government • OEM support 55%
lock down norms • Passenger vehicle
dealers are facing
liquidity crisis
0%-30% 30%-60% 60%-100%
48
Auto dealers foresee demand revival in the festive season
Q2 FY21 Q3 FY21 Q4 FY21 FY22 Sales expectations
(Jul-Sep) (Oct-Nov) (Jan-Mar)
FMCG distributors
38%
Stable demand 40%

22%
Auto dealers 36% 23% 19%

38%
41%
44%
36% 26%
29%
38%
58%
14%
49%
26% 20%
25% 60%
20%

49
Deep dive into downstream supply chain
Auto dealers

FMCG distributors
50
Muted demand and uncertainty worsen auto dealers’ woes
Challenges faced by dealers during the lockdown
Auto dealers
South 43% 14% 29% 14% 58% 12% 6% 24% 45% 22% 33%

FMCG distributors
West 55% 22% 17% 6% 43% 19% 19% 19% 67% 17% 8% 8%
East 65% 21% 14% 37% 44% 6% 13% 38% 25% 37%
North 67% 22% 11% 58% 18% 18% 6% 33% 33% 17% 17%
Muted demand sentiment Unable to reach customers Supply chain constraints Liquidity crisis
Low discretionary spend Lower walk-in customers OEM manufacturing plants shut Higher inventory
Uncertainty of income potential Reduction in the number of enquires Limited staff working due to government
Payment of fixed costs
norms
Deferring purchase and conserving cash
51
Enquiries plunge, first-time buyers mostly browsing
Dealers are focusing on digital
Auto dealers
selling and most of the

passenger vehicle dealers have
~59% decline ~48% decline already adopted this mode
~54% decline
18% - Two-wheelers: Sales
100%
Walk in Telephonic Digital through websites such as
Bikewale, Bikedekho and

Walk in Telephonic Digital
-13%
-40% Just Dial
FMCG distributors
-38% Walk in Telephonic Digital - Passenger vehicles: Sales

Enquiries
-78% -70% -64% -56% through websites such as
Carwale, Cardekho and Acko.
Average number of enquiries has declined across regions, but north is better off Few OEMs have their own
portals to which dealers have
North East West South been given access
-30% -37% -42% - Commercial vehicles: Only
-42% -49% 9% of the dealers are selling
-44% -39%
-47% through the digital mode
-57%
-70% -69%
-86% Conversion from digital mode
low at 2-3%
2W PV CV
Non-metro dealers have seen a sharper fall in enquiries than their metro peers
52
Sales conversion cycle has increased across segments
Auto dealers
Increase by 2.3x Increase by 1.9x Increase by 1.5x

14 19

24
FMCG distributors
10 16
6
Conversion
cycle
(days)
Pre-lockdown Post lockdown Pre-lockdown Post lockdown Pre-lockdown Post lockdown
Following a sharp decline in enquiries and low digital-enquiry conversion, sales conversion cycle will increase significantly, which will impact the
profitability of dealers
53
Dealers ramp up digital presence to boost sales
Auto dealers
56% 56% 53%

50% 50%
50% 50% 41% 42% 44%
35% 35% 37%
39% 36% 36% 33%
33% 36%

28% 28% 24% 19% 22% 25%
22% 19% 19% 22% 17% 17%
19%
17% 13%
FMCG distributors
12%
7%
Increasing online Digital selling Higher discounts Increasing online Digital selling Higher discounts & Increasing online Digital selling Higher discounts &
marketing & schemes marketing activities schemes marketing activities schemes
activities
Many dealers have started marketing and enquiry generation through social media platforms such as Facebook and WhatsApp. Further, they are
training staff on effective utilisation of marketing tools and techniques
Non-metro dealers Non-metro dealers CV dealers believe

31% believe discounts and
schemes will boost
57% focus on digital
selling to boost sales 37% discounts and schemes
will boost sales
sales
~35% of two-wheeler dealers in the east and passenger vehicle dealers in the north plan to offer discounts and schemes to push sales
Percentages indicate respondents for key measures
54
Changing business models and muted demand will
necessitate adoption of stricter cost-control measures
Impact on cost Key cost-control measures adopted by dealers
Auto dealers
2W PV CV
Freeze hiring & improving 56%
Digital selling productivity of staff
32%
• Commission paid to portals
• Online marketing expenses 44%
Reduction in employee costs 19%

Higher discounts 34%
FMCG distributors
21%
Negotiate / deferment of rent 11%
Hygiene and safety measures 15%
• Sanitisation of facilities 15%
• Employee and customer
safety measures Layoff / termination of staff 11%
• Changes in way of working – 10%
adoption of new technology 6%
Low impact Moderate impact High impact 2W PV CV
2W PV CV
• 29% of the dealers in the east plan layoffs • Dealers in the east plan to increase • 25% of dealers in the west plan
• Dealers in the north and west to focus on productivity of workers rather than layoffs
increasing productivity reduce employee costs • 30% of metro dealers plan to
• A quarter of metro dealers plan to reduce • 40% of non-metro dealers plan to reduce employee cost
employee cost reduce employee cost
2W: Two-wheelers; PV: passenger vehicle;
CV: commercial vehicle
55
OEM support to help dealers tide over near-term liquidity crisis
Auto dealers
Extension of credit period from OEMs and self-funding are some of the measures undertaken to mitigate liquidity stress in the near term by
two-wheeler and passenger vehicle dealers, while commercial vehicle dealers plan to increase working capital limits
56% 63%
50% 50%
44% 47%
50%

39% 38% 39% 41% 44%
36% 33%31% 35% 31%
31% 29% 31% 30%
28% 33% 33%
FMCG distributors
25% 26%
17% 14% 22%
13% 17% 17% 17%
6% 6%
0%
Avail extension of Enhancement of Funding from Avail extension of Enhancement of Funding from Avail extension of Enhancement of Funding from
credit period from working capital promoters & family credit period from working capital limits promoters & family credit period from working capital limits promoters & family
OEM limits members OEM members OEM members
A few OEMs have implemented measures to support their dealer network. Below are some of the expectations of dealers in terms of OEM support
2W PV CV
33% 28% 23% 31% 24% 22% 38% 24% 22%

Repayment of Spare parts Fixed cost Fixed cost Repayment of Spare parts Fixed cost Repayment of Spare parts
advances for payment reimbursement by reimbursement by advances for payment reimbursement by advances for payment deferment
vehicles deferment OEM OEM vehicles deferment OEM vehicles
Percentages indicate respondents for key measures

56
Majority expect sales to fall this fiscal; two-wheeler dealers
slightly upbeat on likely higher demand for personal mobility
Auto dealers
28% 21%
50% 50% 50% 50% 59%
58% 63% 58% 66% 67%
50%

44%
12% 25% 6% 12% 37% 8%
43% 39%
FMCG distributors
17% 22%
28% 29% 30% 25% 31% 30% 33%
7% 11% 17% 13% 11%
North East West South North East West South North East West South
• Two-wheeler dealers in northern and southern regions have more optimistic sales expectation
• Majority of passenger and commercial vehicle dealers expect sales to decline on-year
Measures/ trends that will enable quick recovery of the industry

2W PV CV
41% 34% 16% 36% 35% 17% 50% 28% 17%

Higher demand for GST rate cuts Policy measure by GST rate cuts Quick Policy measure Quick introduction Policy measure by Higher demand
personal mobility Govt - boost introduction of by Govt - boost of scrappage Govt - boost due to social
consumption scrappage policy consumption policy consumption distancing norms

57
Product availability an issue for distributors post initial surge
Sales fell 5-10% in May as compared to April
Auto dealers
Major challenges faced by distributors
Red 78% 13% 9% COVID-19 Zones
57% 46% 57%

Orange 52% 28% 12% 8%

7% 25% 10%
FMCG distributors
Green 79% 14% 7% 36% 29% 33%
Green Orange Red

Product availability Logistic issues Manpower availability Liquidity crisis
Scale of operation
• Product availability is the major concern of distributors on account of production 15%
cut by FMCG manufacturers, and severe competition from e-commerce and
23% 62%
modern trade, which source the products in bulk directly from manufacturers
• Because of panic-buying in March, there was an initial surge in sales. But, in May,
sales of distributors operating in red and orange zones plunged. Small enterprises 62% 14%
saw a sharper decline in the month 24%
Micro Small

58
Demand diverged among product categories, signaling shift in
consumer mindset because of pervasive fears
Packaged foods • Ketchup Confectionary •
Auto dealers
Chocolates
• Jam • Snacks
• Biscuits • Chips
• Noodles
• Soup Personal care
• Face wash
• •
Decreased demand
Homecare Body lotion
Increased demand
Soap
•

• Detergent Shaving cream
• • Deodorant
FMCG distributors
Disinfectant
• Sanitiser • Talcum powder
• Liquid hand wash • Hair oil
Food grains • Cooking oil Cosmetics • Hair colour
• Ghee • Kajal
• Flour • Face cream
Hot beverages • Tea
• Coffee
Cold beverages • Aerated drinks
• Chocolate and malt drinks • Energy drinks
• Immunity-booster drinks • Ice tea
• Confectionery sales declined significantly, with the eastern and northern regions reporting sharper decline
• Sales of homecare products, particularly sanitisers, hand wash and soaps, increased primarily in red zones
• Sharp fall in sales of high-margin products, such as cosmetics
• Decline in demand for aerated and energy drinks despite peak summer season
59
Distributors operating in red zones faced manpower
availability issues, rising employee cost
Distributors operating in red and orange zones Distributors in south zone faced greater challenge
Auto dealers
faced manpower availability issues in manpower availability

FMCG distributors
36% 55% 61%

54% 50% 50% 62%
Green Orange Red
North East West South
Distributors in the south zone are facing manpower shortage, owing

Measures adopted to overcome manpower availability constraints
to higher percentage of migrant workforce, and challenges because of
increased absenteeism Hiring temporary staff
Higher salary paid to existing staff

Measures adopted by distributors to overcome manpower shortage is
expected to increase employee costs by ~3% Operations in multiple shifts
 Loaders and unloaders are being paid ~50% additional charges
 Overtime allowance and higher salary payments Additional facilities and services to employees as part of safety measures

60
Distributors unlikely to face near-term liquidity issues
Higher proportion of small enterprises facing liquidity Higher proportion of distributors in the north zone facing
Auto dealers
issues have availed of moratorium liquidity issues have availed of moratorium

69%
41%
38%
25%
19%

7%
FMCG distributors
13% 52% 62% 38% 34% 48%
Micro Small North East West South
Facing liquidity issue Availed loan moratorium Facing liquidity issue Availed loan moratorium
Most distributors plan to use own funds to manage Measures adopted to overcome liquidity issue
working capital gap in near term
Increase in cash-based or advance payment transactions
Funding from promoters and family
48%
members
Reduction in credit period to retailers
Use existing funds in business 34%
Enhancement of working capital limits 13%

Avail extension of credit period from
5%
principal

61
Most distributors expect sales to decline this fiscal, but those
operating in red and orange zones better off than others
Region-wise sales growth expectation
Auto dealers
Scale of operation - sales growth
20%
37% 32%
47% 43% 43%
13%

9%
25%
FMCG distributors
24% 23%
38% 67%
59%
38% 33% 34%
15%
North East West South Micro Small
• Most distributors in the western region expect sales to increase on-year this fiscal because of more red and orange zones in the region, which
has seen a surge in demand
• Distributors operating in the red and orange zones also more optimistic on sales growth in fiscal 2022 compared with those in the green zone
because of sustained higher demand
- However, distributors in the red zone expect higher impact on cost owing to supply-side constraints
• Micro enterprises expect better sales growth in fiscal 2021 compared with small enterprises

62
63
Banks
NBFCs
Lender’s view

Credit growth sentiment weak, more so for NBFCs
Impact of Covid-19 pandemic on credit growth in MSME sector
Disbursements in April-May 2020 Expected normalcy in disbursements Credit growth outlook for FY21*
Banks < 30% of normal level In 3-6 months Up to 5% decline

NBFCs <10% of normal level In 6-9 months 5–10% decline
* Highly dependent on MSMEs resuming operations and easing of restrictions. Over 30% lenders either refused to comment or expressed difficulty in predicting
Drivers for credit growth Challenges for credit growth
Incremental working capital requirement Lack of demand for new/capex funding requirement
Pent-up demand in local markets and for local brands Low recovery sentiment in unorganised sectors
Emergency Credit Line Guarantee Scheme Lack of client connect owing to lockdown
Untapped rural/semi-urban areas, sectors with

non-discretionary demand Lack of demand or revenue growth visibility
Relatively safer short-term trade/supply chain funding Severely impacted cash flows of MSMEs
64
Business sentiment muted, short-term opportunities few
Sectors least vulnerable to Sectors most vulnerable to
deterioration in credit profile deterioration in credit profile
FMCG, food products, hospitals, Automobiles, construction, gems and

pharmaceuticals, telecom jewellery, hospitality, textiles, tourism

Long-term impact on performance of MSMEs
 15-20% of MSMEs may not be able to survive the economic slowdown
 Micro units across sectors to be impacted the most
 MSME definition change to bring more players into the category, resulting in smaller ones receiving less benefits
 Sectors with high dependence on migrant labour to be severely impacted
Short-term opportunities for MSMEs

 Average sales volume at neighbourhood groceries/ pharmacies has increased dramatically
 Shift in business model: Producing masks/ hand sanitisers/ disinfectants, dealing in thermal screening equipment, etc. Definition of essentials is
undergoing a change
 Digital-oriented education services, selling via online platforms through digital transactions has increased
65
Partnering with MSMEs to tide over challenges
Strong connect with Emerging trends in strategies
existing borrowers to
gauge impact and adopted by lenders
create awareness of
schemes
• Portfolio assessment to assign risks – by geography,
Addition of Lending
product and customer, sector, and labour

Covid-19 scorecard selectively; high-
to measure risk sectors composition
resilience avoided
To ensure • Credit assessment model to include statutorily filed
credit flow and data, such as Goods and Services Tax, Employees’
maintain asset Provident Fund returns
quality Relooking credit
Sharper focus on assessment model
cash-flow to change • Digital lending and connect. Personal site visits via
generation ability weightages on video interface
than on past existing factors,
performance and adding new
• Emphasis on promoter’s access to capital (liquid net
factors
worth), personal savings, ability to raise funds in
Adopting cash flow-
emergency
based lending
66
Mixed voices from the ground; challenges expected to continue
Measures by the government and the Views of lenders on:

Reserve Bank of India to improve lending to
Coverage (volume) Credit growth Asset quality- FY21
MSMEs to tide over the pandemic

Loan moratorium
Highly favourable Slightly favourable Neutral
“Despite reduction in repo rates, NBFCs do

“This is the need of the hour. Moratorium on
not expect any improvement in cost of
loans and collateral-free loans offer big
funds, as transmission of rate reduction has
relief to MSMEs to manage cash flows”
not happened significantly”
“On credit guarantee scheme, the system

“Nothing much for demand revival. Some
will not be able to provide Rs 3 lakh crore of
sort of direct benefit transfer to manage
loans before October. So, we will require an
employee cost/rent would have helped”
extension”
67
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The Epicentre of An Existential Crisis

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The Epicentre of An Existential Crisis

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The epicentre of an existential crisis

© 2020 CRISIL Ltd. All rights reserved.

© 2020 CRISIL Ltd. All rights reserved.

Abbas Master Namrata Bhavsar Pooja Karan

© 2020 CRISIL Ltd. All rights reserved.

● Credit growth to MSMEs, an under-penetrated sector, will decelerate this fiscal

● Asset quality pressures to rise despite moratorium, because of slack demand

© 2020 CRISIL Ltd. All rights reserved.

Interest service coverage ratio (ISCR) to drop

© 2020 CRISIL Ltd. All rights reserved.

Note: Micro: revenue of < Rs 5 crore and investment < Rs 1 crore

Linkage to global economy

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Linkage to domestic economy

Revenue CAGR (FY17-20) 5% 1% (2)% (4)% (4)%

Revenue growth (FY21) (16-18)% (40-50)% (28-30)% (33-35)% (13-15)%

Ebitda margin (FY17-20) 7-7.5% 8-9% 6-7% 3.5-4% 3.5-4%

Ebitda margin (FY21) 4-5% 2-4% 2-3% 2-2.5% 0-0.5%

© 2020 CRISIL Ltd. All rights reserved.

Heavy engineering, textiles: furnishing, steel re-

Hospitals; pharma: bulk drugs;

Minimal impact Moderate impact High impact

Vulnerability of credit profile

Gems and jewellery 50 B2B and B2C High 165-170

Textiles (RMG) 25 Largely B2B Low 120-125

© 2020 CRISIL Ltd. All rights reserved.

Sea food 30 B2B and B2C Low 85-90

Poultry 0 B2B and B2C Low 85-90

Dairy 60-65% B2C

Auto components 5-10 B2B Moderate 96-98

Packaging and printing 0 B2B Low 100-105

Packaged foods <5 Largely B2C Low 90-95

Transport operators 0 B2B Low 85-90

Rice milling 20 B2C Low 100-110

High negative working Moderate negative Low negative working

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86% 82% 79% 80%

FY19 FY20E FY21E

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Infra (exc Housing Auto Wholesale Microfinance MSME Gold CE CD

Wholesale finance 1.0% 2.0% 4.0%

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MSME finance 2.7% 3.3% 4.2%

Auto finance 6.6% 5.2% 5.6%

Infrastructure finance 8.2% 8.4% 8.6%

Housing finance 0.5% 0.7% 0.9%

Gold finance 3.4% 2.1% 2.3%

Traditional MSME Fintech

Others 7% Sourcing and High probability of error Auto-populated using

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Traditional parameters excel Traditional & non-traditional

Documentation, loan Difficult to track due to Document uploaded and

Via cheque increasing Once approved, instant

“Note: Based on disbursements as of fiscal 2019”

Source: CRISIL Research

Rs 0-100 70% 6% 8% 5-6 months

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Rs 250-1,000 11% 15% 16% 8-9 months

4% 29% 34% 8-9 months

<1% 10-11 months

42,000 companies Rs 130 lakh crore Rs 11 lakh crore 0.7

 Support MSME  Modus operandi and

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