MSME & START-U TIN Teese Rea Noe SCC SLé Mission Statement "The CMA professionals would ethically drive enterprise globally by creating value to stakeholders in the socio-economic context through competencies drawn from the integration of strategy, management and accounting.” About The Institute The institute of Cost Accountants of India is a statutory body set up under Act of Parliament in the year 1959. The institute as a part of its obligations, regulates the profession of Cost and Management Accountancy,enrolls students for its courses, provides coaching facilities to the students, oragnises professional development programmes for the members and undertakes research programmes in the field of Cost and Management Accountancy. The Institute pursues the vision of Cost competitiveness, cost management, efficient use of resources and structured approach to cost accounting as the key drivers of the profession. In today’s world, the profession of conventional accounting and auditing has taken a back seat and cost and management accountants are increasingly contributing towards the management of scarce resources apply strategic decisions. This has opened up further scope and tremendous opportunities for cost accountants in India and abroad. After an amendment passed by Parliament of India, ¢ Vision Statement “The institute of Cost Accountants of India would be the preferred source of resources and professionals for the financial leadership of enterprise globally.” the Institute is now renamed as "The Institute of Cost Accountants of India” from "The Institute of Cost and Works Accountants of India". This step is aimed towards synergising with the global management accounting bodies, sharing the best practices which will be useful to large number of trans-national Indian companies operating from India and abroad to remain competitive. With the current emphasis on management of resources , the specialized | knowledge of evaluating operating efficiency and strategic management the professionals are known as “Cost and Management Accountants (CMAs)”. The Institute is the 2nd largest Cost & Management Accounting body in the world and the largest in Asia , having approximately 5,00,000 students and 85,000 members all over the globe. The Institution headquartered at Kolkata operates through four regional councils at Kolkata, Dethi, Mumbai and Chennai and 114 Chapters situated at important cities in the country as well as 11 overseas Centres. It is under the administrative control of Ministry of Corporate Affairs, Government of India.X THE INSTITUTE OF cost 7 ACCOUNTANT: 3 OF iNDIA (Statutory Body under an Act of Parliament) TASK FORCE ON MSME & START-UP 2021-2022 CHAIRMAN eA CMA Chittaranjan Chattopadhyay MEMBERS CMA Ashwin G. Dalwadi CMA Debasish Mitra CMA H. Padmanabhan ws CMA (Dr.) KCh A VSN Murthy CMA Niranjan Mishra CMA B. M. Sharma, Past President CMA P. Udaya Shanker CMA R. Venkataramani CMA Jyotsana Rajpal CMA M. Pandurangan CMA B. M. Gupta CMA S. Ramesh (Co-opted) CMA Malhar Dalwadi (Co-opted) Dr. E.Vijaya (Co-opted) . CMA Pawan Jaiswal (Co-opted) PERMANENT INVITEES CMA P. Raju Iyer, President CMA Vijender Sharma, Vice-President \ SECRETARY a CMA Shubhro Michael Gomes DEPUTY SECRETARY Dr. Madhumita Sen GuptaCONTENTS sl. Page . me PARTICULARS a 1 _ Message by CMA P. Raju Iyer, President, a | The Institute of Cost Accountants of India | 2 Message by CMA Vijender Sharma, Vice President, 08 The Institute of Cost Accountants of India 3 Message by CMA Chittaranjan Chattopadhyay, it Chairman of Task Force on MSME & Start-up | 4 Editorial 12 ARTICLES Impact of CSR on SME IPOs performance in India & future of fundraising | of SMEs through Initial Coin Offering (ICOs) and Security Token Offerings 1B (STs) 6 Attaining Self-Reliance in Defence Manufacturing : Role of MSMEs 19 . 7 An overview of Institutional Support in The Life Cycle of an MSME 28 "8 MSME- The (Back) Bone Needing Calcium 28 9 MSMEs & The CMAs 31 . 10 Start-Up In India - Strategies & Funding Options 37 EXTRACTS FROM THE AIDE MEMOIRE ON LENDING TO MICRO, SMALL, MEDIUM ENTERPRISES SECTOR (INCLUDING RESTRUCTURING OF MSME CREDITS) | 12 ABriefon TReDS 43 | | 13. A Bird-eye view on GeM 47 14 Performance and Credit Rating Scheme for Micro & Small Enterprises 49sl. Page a PARTICULARS Niet RECENT (SELECTED) CIRCULARS & PRESS RELEASE RELATED TO MSMES 15 RBI Master Direction on Lending to MSME Sector 53 16 Press Releses on Working Capital 54 17 Press Release on Procurement of Goods & Services 55 | 18 Press Release on Bailout Package 56 INITIATIVES OF THE TASK FORCE & START-UP, REGIONAL CHAPTER AND ICAI 19 Recent Activities of the Task Force on MSME & Start-up 87 20 Seminar on MSMES & Operational Issues, : 58 1 Comments/ Suggestions of The Institute of Cost Accountants of India on Draft 5 National Policy for Micro, Small and Medium Enterprises (MSME) in India 22 Webinars/Webints conducted by the Task Force on MSME & Start-up 64 23 Snapshots 65_MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 We Institute of Co Acne The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 President's Message releasing the MSME and Start-Up Bulletin. | would like to acknowledge the extraordinary work achieved by the Task Force on MSME and Start-Up and the efforts undertaken in publishing this Bulletin. | congratulate CMA Chittaranjan Chattopadhyay, Chairman, Task Force on MSME and Start-Up and all other members of the Task Force for an excellent initiative for the benefit of stakeholders at large. The MSME and Start-Up sector plays an important role in the modern economic world, The MSME and Start-Up sector in India is one of the most booming sectors of the Indian economy. | am delighted to know that the Task Force on MSME and Start-Up of the Institute is The publication is intended to enrich the readers about the MSME and Start-Up sector of our economy by providing current updates and value added articles. | hope the readers will find this publication of immense benefit. With the objective to enrich the readers about the various issues and recent developments in the MSME sector, the dedicated Task Force on MSME and Start-Up of the Institute has been relentlessly working and has been putting in its best efforts to continuously sharpen our axe of knowledge. The MSME and Start-Up Bulletin has proved to be a comprehensive guide to enrich the readers about the MSME and Start-Up sector of our economy by providing current updates and value added articles from the experts. My best wishes to Task Force on MSME and Start-Up of the Institute for their future endeavours. Warm regards, (CMAP. Raju yer) President The Institute of Cost Accountants of India The Institute of Cost Accountants of India 7___MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Vice President’s Message on MSME and Start-up in the month of June, 2022. | am confident that the issue wil evoke widespread interest amongst the MSME community and that the Bulletin would provide food for thought to our members to ‘delve in various issues in the MSME and Start- up Sector. | wish to express my sincere thanks to CMA P.Raju lyer, President of the Institute for his guidance and support. | am happy to note that the Task Force on MSME and Start-up is bringing out a Bulletin ! compliment CMA Chittaranjan Chattopadhyay, Chairman, Task Force on MSME and Start- up and all the members of the Task Force for the efforts in bringing out this “MSME and Start-up Bulletin” and hope that Task Force on MSME and Start-up would bring out various other publications for our members in coming days. | would like to thank our advisors, resource persons and the officials who have contributed towards materializing this Bulletin. The Task Force on MSME and Start-up will continue to strive ahead in providing impetus to the growth and development of the MSME and Start-up Sector as well as our CMA profession. 'hope that the members and students will be benefitted with the various future endeavours undertaken by the Task Force on MSME and Start-up. With warm regards, (CMA Vijender Sharma) Vice President The Institute of Cost Accountants of India 8 The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Chairman's Message he Micro, Smalland Medium Enterprises (MSME)isa highly vibrant and dynamic sector of the Indian economy with over 6 crores units, providing employment to 11 crores+ people (just next to Agriculture), having 29% share of GDP and 50% of country’s total exports. The MSME sector contributes ina significant way to the growth of Indian economy across the range of production system, employment generation national output exports etc. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. The Government of India has designed various policies for the growth of MSMEs in the country. The Ministry of MSME runs numerous schemes targeted at providing credit and financial assistances, skill development training, infrastructure development, marketing _ assistance, technological and quality upgradation and other services for MSMEs across the country. The Institute of Cost Accountants of India The Govt. has identified to work on 5 key areas where the Indian Industry specially the MSME should head towards. The key areas include: Industry 4.0, including elements like artificial intelligence, 3D and virtual reality with the objective of making India a global leader in Industry 4.0 + export promotion and _— import reduction, including how to focus on the key manufacturing areas, how to improve our quality standards, designs and technology, packaging with the objective to see that India becomes a global manufacturing hub anda leading exporter in the world + re-engineer vertically and horizontally the existing cluster schemes so that they are able to assist the grass-root and the micro-level enterprises as well as the high-end enterprises focus on to integrate the technology centres + explore interventions to align various modernisation schemes like ZED (zerodefect and zero effect) and LEAN (for manufacturing competitiveness), as well as other schemes related to design, intellectual property rights and marketing scheme. The Covid-19 pandemic affected the entire country’s economy, with the MSME sector being the worst hit. The sector suffered the most in ensuring business continuity, challenged by severe liquidity crunch and dipping demand. Amidst the crisis, it’s the government's consideration for the stressed sector that has provided much impetus for the MSMEs. The government is already reviving the economy by promoting indigenous manufacturing through various incentive schemes. One of the key schemes is PLI Scheme which is attracting global players to set up manufacturing units in India to become an important part of the supply chain system. banks were exempted to maintain cash reserve ratio for the loans disbursed from January 1 to October 31 2021 to first time MSME borrowers. Furthermore, RBI has also allowed Non-Banking Financial Companies (NBFCs) to avail bank funding under Targeted Long Term Repo Operations (TLTRO) to promote incremental lending and push revival of stressed sectors. Under the scheme, NBFCs will be able to provide a credit lifeline to financially drying MSMEs. these measures will helped make funds more readily available for MSMEs. The Union Budget 2021-2022 brought relief to the capitalstarved MSMEs, with the government infusing Rs 15,700 crore for the sector. The decision to incentivize the incorporation of One Person Companies (OPCs) in the budget will feed the MSME ecosystem. To push for faster resolution of cases, the government has sought to strengthen NCLT framework while announcing the introduction of alternate methods of debt resolution, such as via 10 MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 e-courts and special framework for MSMEs. The government had already initiated numerous measures under Atmanirbhar Bharat Abhiyan. The measures include Rs 20,000 crore subordinate debt for MSMEs and Rs 50,000 crore equity infusion through MSME funds of funds. The rationalization of taxes and duties (for various products from steel and alloys to garments and leather) favours domestic manufacturers and will further boost the sector to support the slogan of vocal for local to global. The opportunities available in the form of government financing, restructuring of their loans, availment of rehabilitation packages by RBI government or alternative business ideas must be used by MSMEs optimally. Here arises the need for Cost and Management Accountants (CMAs). The role of CMAs in helping the MSMEs navigate through the obstacles of high fixed cost, low credit worthiness, risk of bankruptcy etc. In the new era of disruptive technologies, Indian MSME are in a paradoxical situation as they want to improve the quality of the products/services to ensure customer delight. It is evident that in the quest for excellence, MSME must adopt better quality enhancement and sustainment strategies to take advantage of the new era, which in turn will ensure their survival in the global market. Cost and Management Accounting offers a spectrum of tools and techniques for performance management and to ensure competitiveness with the help of MBO, Balanced Scorecard, HR Cost accounting method. Effective deployment of the management accounting techniques will assure the MSMEs with reduced operational cost, decreased process variability, enhanced business competitiveness and enhanced customer satisfaction. The The Institute of Cost Accountants of India[MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 : Q intricate methods of Target Costing, process costing and standard costing can be best applied by the CMAs which would help the MSME to prosper for future. When companies talk about cost management, their focus typically is on slashing. their current expenses. But in today’s digital era, cost management has taken ona new hue. It providesastrategic lever to generatesavings that can be invested in driving growth. Using cost management as a strategic lever, as opposed to a defensive response, opens up new opportunities. CMAs are experts in both financial and non-financial information. They can make use of relevant financial information from the statutory financial accounting records and at the’ same time collect non-financial information and can work towards improvement of performance with increased profits benefitting the entire organisation. In view of the significance of the MSME sector in the Indian economy the Banking, Financial Services and Insurance (BFS!) Board of the Institute of Cost Accountants of India felt it necessary to help the MSME during the’ period of Covidig pandemic. The Task Force on MSME & Start-up conducted survey amongst the members of our Institute and based on the feedback of esteemed members, we submitted suggestions for rejuvenation of MSME Sectors post COVID-19 to the MSME Ministry, Government of India including extension of rehabilitation measures. And it is a matter of encouragement and satisfaction that many of the suggestions were endorsed by the Government in various forms. The Institute of Cost Accountants of India has brought out acomprehensive Hand Book on MSME titled Aide Memorie on Lending to Micro Small & Medium Enterprises Sector (including Restructuring of MSME Credit) The Institute of Cost Accountants of India which covers every aspects of MSME Start Ups and also for the existing Units. It delves on Registration Process to Restructuring of Loans availed from the Financial Institutions including important areas like TReDs, Listing with NSE, Global Tender System, Business Continuity Plan, MSMEs Strategy for survivability etc. This comprehensive book had been widely accepted by the banking and MSME fraternity. The Institute felt need of having a dedicated task force on MSME & Start-ups with the objective of extending support forimproved performance management of MSME through various management accounting techniques and tools. MSME help desk have been set up in various Chapters of the Institute across India to assist them with various services voluntarily. To spread the awareness of various schemes in MSME, The Institute of Cost Accountants of India has dedicated the month of April as MSME month in the year 2020. Since then the Institute has been organising series of Webinars at National & International level. With warm regards wish you all a Successful entrepreneurial Year ahead. \ CMA Chittaranjan Chattopadhyay Chairman Task Force on MSME & Start-up The Institute of Cost Accountants of India un]P BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022, EDITORIAL ore than a quarter of India’s micro, small and medium enterprises (MSMEs) lost market share of over 3% due to the Covid-19 pandemic, and 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, CRISIL Research’ SME Report 2022 reveals. The report refers to an example and states that the pandemic-induced supply chain disruptions impacted small pesticides manufacturers more. On the other hand, large ones leveraged their global presence to procure raw materials, so could eat up a huge chunk of the SME pie: Surging input costs weighed heavy on sectors that operate in low-margi products and have limited pass-through. The report predicts that in the milieu, MSMEs should see revenue increase 9-11% this fiscal 10 1.25 times the fiscal 2020 level, though EBITDA margin is likely to remain range-bound at 5-5.5%. 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% increase in revenue and EBITDA margin of 19-20%. Facilitating the transformation of an underwhelming performance into an overwhelming performance is the core attribute of the CMA fraternity. The MSME is calling! The CMAs are, certainly, equipped to visualise the needs of MSMEs in terms of innovative cost and return management tools & techniques and to enable the MSMEs to bounce back with rigour and vigour. Given the context, here goes your MSME Startup Bulletin that is intended to broaden your sphere of proficiency from quarter to quarter. 2 The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 IMPACT OF CSR ON SME IPOS PERFORMANCE IN INDIA & FUTURE ; ~ OF FUNDRAISING OF SMES THROUGH INITIAL COIN OFFERING (ICOS) AND SECURITY TOKEN OFFERINGS (STOS) Sarojkant Singh iso PhD research scholar (Management) at ICFAI University Jharkhand. He isthe Group Head “strategy &Risk in McNally Bharat Engineering Co. Ltd He has 19+ years of experience in handling large scale industrial projects and formulating business strategy. He has executed Grid connected 100MW solar project, Ash handling projects, Coal Handling projects and Stee! 5 projects where he has handled portfolios of projects with a mix of green energy and traditional oe energy for businesses. He also strategizes environment sector products like centrifuges, = thickeners etc. where he has initiatives for sustainability and climate change. He has worked in L&T, Siemens, EWB Kft and Furnace Fabrica prior to his present role. EE ele er inter lr rihan Schoo! of Business, holds a een ncvanced fechinal Rariiing from University of sheffield, MA economics from Anamalai University, MBA in Finance from Pondichery University and a BE. in Mechanical Engineering from Indian Institute of Engineering Science ond Technology (Shibpur) ‘Management Accountant (ICAI Journal, a UGC approved Journal) and other Journals and 3 Raja Ghosh (MCOM, FCMA, ACS, CFA, PGDM, MFA) holds presently Professional position of Additional General Manager (F&A) WBSEDCL (A State PSU in Power Sector). The Main Power Discom in West Bengal. He is also a Doctoral Research Scholar, ICFAI University, Jharkhand, Ranchi, He has written (Eight) articles, in Professional Journals like the regular Trainer /Faculty in WBSEDCL/ Professional institutes in the last 15 years. Raja Ghosh Abstract ‘The paper aims to review the present SME IPOs performance listed in MSME exchanges of NSE & BSE and the impact of CSR activities in these companies. Literature survey on CSR and its influence on social : trust is done. We examine how social trust impacts the underpricing of such IPOs. New innovative crowd sourcing avenues are evolving in the Indian markets. A systematic literature review is conducted and the future prospects of ICOs (Initial Coin Offerings) and STOs (Security Token Offerings) for fund raising is studied with examples from other countries. The authors then provide a prospective on how CSR activities by companies will impact such fund raisings in the days to come. In this paper we study 26 company IPOs and their underpricing and the CSR activity disclosures in their prospectus. The results indicate that CSR activities impact the underpricing of the SME IPOs. Keywords: Corporate social responsibility, fundraising, initial public offering, initial coin offering, security token offering, trust The Institute of Cost Accountants of India 3BIntroduction To open routes for SMEs the Govt. of India allowed NSE and BSE to open exchanges where SME’s could elit and their stocks could be publically traded. These are BSE SME and NSE Emerge (IIFL, 2021). This, took time but in this year 2022, SMEs have raised a mammoth Rs. 900 crores (Soni, 2022). Last year some of them gave 100% returns (Roy, 2021). The regulations for a SME IPO is simplified compared to a mainboard IPO on NSE or BSE. SME. IPOs released after 2021 are studied to check how the CSR activities impact the investor decisions. The companies are randomly chosen for the testing. The avenues for the SMEs is not just limited to Angel Investors and IPOs, other crowdfunding models are emerging. We will investigate the Initial Coin Offerings and Security Token Offerings in this paper. Govt. policy like automatic FDI route, MSME cluster development, Credit guarantee schemes, etc., have provided avenues for SMEs. The start-up ecosystems are emerging and another avenue for the MSMEs to raise funds where embedded finance is evolving. However, the less evolved area is that of the DApps (distributed applications ) and blockchain, We analyse the prospects in this sector and will this be the future of fundraising. Since 2017 many start-ups have raised funds through ICOs despite the ambiguity of government regulations (Bansal, 2017). WandX, Bangalore based start-up raised USD 4 Million through their ICO. Other names were Drivezy, Nucleus Vision, BitIndia, Casha. The ICOs and STOs are the new way “of crowdsourcing for start-ups (Kozhanova, 2020). Initial Coin Offering (ICO) and Security Token Offerings (STO) It is simply a way by which instead of equity the founders provide digital tokens to investors to raise funds. These digital assets may be used in future to take services from the company or exchanged for curreney. The sole purpose of the ICOs were to reduce trading costs and streamline trading process. This was overshadowed by scams and thus ‘trust factor" was taken away (Rangwala, 2019).With the threats SEC is studying this sector for regulations. The evolution of new securities Security Token Offerings (STO) happened thus in 2019. These security tokens are a better regulated form of digital tokens. The STOs are backed by physical assets like stocks, metal and bonds. There are many advantages of STOs. They suit regulatory requirements, they provide fractional ownership i.e., multiple owners can buy a single asset, they reduce costs by removing middlemen and they provide better liquidity u Mw. MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Literature review (Ashish Sharma, 2018) study SME financing and success of companies post IPO, (Dr. Makarand S. Wazal, 2020) study the IPO performance in SME Exchanges vis a vis the main board. The author highlight issues of transparency and lesser subscriptions compared to Main Board IPOs. (Arora & Singh, 2020) examine the factors for oversubscription of SME IPOs and conclude that firm size, underpricing, ‘underwriter reputation are important factors while issue price and listing delays are some of the downturns, (Arora & Singh, 2021)9 and 12 months share returns of Indian SME IPOs is studied using event time methodologies, i.e. buy and hold returns, cumulative abnormal returns and wealth relatives on a sample of 375 SME IPOs issued during February 2012 to May 2018. Additionally, ordinary least square regression has been used to investigate the determinants of long- run performance of SME IPOs on a reduced sample of 104 because of non-availability of price observations. Findings The findings reveal that Indian SME IPOs, exhibit long-run overperformance contradicting the international evidences of underperformance, and this overperformance is significantly evident using buy and hold abnormal return (BHAR show SME IPOs are performing well and exhibit buy and hold abnormal returns (BHAR). In their exploratory study on sustainability and blockchain (ayawardhana & Colombage, 2020) discuss the two pillars of sustainability, i.e., responsibility and governance. The authors cite examples of CSR activities to achieve these objectives and show how blockchain can fill the gaps. (Elise Alfieri, 2020) discuss how cryptocurrency and sustainability are linked. They break down the social pillar into three factors of miners" incentive, community’s inclusion and user privacy. The results show that inclusion and miners’ wage premiums are irrelevant to coins’ valuation and remain unaccounted for by market participants. Furthermore, privacy is penalised by the market. (Gangi et al., 2020) show that firms with good corporate governance do CSR, by studying 51 countries and 2480 firms. They also conclude that CSR impacts negatively the firms risk of financial distress. (Francesco Bollazzi, 2017) show that the commitment of business in terms of ESG and CSR impacts the performance of the SME IPOs, in particular regarding underpricing and ROE in Italian stock exchange. (Ghalke et al., 2018) show that SME IPOs company give better focus to earnings management than Main Board IPOs in India.(Hou et al., 2020) investigate the how corporate social responsibility (CSR) activities of listed enterprises on SME Borad in China is impacted by effects of stakeholder protection The Insti fe of Cost Accountants of India| MSME & START-UP BULLETIN, VOLUME 1, ISSUE and public trust, The conclude that stakeholder protection has a significantly positive impact on SME CSR activities.(Agustina & Clara, 2021) show that CSR impacts the underpricing or overpricing of SME POs in Indonesia. (Li et al., 2019) investigate trust and IPO underpricing of firms in China and show that firms in high social trust have less underpricing and also that trust is more prominent in asymmetric information environment The game change ICO and STO (Mazzorana-Kremer, 2019) study ICO and STOs as analternative to SME IPOs. The research has shows that the blockchain technology offers a unique opportunity to raise equity more efficiently. The success of STOs will be dependent on factors like quality of their issuers . specialised platforms, and interoperability across platforms. (Hakizimana, 2020) in his thesis shows that STOs will be an evolutionary phase for fundraising and the financial market will become 4 hybrid where the traditional instruments and tokenised securities co-exist.(Lambert et al., 2021) shows that STOs will be the future fundraising and the challenges they face fn 1, AUGUST 2022 wv today and coming days. He concludes that NDS or native digital securities will be the game changer for raising funds and governance. Research gap and data collection We find that there is little research done in the correlation between CSR disclosures and activities undertaken by firms in SME and their impact if these firms go for an IPO. There are research works in this area in Indonesia, Italy, etc., but none that authors found in India. The authors therefore took firms which went for IPO in India and collected the CSR data provided in their investment portfolio. We found literature on success factors of tokens and digital coin offerings but none where CSR or ESG was factor. Data of firms The data from IPO listings and NSE prospectus has been taken. 26 firms have been studies and their disclosures in the prospectus for CSR activities haven been taken. Furthermore we examine the underpricing of these SME stocks on the day of listing, Antony Waste 2021-315, 436 38% 0.10% — Cashissue unspent s.1 lakh MispectorsFood | 2020. 288 «501-78 2% Nothing unspent Company has losses but spent on Burger king 200 60 ns 9% 0% CSR through Avasara Institute in : Education Net PixShorts 2020-30 301 | 033% 0% Did not do any spending Gland Pharma 20201500 = O13 0% Made profit but no CsR information ShineFashions = 2020 40 405 0% Buches 2000 8s mom aR malig ns 2008, minor AtalRealtech 2020-72 702. 3% “Ow Marginal profit Mazagaon Dock 2020 145. 216 49% 2% Overspent chemcon 2020 340730: 5% 2% Nothing unspent Happiest Minds 2020166 511% 2% Nothing unspent Mindspace = re 300 im 2% Nothing unspent ves Bank 2 23 | 3% 1%: R5.67000000 unspent Fabino Life 36 385 me o% Marginal profit. CMSinfosystems 2021 216 21S 2% Nothing unspent Medplis = WS 2a 2% Nothing unspent 15ao wv MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Metro Brands 2021-500 436 = 13% 1% ——_-Rs.19000000 unspent» Tega 2021453 753 66% % ‘Nothing unspent (Pagan FOR 900 TOR Mme ‘Nykaa 2021-1125 2001 78% 2% "Nothing unspent Fino Payments 2021 S77 SHB 8% 0% Maman POR BB Ea NMANgERRPEM Marutiinterior 202255, 685 25% 0% Adina ROR BON Nating ape SuyogGurbaxine 2021 45, 455 1%, 0% Data Analysis There is an overall positive impact on firms which do CSR as shown from the trend below: Under Pricing The data shows that firms which spend 2% of the | unknown, stipulated CSR are better valued than those who don’t spend or spend less than that stipulated. On day on For those firms which don’t do any CSR spending listing the IPO price is upto 120% higher for the | We observe that most are underpriced below 20% and those who spend all the CSR. Except for one case of some overpriced. Except Burger King. On a closer Adani Wilmar all are above the listing price. Thus | €xamination we find that Burger King had losses in underpricing is quite high. Majority of the 26 firms their previous year and not required to do any CSR, in this category are underpriced more than 20%. On _ but still they supported an education initiative through examination we found Adani Wilmar did extensive | CSR. The stock was underpriced 80% . CSR activities and thus reason for this aberration is 16 The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 was Antony Waste which was an environmentally Of the 26, three companies had unspent CSR funds. friendly company and underpriced upto 38% We found that these were penalised by the investors and these sold upto 10% below listed price. Exception ‘50% 40% 30% = underpricing Findings Our findings indicate that SMEs which do CSR activities are positively impacted when they go for IPOs, There may be other factors which impact the Bibl * liography Ashish Sharma, P. G. (2018). SME Financing: TPO issue and Post-IPO analysis. Effulgence. SME IPOs, but since CSR spendings are related to Bansal, N. C. (2017). Economics times. profits in India by regulation this maybe a correlation Retrieved from https://economictimes. with profits. However, we do find that those which indiatimes. com/small-biz/startups/newsbuzz! made losses like Burger King but still spent in CSR was. startups-test-a-brand-new-crypto-currency-ico! impacted positively. The only aberration was Adani articleshow/61938744.cms?from=mdr Wilmar. The reason for their overpricing lies in other — factors that effect the SME IPO pricing than CSR. bes De Makarand (Sp azehy hs 9 (2020) Comparative analysis of Underpricing and Limitations and fitrthernescarch, Subscription of SME IPOs and Main Board IPOs. Our research is limited to SME listing after 2020. Sth International Conference on “Innovations in We have taken companies from various sectors and IT-and. Our Heritage. sectoral factors would play an important role in the social SME TPO pricing which was not studied. A further Elise Alfieri, Y. F. (2020). Social Features and study with a bigger dataset would be a scope of future ne ceaa ena research. A regression analysis of other factors and @ Francesco Bollazzi, G. R. (2017). IPO and CSR: Ne ea See i ao An Analysis on Last Performance in Italian Stock Exchange. China-USA Business Review. Conclusion i Hakizimana, J. [. (2020). Security Token Offerin Our research findings show that CSR activities (STO): A Pe Ea in global pee impacts SMEs when they go for fund raising. The markets. How Blockchain technology might ful] OF fandralsing Qoyalj be pouarked py Alc Os}and disrupt the traditional Initial Public Offering? STOs, and it will be important to see how ESG and Lourain Schoo! of Maoagemene. CSR activities of the ICO and STO offering firms will impact their acceptability. The offering agency is a [IFL. (2021, August 31). Retrieved from https:// critical factor in success of the ICO as provided by www. indiainfoline.com/article/knowledge- evidence in literature and hence the steps they take in centre-ipo-general/sme-ipo-what-is-sme-ipo- ESG and CSR will be critical for SMEs using their india-infoline-121083100621_1 html platform to raise funds. Kozhanova, A. V. (2020). ICO and STO as The Institute of Cost Accountants of India 718 modern tools for Crowdfunding Startups. Vestnik Universiteta. , 41-48. Mazzorana-Kremer, F. (2019). Blockchai Based Equity and STOs: Towards a Liquid Market for SME Financing? . Theoretical Economic Letters. Rangwala, A. (2019). Retrieved from https:// www. wipro.com/blogs/abdemanaf-rangwala/ security-token-offerings-what-does-it-offer/ Roy, K. S. (2021, September). SME IPOs ack @ punch on the returns front. Retrieved MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 from https://www.thehindubusinessline.com/ portfolio/sme-ipos-pack-a-punch-on-the-returns- front/article36671967.ece Soni, S. (2022, March 28). SMEs raised over Rs 900 crore through IPOs in FY22, up nearly 4X from previous year. Retrieved from Financiai Express: https://www.financialexpress.com/ industry/sme/msme-fin-smes-raised-over-rs- 900-crore-through-ipos-in-fy22-up-nearly-4x- from-previous-year/2473929/MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 ATTAINING SELF-RELIANCE i) DEFENCE MANU De ROLE OF MSMEs Dr. Manpreet Kaur Associate Professor, SOIL Schoo! of Business Design, Gurugram. Indian defence forces is one of the largest forces across the globe. The major challenge for the Indian defence industry is to equip such a large force with modern technology and equipment. Though India relies largely on imports of defence equipment, but the recent reforms and initiatives of the government facilitated development of defence capabilities indigenously. As a result, the contribution of private sector in defence manufacturing has grown considerably. MSME by virtue of their presence in Tier-II and III within the supply chain, can become important force multiplier to defence manufacturing. This article discusses the role of MSME in defence, the initiative taken by government to promote MSME in defence, the current challenges faced by MSME, pre-requisites to become defence MSME followed by the way forward. The Ins itute of Cost Accountants of India Dr. PMalarvizhi Professor, SOIL School of Business Design, Gurugram I. Introduction ‘The introduction of Micro, Small and Medium Enterprises (MSME) Development Act, 2006 marked the beginning of the era for promotion of domestic manufacturing and service industries. After enactment of this act, Indian government has supported MSME with various schemes to facilitate their access to funds, modern technology and expansion through contracts. MSME contribute significantly to the GDP of India and promote nation's growth by providing employment opportunities to lakhs of unskilled and semi-skilled individuals. In quantitative terms, MSME contribute almost 30% to India’s GDP and 50% to total exports. Further, about one-third of the manufacturing output of India is contributed by MSME making them key drivers of long-term sustainable growth of the 19@ country. MSME contribute to almost every sector of the economy. Defence sector is no exception. India ranks among the top 10 countries in terms of military expenditure. Interestingly, around 60% of the defence procurements are imported. In order to make India self-reliant, government launched Aatmanirbhar Bharat Abhiyan mission in May 2020. Indian government has announced “liberalisation of defence production” thereby encouraging private sector participation in defence manufacturing ecosystem. Several policy initiatives are spanned out in the union budget 2022 such as “Make in India Programme” for promotion of MSMEs in defence sector in order to make India self - reliant in the defence manufacturing. Initially, Defence being the sensitive and critical sector for the economy, procurements were restricted within government jurisdiction coupled with the inability of private sector to produce quality defence products. The manufacturing of defence products was done largely through backward integration in Ordinance Factories, Defence PSUs through feeder factories and captive units, The contribution of private sector was restricted primarily to sourcing of parts and components. In the year 2001, defence production was opened for private sector through 100% equity participation and 26% foreign participation with licensing restrictions. Since then, there has been continuous amendments in the Defence Procurement Procedures to boost widespread private sector participation, These progressive initiatives increased the private sector participation substantially. However, the potential of MSME still remained untapped. IL, Role of MSME in Defence Manufacturing Understanding the contribution made by MSME in the national growth, the “Make in India” initiative of the government encouraged participation of MSME in into defence manufacturing. Indian government aims to achieve 70% self-reliance in defence by 2027 thereby reducing dependence on defence imports. MSME can be construed as the untapped force multiplier for the defence sector. As per the data shared by MSME. minister Mr Nitin Gadkati, total MSME supplying to the defence public sector undertakings increased from 7591 in 2018 to 12,000 in the year 2021 Consequently, the value of procurement raised to 5464 crores in 2021 from 4843 crore in 2019. Ministry of Defence is expected to increase the number of MSME_ participation in defence to 16000 by 2024 From supply chain partners to DPSUs to discharging 20 MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 offset obligations, revenue procurement, designing & developing complete defence systems, MSME have come a long way. Department of Defence Production has notified a list of 127 items where the purchase preference is given to local suppliers meeting the Minimum Local Content (MIC) as prescribed for each item. 26 items out of this 127 are notified specifically to MSME and local suppliers. Recognising the contribution made by Indian private sector, Ministry of Defence made amendments 10 defence procurement procedures to incorporate new category “Make and Buy (Indian)”. MSME contribute more towards innovation through R & D in sectors such as aerospace and defence industry due to low scale of economies and higher knowledge. MSMEs can contribute to the following areas but not limited to aerospace: sub systems and accessories, ground equipment and tooling; Naval systems, subsystems and accessories; Land systems, subsystems and accessories; Capital goods; IT hardware and electronics; Casting, forging and metal works; R&D; Software, etc. II]. Initiatives/Scheme for promotion of MSME in Defence 1. Launching of Sirjan Portal in August 2020 accelerated the process of defence indigenisation The portal contains complete information on items that can be taken up for manufacturing by defence sector. Indian Air Force is leading on the portal by indigenising over 60000 lines of spares out of which 40000 lines of spares are consumed regularly which are sourced largely from MSME. Out of the total 12000, around 700 are registered directly with Indian Air Force. 2. Defence Acquisition Procedure (DAP) 2020 emphasise *Make Projects” to promote indigenisation of defence equipment through funding from government and industry. As per “Make projects’ scheme, projects amounting to over 100 crore/year are reserved for MSME and Uill date over 40% sanction orders are issued in favour of MSME. 3. To enhance cutting edge technology capability for defence systems, Technology Development Fund (TDF) has been set up to provide necessary grants to private sector, especially MSMEs. to facilitate their participation in defence manufacturing. 4, The government of Tamil Nadu and Uttar Pradesh has signed around 30 MoUs with MSMEs (total 80 MoUs signed) for their The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 We Defence Industrial Corridors. Special reservations for MSME in the Make procedures and supply to the defence. Setting up iDEX (Innovations for Defence Excellence) to foster innovation and technological development in Defence. and Aerospace paved way for start-ups, MSMEs, individual Innovators, R & D institutes and academia by providing funds and other support to carry out research and development having future potential for adoption. The recent amendments in the Defence Offset guidelines facilitated MSMEs as Indian Offset Partners (IOP) thereby integrating them in global supply chain. Department of Defence Production regularly conducts the outreach programmes in Tier- II and Tier III cities to spread awareness about export opportunities in defence manufacturing, Defence Investor Cell is constituted to address the issues and grievances of vendors at DPSUs, especially MSME vendors, Under Make-III, MSMEs can form Joint Venture with foreign Original Equipment Manufacturer (OEMs) to manufacture components, equipment or platforms not designed in India. IV.Challenges for MSME in Defence manufacturing ‘The Ministry of Defence rolled out various measures to support indigenisation of defence manufacturing. MSMEs are expected to play a vital role given the policy thrust, Yet India faces several challenges in its journey towards self-reliance, though manufacturing locally will fuel economic development in the long run, Due to factors mentioned below functioning of MSMEs in defence manufacturing are hindered: 1 5 Absence of proper documentation with MSME which, in turn, affect the quality of products. Lack of regularity of orders from defence forces. Non-availability of superior technology and ‘operation inefficiencies. Lack of understanding of Defence Procurement Process. Lot of legal formalities are involved such as The Institute of Cost Accountants of India n. 12, obtaining quality certifications and industrial licenses, Lack of technical know-how and expertise Lack of clear policy and organised handholding, Government needs to improve the competitiveness. of the MSMEs and enhance their role in defence manufacturing. Inability to access the international markets to become global supply chain partners. . Lack of funding facilities which is the perennial cause of sickness of MSME in general. High security requirements related to defence products add to the costs for MSMEs as the defence products are lethal in nature Quality Assurance and reliability are the key to defence production. There are stringent benchmarks related cost, quality and delivery. The major concern especially for MSMEs is to target zero defect in defence manufacturing V. Prerequisites for Defence MSME When a non-defence MSME ishes to enter in to defence manufacturing, it should identify the right opportunity, build the infrastructure and team, secure the initial order, get the required certifications to move up in the value chain. Making in India brings down the production costs and offers abundant opportunities. It is important to integrate small business into global supply chains for consolidation of benefits offered in government policy initiatives. Other than meeting the quality standards for the manufacture of defence products, MSMEs must comply with the following mandatory requirements: I 2. Registration of MSME as per MSME Act, 2006, A Company should be a registered Company to be eligible as Indian vendor under Defence Procurement Procedure (DPP) 2016. ISO Certifications required to ensure minimum standards of quality. For aerospace manufacturing, AS9100 quality certification is required. Additional security safeguards as specified by the government are required to be put in place for the Indian licensed defence companies. 2MSME & START 5. For manufacturing and testing of certain category of arms and ammunition, licenses are required under Industries (Development and Regulation) ‘Act, 1951 and Arms Act, 1959 The way forward The role of MSMEs in defence sector is practically a new concept for entrepreneurs. Government must create awareness about “Make in India” programme in defence, through seminars, events, conferences for MSMEs, in addition to various support schemes and programmes. This will increase the networking and business synergy opportunities through creation of MSME clusters. Additionally common facilities for design, testing and simulation should be established in MSME clusters, on a pay-per-use model. There is an urgent need to mentor non-defence MSME about the prospective market and business opportunities in India and abroad. Furthermore, to facilitate a level playing field for MSMEs, request for proposals should be» based on competitive bidding and not PSU nomination. The identification and notification of Raksha Udyog Ratnas (RURs) should be accelerated so that MSME. can register and subsequently become supply chain JP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 partners. In addition to the above, MSME should be facilitated to interact with foreign OEMs to encourage participation in the offset business industry. India is viewed as a global investment hub and obstacles faced can be addressed by the government for MSMEs to become more involved in defense manufacturing in future. References & hups://www.financialexpress.com/industry/ sme/msme-eodb-make-in-india-how-govt-is- turning-to-msmes-to-make-india-self-reliant-in- defence-manufacturing/2477821/ https://www.thebindubusinessline.com/ companies/msmes-queue-up-lo-support- defence-forces-indigenisation-programmes/ article64969560.ece https://pib. gov in/Pressreleaseshare. aspx?PRID= 1810448, https://psuwatch.com/ministry-of-defence-list- 26items-indian-local-manufacturer-msme The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 SUPPORT IN THE LIFE CYCLE OF AN MSME i ne 100, Introduction Micro, Small and Medium Enterprises (MSMEs) are recognised globally as the drivers of economic growth, employment generation, social development and innovation, This sector is the most apt means for the encashment of the demographic dividend of India for its all-round growth In India MSME sector delivers 9000 products & services. It has 63.34 million units contributing to 80% of total industrial units of the country. Out of this around 30% are in manufacturing sector and 70% in service sector. It provides employment to nearly 120 million Population of this country which constitutes around 60% of total employment. In this number rural India has share of about 51% and urban India contributes rest 49%. It is interesting to note that 97% of this employment is generated from micro units MSME sector contributes towards 40% of the GDP Which is targeted to increase upto 50% in next 2 years. The Institute of Cost Accountants of India CMA Jyotsna Rajpal is 0 Practicing Cost Accountant based in Nogpur with 3 decades of experience in more than 20 industries. She specialises in Systems development & implementation. She has special interest in Music, Meditation & Organic farming Out of this 20% comes from manufacturing & rest 80% is the contribution of service sector. Presently MSME sector is contributing around 48% of total Indian exports which is expected to go up to 60% in next 2 years. Looking at these magical figures, one can say that MSME is the back bone of the country 2.00. Magnificent MSME The industries which come under the purview of MSME are classified on the basis of capital investment and turnover, 99% of the total MSME units are micro units. They provide all small and big items of our daily need. Almost all essentials like Food Products, Dairy, Garments, Home furnishings, Khadi Handicraft, Utilities, Services, etc., except direct food grains are provided by these micro units. The investment limit for these units is Rs. one crore and ‘maximum turnover cap is 5 crores. If a unit crosses this Timit, it will switch to small enterprises. 23,‘Tl ve MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 2.02. Small Enterprises: Small enterprises cover like detergents, personal care, small equipment, fertilizers, etc. Means most of the items required for trade and profession fall under this category. The investment limit for this sector is Rs.10 crores and maximum turnover is Rs. 50 crores. 2.03. Medium Enterprises: Units with an investment of more than Rs.10 crores but less than Rs.50 crores and turnover of more than Rs.50 crores. but less than 250 crores fall under this category. Enterprises like Edible oils, Frozen foods, Paper, Textile, Distillery, Chemical, Pharmaceuticals, Glass, Leather, etc., pertain to medium enterprises. This list is inclusive not exhaustive. It can be concluded that anything and almost everything required to run a regular daily routine, is supplied by MSME sector. 3.00. MSME Life Cycle Life of an enterprise is similar to life of a human. being. Human life begins with conception, followed aeeaa espa ee dete by taking birth, growth, getting matured and then later decline starts. Similarly in case of an enterprise also, wwe have various stages like, ideation, evolution, growth & maturity. In human life deterioration of health is inevitable after a certain age but in case of MSME, depending upon the performance of the enterprise at maturity stage, 2 options are available. Either we take it for expansion or decline. Because life cycle curve cannot be in straight line. It will actually depend on the decisions we have taken in the course of business and the available support system, Looking at the potential of MSME. sector, Government of India has launched various schemes to be implemented through various national government agencies like MSME-DI, SIDBI, NABARD, NSIC, eic. These agencies support Micro Small & Medium Enterprises at various stages through their designated schemes & programmes. These include programmes for Entrepreneurial development, Credit support, Marketing support, Design support, technical up- ‘gradation, etc. Stage wise available schemes have been listed below: 08 am OO FOOOm RT OLED 454 This diagram shows that if a micro unit is successful, it gets upgraded into a small unit and then small unit will become medium scale enterprise, later on which can be converted into a large enterprise. The difference between these four categories is that of magnitude. So, if a micro unit is managed well it can emerge as a large enterprise in due course of time. Many success stories like Amul, Nirma, etc. are visible. 3.01. Ideation and Commencement: Ideation, this is the first & most important stage in an entrepreneurial journey. During this phase an entrepreneur requires support services related to availability of technology, finance, infrastructure, 24 machinery, raw material, utilities, statutory compliances, etc. Along with these support services an entrepreneur also needs to be created by inculeating basic entrepreneurial skills and mind set of an entrepreneur. This is more important especially in case of first-generation entrepreneurs. The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Government has launched various schemes; few are listed below: i, Entrepreneurial development programmes: to help entrepreneurs to grow and be ready to initiate the business. ii, National Manufacturing Competitiveness Programme (NMCP): to convert innovative ideas into technology oriented enterprise. Business incubation centres are setup to give initial product development support for the start-ups. Certain marketing exhibitions and trade fairs are also conducted for providing marketing information and opportunities to budding entrepreneurs. i fii, A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE) to provide skill set to start the business in rural areas and hand holding, {for a critical period to ensure sustainability 43.02. Evolution: Like in the life of human beings, initial 7 years are very crucial and formative for the development of a child, likewise, in the life of an enterprise, initial 2 -3 years are crucial and errors made at this stage continue to affect the whole life of the project. At this juncture all kind of supports are needed like Infrastructure support, Credit support, HRD support, & Marketing support. Maximum number of schemes are available for this phase. Udyam Registration is essential to take the benefit of government schemes. Few schemes are: 1, Infrastructure Support: Industrial development infrastructure corporations develop industrial estates and offer to the new and existing ventures i. Credit Support: Finance is the life blood for any ‘business and its availability decides the fate. Adequate, affordable & timely availability of funds is decisive in the growth of a business, Various schemes + Stand up India for women & marginalised group, + PM Employment Generation Programme for urban & rural youths, traditional artisans and marginalised groups, + PM Mudra Yojana for non-farm sector down trodden people, minimum assistance is Rs.50000 + Raw material ass tance The Institute of Cost Accountants of India x + Credit facilitation through banks + CGTMSE - Credit Guarantee Fund Trust for Medium & Small Enterprises, providing credit without any guarantee on easy terms under priority lending ii, Marketing: Domestic & international trade fairs & Gem ~ a single window for govt supplies iv. HRD Common facilities & training programmes 3.03. Growth Stage At growth stage, the survival of start-ups depends on the time taken to supply the goods to the market and the cost involved. After the commencement of operation of the enterprise, supplying the goods to the market at the carliest will help for revenue generation at a lower cost and enables the enterprise to attain breakeven. Generally, it takes 3-4 years for an enterprise to reach the breakeven point and be considered as sustainable. This indicates the growth stage. As a sign profit improves slowly and steadily due to an increase in recurring revenues by enticing new markets. Ultimately, an increase in the market share of an MSME indicates the growth trend. At this stage challenges are different from initial 3 stages. Incorporating modern technology, innovative marketing and modern management techniques help to beat the competition and make the unit sustainable. There are numerous schemes to beat different challenges at this stage. Few are: Marketing Assistance & Tech Up-gradation Scheme (MATU) is for participating in domestic & international trade fairs & exhibitions, vendor development programmes, national and international procurements, etc ii, Schemes for developing competitiveness: Lean manufacturing competitiveness scheme Design clinic scheme ++ 4+ ‘Scheme for IPR awareness + — ZED Certification - Zero defect & zero effect for higher productivity, etc. ili, Credit linked capital subsidy scheme: 15% capital subsidy is provided on institutional finance for 25mY selected products and sub-sectors. SIDBI Make in India Soft Loan fund for SME (SM soft loan for new and existing units in the form of quasi equity with maximum 3 years ‘moratorium. y. Performance & Credit rating scheme for micro & small units is implemented through NSIC and 75% Of the fee is financed by Ministry of MSME. The main objective of the scheme is to provide a trusted third party opinion on the capabilities and creditworthiness of the Micro & Small Enterprises (MSEs) so as to create awareness amongst MSEs about the strengths and weaknesses of their existing operations. Equipment finance up to 100% of the equipment cost from nationalised and commercial banks at easy terms. 3.04. Maturity Stage It is quite similar to human life. As one attains the age of 40- 50 years, one starts getting social & financial stability in life. Now small loans or finances are not required. Financial resources are sufficient for sustenance but for something big and to take some ‘quantum leap in profession, borrowing needs may emerge. In fact, very few MSMEs reach this stage and it is a proud moment for an entrepreneur when his enterprise grows in terms of its operation, number of employees, revenue generation, profit-makiig and wealth creation. ‘The requirement of capital also increases for expansion or diversification or takeover. These are the signals of an MSME attaining the maturity, At this phase of the business, only 2 financing options are available for expansion: 1. Raising capital through Venture Fund or Angel Investors 2. Raising capital through Small & Medium Enterprise Stock Exchange 3.05. Expansion or Decline ‘The decisions taken by an enterprise decide whether it will expand or decline. If growth has been the driving force, then definitely it will move towards expansion, otherwise decline is inevitable. AS life cannot be stagnant, 26 MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 In case of expansion, finance through SME Exchange, SMILE of SIDBI or some other financing options like venture capital, etc., can be explored. In case of decline, framework for revival & rehabilitation of MSME is the legal endowment conferred under the provisions of the MSME Development Act 2006. This provides the timely & workable solution to preserve the rights of bankers & lenders and business to continue its operations without break 4.00. Way Forward Evolution is a continuous process and outcome evaluation is essential to evolve. Improvements can be devised and adopted based on the feedback received in the evaluation process. This outcome evaluation in the life of an MSME paves the way for expansion and ‘moving to the next level as shown in the circle arrow diagram below. Micro ( ‘small >) ( Large i] This diagram shows that if a micro unit is successful, it gets upgraded into a small unit and then small unit will become medium scale enterprise, later on which can be converted into a large enterprise. The difference between these four categories is that of magnitude. So, if a micro unit is managed well it can emerge as a large enterprise in due course of time. Many success stories like Amul, Nima, etc., are visible. Cost Accountants have a vital role to play in the outcome evaluation as well as suggesting the desired improvements to keep the trend rising. The The Institute of Cost Accountants of IniMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 enterprise community & Government machinery need to understand the role of CMAS in the development story of MSME and ICAI must make these institutions aware about the magic CMAs can spread with their capabilities for the growth of MSME sector. ‘The ultimate aim of an enterprise should be to achieve an ethical growth and prosperity to make India ‘Atmanirbhar Bharat’. References: 1. Perspective Paper: Indian Government Interventions in Micro, Small and Medium The Institute of Cost Accountants of India — ot Enterprise Development: An Enterprise Life Cycle Perspective, Kalai Socratesa , B. V Gopala Krishna, Colombo Business Journal, Vol. 11, No. 01, June, 2020 Various scheme Documents released by Ministry of MSME, Government of India, from time 10 time Lu, X., & Wang, J. (2018). A review of the classification of the enterprise life cycle. Modern Economy, 9(7), 1169-1178. e 7Shri Avinash Chandra Jha, Fintech Professional Been there done that: Inadequate funding to MSMEs has always been a burning issue in this country. Several committees, formed by the Government of India, Ministry of MSME. and RBI, have submitted their findings mentioning the “access of credit” as one of major hindrances towards the development of this sector over the years. Ignore at own peri Though there are some other significant challenges facing them for a long time now. One of them, which is very crucial and hampers MSMEs’ working capital needs, has been seldom discussed and addressed, out of fear of losing business by MSMEs themselves. That is “Delayed payment made by the buyers (Corporate segment, PSUs, etc.) to the MSMEs for supply of 28 MA MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Avinash Chandra Jha, has been serving the MSME sector for over a decade and half as «@ Banker, Risk Information and Rating executive, an Export Manager and now a Fintech Professional. The opinions expressed are personal. goods and services”. The MSME Development Act 2006, had these points crystal clear under the heading “DELAYED PAYMENTS TO MICRO AND SMALL, ENTERPRISES” (Chapter-V). Covid period was just an extension and aberration of this under the carpet pain point of MSMEs Covid throttle: A huge number of MSEs have closed down their units, many were forced to sell off their properties, hundreds and thousands are trying hard to stay away from going to ARCs and lakhs of them are putting up a brave fight to stay afloat Prolonged Covid-19 period created havoc to business houses world over but more damage was done to The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Ye traditional MSME bi esses where (salient causes) @ MSMEs did not see the digital age coming fast. % Their ecosystem had just their buyers and suppliers Buyers were more important than suppliers, © E-markets were ignored out and out They did not alter their working as Many to One (supplier to buyer). Non-traditional means of funding (borrowing at exorbitantly higher interest rates) Funds were not used properly in the business. A strong rapport with lenders was not established Digital mode of banking was not opted for. There could be many more reasons (besides Covid driven ones) but the above ones are so gullible that MSMEs can sit back, discuss, debate and deliberate upon Attention! we need MSMEs: ‘The silver lining during the bygone unseen tough times for businesses, during Covid, could be the prompt policy measures and acts of the Governments, across the globe. All-this, once again, proved that if MSMEs are to sustain, crystal clear policy guidelines are to be writen and implemented. There will come the need for changes and reworking at regular intervals of time but the existing ones must be accepted and adhered to by all the stakeholders and ecosystem players. Other than the central government's initiatives, state level ones might come handy towards helping MSMEs upgrade their overall operation and working on and with technology, industry associations can be the nodal bodies to promote competitiveness amongst members (MSMES), long pending slow development of clusters {even the smaller ones) in tier-II and tier-IIT towns and locations, providing strong infrastructure in terms of electricity, roads and water, raw material supplies and last but not the least financial assistance to MSMEs. Let us explore: Few of the areas that may add value and create catalytic support to MSMEs could be: The Inst jute of Cost Accountants of Indi % Bring in respective SFCs (State Finance Corporations) and IDCs (Industrial Development Corporations) work in tandem with SLBCs Like Banks, this new team of SFC and IDC should be given a lending target of 80 percent to priority sector and 50 percent (out of that 80) 10 MSEs in rural areas, 4 Fintechs reaching out to MSMEs with banking services may be included in the SLBCs. SIDBI and NABARD may select and form a team of Fintechs and MFIs with some vintage and larger distribution reach. © Selected and deserving Fintechs should be given funds to deploy to MSMEs in rural areas. A different credit assessment mechanism (differentiated than banks’) for MSMEs should be devised, where cash flow based lending with partial collateral is guaranteed % A LTC-LIR (Low ticket credit, lower interest rate) model lending to MSEs can be initiated for Agri and Food producing units Glancing through Governments’ help: The Covid-19 crisis saw some new steps being taken by countries for their MSMEs. This shows the seriousness of even developed economies towards their MSMEs. Some interesting moves pertaining to MSME support by different countries are as below: % Denmark came up with and Joan guarantee”, lary compensation © France guaranteed (up to) 90 percent of liquidity enhancement loans. Germany came up with “Quick loans to MSMEs depending upon turnover”. Italy extended Joan repayment suspension along with special assistance to start up enterprises. © Spain gave “Relief in payment of energy bills (gas, electricity) and liquidity measures designed to compensate for closure or losses and targeted towards maintaining employment, Loan guarantee upto 80% and bounce back loan (25% of turn over) for six years with one year ‘moratorium in the UK is worth mentioning. 29xv The Government of India did come forward ad ing the banks to help MSE borrowers. Public sector banks reached out to MSEs extending the much needed support by providing 20% of the outstanding loan, as on specific date, with moratorium and guarantee coverage to banks/lenders. The scheme named ECLGS saved many MSMEs. Finally: Inall probability MSMEs’ task is cut out clearly. On one hand they can expect more and more hassle free 30 MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 work environments and friendly government policies but on the other hand they are to play self defying roles for themselves, and for the country. The backbone of the Indian economy must slog it out to get calcium on their own, in order to gain power and respect rather than sympathy. It is in their hands to be seen as muscle or fat. Moreover, Startups are w: ng to seize the limelight. The Institute of Cost Accountants of India» fn MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 ve CMA Dr. Srechari Chava Practicing Cost Accountant, Nagpur 01.00 MSMEs Itis an established fact that Micro, Small and Medium Enterprises (MSMEs) have emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. The sector contributes significantly in the economic and social development of the country by fostering entrepreneurship and generating large employment opportunities at comparatively lower capital cost, next only to agriculture, The primary responsibility of promotion and development of MSMEs is that of the State Governments. However, the Government of India, supplements the efforts of the State Governments through various initiatives. In this direction, a number of statutory and non-statutory bodies work under the aegis of the Ministry of MSME which includes: The Khadi and Village Industries Commission «KvIC) The Institute of Cost Accountants of India ‘The Coir Board National Small Industries Corporation (NSIC) National Institute for Micro, Small and Medium, Enterprises (NIMSME) Mahatma Gandhi Industrialisation (MGIRD). Institute for Rural ‘The Ministry of MSME, also, runs various schemes aimed at financial assistance, technology assistance and up-gradation, infrastructure development, skill development and training, enhancing competitiveness and market assistance of MSMEs. Such is the statutory support provided to this sector that in case of delay in payment beyond 45days, MSESs suppliers may approach the Micro and Small Enterprises Facilitation Council (MSEFC) constituted 313 . MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 under the MSMED Act in all State/UTs. The legislative | heterogeneous in terms of size of the enterprises provisions, in such instances, stipulate that delayed | and variety of products and services, and levels of payment to supplier units attracts compound interest technology employed. MSMEs are complementary with monthly interests at three times of the bank rate | to large industries as ancillary units and contribute notified by the Reserve Bank. significantly in the inclusive industrial development of the country. The MSMEs are widening their domain Under the Atmanirbhar Bharat Abhiyan, the MSME across various sectors of the economy and cater to the sector has not only been given substantial allocation but demands of domestic as well as global markets. The has also been accorded priority in implementation of economic potential of the MSMEs may be gauged the measures to revive the economy. by the Gross Value Added (GVA) by them over the years. The data relating to the trend of GVA of Indian 02.00 MSME Potential MSMESs for the period from 2011-12 to 2018-19 are tabulated as table 1 The MSME sector in India is exceedingly Table 1: Trend of GVA of Indian MSMEs GVA Rate of Growth (%) Year MSME India . MSME % to India MSME India (Rs. Lakh Crore) (Rs. Lakh Crore) 2011-12 25.83 81.07 31.86 2012-13 29.78 92.03, 32.36 15.27 13.52 2013-14 33.43, 103.63 32.26 12.27 12.61 2014-15 36.58 115.04 31.80 9.43 11.01 2015-16 40.60 125.75 32.28 10.97 9.30 2016-17 45.02 139,65 32.24 10.90 11.06 | 2017-18 50.86 155.13, 32.79 12.98 11.08 2018-19 57.42 171.40 33.50 12.88 10.49 MSMEs have, evidently, been contributing around | in Manufacturing, 0.03 lakh in Non-captive Electricity one third of the Indian GVA continually. Another | Generation and Transmission, 230.35 lakh in Trade salient feature that comes to the fore is that, except for and 206.85 lakh in Other Services. Table 2 provides 2014-15, the growth rate of the GVA of the MSME the locational distribution of these MSMEs. sector is fairly higher than that of the Indian economy on a consistent basis. The rational inference that may be Table 2: Locational Distribution of the MSMEs drawn, here, is that focus on MSMEs would facilitate | (Figures in lakhs) augmentation of Indian GVA. = = pais ST ORS a As per the National Sample Survey (NSS) 73" round, cg Raat an ‘Total Share (%)_ conducted by National Sample Survey Office, Ministry re of Statistics & Programme Implementation during the Miro 324.09 30643-63052 99.47 period 2015-16, there were 633.88 lakh unincorporated non-agriculture MSMEs in the country engaged in | Small 078 253 331 02 different economic activities comprising 196.65 lakh 32 The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 | wedum 0.01 0.08005. Total 32488 309.00 635.88 100.00 | Share | 51254875 100.00 8) ‘The table throws up the facts that out of 633.88 lakhs, Micro sector accounts for 99.47% (630.52 lakh enterprises); Small sector for 0.52% (3.31 lakh) and ‘Medium sector 0.01% (0.05 lakh) of the total. Further, ‘Table 3: Employment in MSMEs 51.25% (324.88 lakh) of MSMEs are located in rural areas and 48.75% (309 lakh) are in urban areas. Apparently, the sector-wise distribution of the ‘SMES is concerted on micro units whereas locational istribution appears to be fairly balanced between the rural and urban areas. It is also reported that 95.98% | @B.A1 lakh) MSMEs were proprietary concerns. MSMEs have been providing huge employment across the country. The data relating to the employment in MSME are furnished table 3. Urban Total Share (%) Employees (Lakhs), (Lakhs) a 586.89 1076.19 96.96 ww 24.07 31.95 2.88 9.65 115 1.75 0.16 35 612.11 1109.89 100.00 175. 55.15 100.00 1.98 175, [As may be seen from the table, Micro sector with | 03.00 CMA Competency 1076.19 lakh employees accounts for 96.96%; Small sector with 31.95 lakh accounts for 2.88% and Medium sector with 1.75 lakh accounts for 0.16% of the total. Location wise, 44.85% (497.78 lakh) are employed by the rural MSMEs and 55.15% (612.11 lakh) are employed in the urban units ‘The average number of employees per unit works out 10 1.71 for the micro units, 9.65 for small units, 35 for medium sector, and 1.75 in the overall. Location-wise, the employees per unit work out to 1.53 for rural units and 1.98 for urban units. It goes without saying that Micro, Small & Medium. Sector has the potential to strengthen the socio- economic growth of the nation by providing solution to the unemployment problem of the country at local level which will reduce the population load at megacities. This will, also, enable lessening the inequalities between the geographical areas in terms of economic imbalances. In addition, the sector holds the potential to grow at a faster pace. The Institute of Cost Accountants of India The fraternity of CMAs has been tuned to facilitate prudent deployment and optimum utilisation of the entrepreneurial resources. CMA computations take forward the financial analysis by introducing cost classification and segregating costs into convenient categories. The enshrined objective is ascertainment of the unit costs with reasonable accuracy for the purpose of cost analysis, cost control and value maximisation. Over the decades, various methods of cost computing were evolved with a view to fill the needs of the ‘manufacturers and service providers. The list reads on like Job Costing, Batch Costing, Contact Costing, Process Costing, Operating Costing, etc. Different ‘methods are adopted for different industries. Even a combination of the methods is chosen as is needed. Simultaneous to the methods, multiple techniques ‘of Cost Management too have come up. Marginal Costing, Budgetary Control, and Standard Costing may be mentioned as vital techniques that can be adopted conveniently by the small and Medium Enterprises. In addition, Cost Strategies such as Target Costing, 33Lean Manufacturing, Financial Reengineering and Cost Leadership have also been evolved to pave the way for competitive advantage. ‘The CMA approach embraces the whole of the life cycle of a project, process, product, service, and so ‘on, It tracks the entire flow of activities. from ‘Cradle to Cradle’ mapping and wrapping the movements from ‘one generation to the next and so forth. The process covers the entire gambit of Project Conception, Project Execution, Project Sustenance, and beyond. The ‘onward momentum is incessant and perpetual Any of the methods, techniques, systems and strategies adopted by the CMA fraternity focuses and targets four vital quadrants comprising: Revenue Management that refers to all those activities that are adopted by an enterprise in pursuit, of augmenting the revenue inflows from the existing pool of resources. The process includes revenue maximisation measures across various streams as also control measures that arrest revenue leakages. Capacity Optimisation that refers to rediscovering the hidden potential of the existing resources with a view to optimise the outputs. Resources, in this context, pervade physical such as infrastructure facilities; hhuman such as employees; and financial such as capital employed. Cost Synergy that reflects the Synergic Impact arising from the chain of Cost Management Activities carried out, in cohesion, during the course of Value MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Addition. The idea is on looking beyond any of the Cost Management Activities singularly; and targeting for an integrated unidirectional approach that would foster a synergic impact from the combination. Brand Positioning that reflects the strategic ranking awarded to the entity by the basket of stake holders In other words, Brand Positioning reveals the superior acclamation of the enterprise over its competitors, No need to mention that Brand is the unique output that keeps stakeholders bonded to the enterprise. In the end, CMA Competency is organisation centric. It is an enabler for the organisation as a whole. The perspective is for the long term with unidirectional goal congruence. ‘The CMA approach may be demonstrated by analysing certain figures relating to Khadi and Village Industries. 04.00 Khadi and Village Industries Khadi and Village Industries is an active segment of the micro enterprises. Its activities are the primary source of livelihood for rural and urban people who largely include Spinners, Weavers and other Artisans spread across the country. Khadi activity is considered as a potential tool for creation of employment opportunities at the doorstep of rural artisans at a very low capital investment. Immediately after independence, Khadi and Village Industries productivity became the grand symbol of nationalism. As such, Khadi came to be known not just a piece of cloth, but as a symbol of freedom and self-reliance. Village Industries comprise six different sectors, viz: i, Agro Based and Food Processing Industry ii, Mineral Based Industry Wellness & Cosmetics Industry iv. Hand Made Paper, Leather and Plastic Industry v. Rural Engineering and New Technology Industry vi. Service Industry Khadi & Village Industries Commission (KVIC) has been identified as one of the major organizations in the decentralized sector for generating sustainable non-farm employment opportunities in rural areas at a ow per capita investment. It undertakes activities like The Institute of Cost Accountants of India. # jSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Q improvement, transfers of technology, research & development, marketing, etc., and helps in generating loyment / self-employment opportunities in rural areas. Khadi and Village Industries (KV) programmes are implemented through 34 State / Union Territories (UTS), iiand Village Industries Boards (KVIBs); and Registered KVI Institutions. Table 4 provides the data relating the Khadi and Village Industries for the last five years. Table 4: Performance of Khadi and Village Industries Production (Rs. Crore) Sales (Rs. Crore) 2007 2510 3215 an 3857 Employment (Lakhs) Production (Rs. Crore) 76582 Sales (Rs. Crore) 49992 56672 7077 84664 101507 Production (Rs. Crore) 48081 58130 67667 78686 Sales (Rs. Crore) 52138 59182 74292 88876 105163 "Employment (Lakhs) 136.40 140.36. «146.99 152.73, 159.12 ‘The data in the table reveal that as of 2016-17, the | ‘The growth in relation to production and sales appear F accounted for Rs.42,631 crore of production, to be fair and reasonable, However, the growth in .52,138 crore of sales and employed human employment is comparatively very low. x s of 136.40 lakhs. By 2020-21 the performance moved up t Rs.78,686 crore of production, i.e. an The analysis may be taken forward by computing of 84.57% over the years; Rs.1,05,163 crore _ the Key Performance Indicators (KPIs) of Production ‘of sales i.e. an increase of 101.70% and an employed per Employee and Sales per Employee year-wise and Jhuman resources of 159.12 lakhs, i.e. an increase of | Segment-wise. ‘The data so computed, in terms of just 16.66%. performance per employee, is furnished as table 5 ‘Table 5: Performance per Employee of Khadi and Village Industries hadi Sector 33352 30982 «39583 M6765 42080 Village industries 382 3u2s1 39546 4222-49690 Total 30256-3957 44305 hadi Sector 53983821 village industries 37918 4760500485729 5732. Total 38224 42165 50542 58191 66091 “The Institute of Cost Accountants of India 35It may be observed from the table that production per employee for Khadi Sector has gone up by 26.16% (i.e. from Rs.33,352/- in 2016-17 to Rs.42,080/- in 2020- 21); by 59.35% (i.e. from Rs.31,182/- in 2016-17 to Rs.49,690/- in 2020-21) for village industries; and the overall aggregate movement being 58.22% (i.e. from Rs.31,254/- in 2016-17 to Rs.49,451/- in 2020-21). Sales per employee for Khadi Sector has gone up by 63.84% (i.e. from Rs.47,075/- in 2016-17 to RS.77,130/- in 2020-21); by 73.35% (i.e. from Rs.37,918/- in 2016-17 to Rs.65,732/- in 2020- 21) for village industries; and the overall aggregate being 72.90% (i.e. from Rs.38,224/- in 2016-17 to Rs.66,091/- in 2020-21). ; Serial - Particulars 2016-17 © 1 hadi sector 13723 _ Village Industries 6736 3 Total 6970 Khadi sector was providing a net value addition of Rs.13,723/- per employee in 2016-17 as against Rs.6,736/- by village industries and an average of Rs.6,970/-. The figures have gone up to Rs.35,050/- per employee in 2020-21 for khadi sector, to Rs.16,042/- for village industries and to an average of Rs.16,640/- for both together. The output of khadi sector turns out to be better when the performance is analysed in terms of net value addition per employee which reflects the ground reality ‘The critical observation, in this context, is whether a net value addition of Rs.16,640/- per annum is sufficient for the survival of any artisan or a worker? ‘The obvious need is towards augmentation of the NVA. per employee to sustainable levels; and that is where the skill set of a CMA would come handy. 36 MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 The evidence is that per employee performance of village industries is better on both the fronts, i.e production and sates, in comparison to khadi sector. However, the difference between the two sectors in per employee performance of sales is lower. A fair assumption is that the excess of sales per employee over production per employee reflects the ‘Net Value Addition (NVA) per Employee’ Accordingly, the NVA per employee of khadi and village industries over the years would work out to the figures as tabulated in table Table 6: NVA (in Rs.) per Employee of Khadi and Village Industries 2017-18 2018-19 2019-20 2020-21 19001 25238 37969 35050 7529 10498, 13077 16042 7909 10995 13886 16640 05.00 Bottom Line ‘The example of computation of “Production per Employee’, ‘Sales per Employee’ and ‘Net Value Addition per Employee” has been chosen to demonstrate the CMA capabilities that can add visionary advantage to micro enterprises. The tools and techniques of CMA fraternity could be many; but the objective is singular - “Enabling a competitive edge by unveiling and unteashing the untapped potential of the entrepreneurial resources”. MSMEs and CMAs could, therefor churn out to be a fantastic synergic combination for the economic prosperity. Resources: 1. Annual Report for 2020-21 of Ministry of MSME, Government of India 2. Budget documents of Government of India. @ The Institute of Cost Accountants of India2 MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 . START-UP IN INDIA - STRATEGIES AND FUNDING OPTIONS P. Udaya Shanker, M.Com, DIM, PGDPA, FCMA Former Director General in-charge ‘National Institute for Micro, Small and Medium Enterprises, (CMA Dr. P. Udaya Shanker Abstract There is a need to identify innovative approaches to bring in total change in entrepreneurship culture to withstand in the competitive markets. In order to make this happen good support is required from various stakeholders both in terms of promotion and financial aspects. This paves way to bring in wealth creation and increases risk taking abilities amongst the entrepreneurs In order to promote start ups the Department for Promotion of Industry and Internal Trade of the Ministry of Commerce and Industry has initiated the Startup India scheme in 2016. Its primary objective is the promotion of startups, generation of employment, and wealth creation. One amongst the promotion strategies is Atal Innovation Mission (AIM) a flagship programme to create and promote a culture of innovation and entrepreneurship across the length and breadth of the country. The objective is to develop new programmes and policies for fostering innovation in different sectors of the economy, provide platforms and collaboration opportunities for different stakeholders, and create an umbrella structure to oversee the innovation and entrepreneurship ecosystem of the country. The various activities under this programme are: Atal Tinkering Labs - at school level This is being launched 4 years ago. These labs are a state-of-the-art space established in a school with 4 goal to foster curiosity and innovation in young minds, between grade 6th to 12th across the country through latest tools and technologies such as Internet of ‘Things, 3D printing, rapid prototyping tools, robotics, niniaturized electronics, do-it-yourself kits and many more. The aim is to stimulate a problem-solving innovative mindset within the children of the lab and nearby communities. It has selected 10,000 schools in 680+ districts of the country for the establishment of Jabs. More than 7000 schools are funded and over 2 The Institute of Cost Accountants of India million students have access to labs. Atal Incubation Centres These are to create an ever-evolving ecosystem of start-ups and entrepreneurs, It has been establishing world class incubators at universities, institutions and corporates among others. The aim is to foster and support innovation, dynamic entrepreneurs who want to build scalable and sustainable enterprises. It has successfully operationalised 68-+ centres with universities/institutions/private players and each of these to foster creation and nurturing of about 50-+ world class startups every four years. They support the incubated startups by providing technical facilities, resource-based support, mentorships, funding support, partnerships and networking, co-working spaces and lab facilities among others. There are 1800+ operational startups have been supported by these centres of which 500+ startups are women led and have created 15,000+ jobs in the ecosystem. Atal Community Innovation Centres The centres promote the benefits of technology led innovation to the unserved/underserved regions of the couniry including Tier-2, Tier-3 cities, aspirational istricts, tribal, hilly and coastal areas. Setting up of these centres with a unique partnership driven model wherein AIM would grant upto Rs.2.5 crores to an ACIC subject to a partner proving equal or greater matching funding. It has received 650+ applications across the country and 50+ ACICs will be established during the next two years. Currently, 24 applications 37are undergoing due diligence and upon clearance they shall be established. Atal New India Challenges The purpose is to create product and service innovations having national socio-economic impact, ‘AIM has launched over 24 such events in partnership with five different ministries and departments of central government. There are 52 applicants that were shortlisted for grant-in-aid support and hand holding by incubators/mentors of AIM out of 950+ applications received. There are 13 innovations have been supported with grant-in-aid tll date and others are undergoing due diligence process ARISE-ANIC challengers Atal Research and Innovation for Small Enterprises (ARISE)-Atal New India Challenge (ANIC) programme is a national initiative to promote research and innovation thereby increase competitiveness-of country’s startups and Micro, Small and Medium Enterprises (MSMES). In order to promote innovation in a phased manner in the MSME/Startup sector AIM has launched 15 challenges along with partnership of Ministry of Housing and Urban Affairs; Ministry of Health and Family Welfare; Indian Space Research Organisation; Ministry of Defence and Ministry of Food Processing Industries. The purpose is to improve research capabilities in the startup and MSME eco system. As part of this initiative, deserving ideas will be converted (0 viable innovative prototypes followed by product development and commercial deployment. There are 160 applicants fiave been shortlisted and are currently undergoing evaluations. Mentor of Change (Mentorship and partnerships public, private sector, NGOs, academia, institutions) For the purpose of enabling all the initiatives to succeed AIM has launched one of the largest mentor engagement and management programme “Mentor India ~ The Mentors of Change”. There are over 1000+ registrations nationwide on the AIM INNONET portal with 4000+ of them allocated to ATLs and AICs. Vernacular Innovation Program (VIP) This is an initiative of the AIM, NITI Aayog, targeted at decoupling creative expression from the language of transaction in country’s innovation ecosystem, This is designed to lower the language barrier for vernacular innovators when learning design thinking and entrepreneurship, accessing markets, attracting 38 iN F v MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 investments, and influencing innovation policy. To accomplish this objective a Vernacular Task Force (VTE) in each language has been formed for creating the necessary resources as well as the ecosystem activities. VTF team will learn, contextuatise, implement and translate the design thinking and entrepreneurship concept in their respective languages. The team build, ‘cement and augment design thinking concepts in the scheduled 22 languages. The ecosystem will be opened up to vernacular innovators with regular ecosystem services. There are train-the-trainers VTF sessions. Prime partners are: eco-system builders, knowledge partners, implementation partners to work cohesively. Strategic campaigns One of such events is AIM-Incubator Capabilities enhancement. for a Robust Ecosystem for high performing Startups (iCRESt) AIM over the last few years, has created a network of incubators that energise the innovation value chain in the country. Within this ecosystem, AIM is conscious Of the team related challenges faced by incubators as they strive to produce viable, successful bu: Keeping this in mind, AIM, designed iCRESt of its kind, remotely conducted, programme that aims to become a growth hack for incubators as they strive to become #WorldClassIncubators and reach greater heights. For this programme, AIM has joined hands with Bill & Melinda Gates Foundation and Wadhwani Foundation ~ organisations that can lend credible support and expertise in the entrepreneurship and innovation space. These partnerships provides global expertise and showcase proven best practices t0 the AIM’s incubator network. It has been designed to enable the incubation ecosystem and act as a growth hack for AIM’s Atal and Established incubators across the country. Under the initiative, the AIM’s incubators are set to be upskilled and provided requisite support to foster the incubation enterprise economy, which will help them to significantly enhance their performance. AIM will enable incubators and their teams to gain deep insights about incubation and acceleration, learn about best practices of about 200 incubators and accelerators globally, and use tools, templates, and frameworks to close the existing gaps and uncover the magic The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 behind successful incubation. This capacity-building programme for the incubators will be complemented by providing training to entrepreneurs, also through technology-driven processes and platforms. This is being extended to the entire portfolio of 65+ AIM supported incubators. Even during Covid-19 pandemic, the core programme teams have worked ‘out means to deliver this programme in a contactless and digital manner via interactive online sessions This programme leverages technology in a big way to convert the art of incubation into science by providing logical, structured, self-learning modules on a digital platform. AIM believes that incubators and accelerators have critical role to play in creating high-potential startups However there is a strong need for creating disruptive solutions for the socio-economic challenges within the country. The programme is launched with the objective of enabling and empowering its incubators so that they are able to nurture and hand-hold to next-gen disruptive startups that shall provide transformative solutions for the country and the world. The core objective of this structured capacity building programme is to enable the incubators to design and implement world-class entrepreneurship programmes, make their institution sustainable, and build credibility Programme has been designed keeping the following main objectives in view: 1. Enable incubators to design a world-class ‘entrepreneur support programme that covers all aspects of incubation: Sourcing and selection; Incubation and startup building; Community engagement and collaborations; Monitoring progress and tracking growth; Mentor on- boarding and management 2. Enable incubators to develop sustainable business ‘models for themselves 3. Enable incubators to provide requisite support infrastructure and training for startups 4, Create a robust network of mentors, investors, and other ecosystem stakeholders and encourage a collaborative ecosystem 5. Create a process to produce viable, investable startups and attract investors Funding options for start-ups The Institute of Cost Accountants of India : a Mm This is the era of startups and in the field of startups, in a way, country is leading the world, Country has created robust ecosystem for startups as well as entrepreneurs and now home to the third-largest startup ecosystem in the world, according to the Economic Survey 2021-22 Over 60,000 startups are operating and over 100 unicorns in the country. However, not all of them have the right resources to thrive in the ecosystem and create a strong presence. Government actively supports startups and entrepreneurs by launching various programmes and initiatives to train as well as provide financial assistance, technical support, subsidies and other essential services to these entrepreneurs and startups to fuel their growth. These initiatives play a vital role in the journey of these entrepreneurs in building their businesses and leaving a dent in the world. With government support, these startups get worldwide recognition and can attract foreign investors as well Funding for start-ups Sources for equity funding for start ups, Angel investors; Self-financing - family and friends; Venture capitalists; Crowd funding; Incubators/ Accelerators Debt financing institutions, Banks, Non-banking financial Government loan schemes institutions. Government schemes for funding start-ups Startup India Seed Fund Scheme ISFS) Startup India initiative envisages building a robust start-up ecosystem in the country for nurturing innovation and providing opportunities to budding entrepreneurs. Have a roadmap for the creation of conducive ecosystem for startups. SISFS is one such scheme provides financial assistance to early-stage startups. This enables to have easy availability of capital which is essential for entrepreneurs at the early stages of growth of an centerpi Funding from angel investors and venture capital firms becomes available to startups only after the proof of concept has been provided. Similarly, banks provide 39)loans only to asset-backed applicants. It is essential to provide seed funding to startups with an innovative idea to conduct proof of concept trials. Department for Promotion of Industry and Internal Trade (DPIIT) has created SISFS with an outlay of Rs.945 crore to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry, and commercialisation. It will support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years. The fund will be disbursed to eligible startups through eligible incubators across India ‘The objective is to ensure smooth flow of funds so a to avoid: + Country's startup ecosystem suffers from capital inadequacy in the seed and *Proof of Concept’ development stage. + Capital required at this stage often presents a make or break situation for startups with good business ideas. + Many innovative business ideas fail to také off due to the absence of this critical capital required at an early stage for proof of concept, prototype development, product trials, market entry and commercialization. Fund offered to such promising cases can have a multiplier effect in validation of business ideas of many startups, leading to employment ‘generation, 4 Government has allocated Rs.283.5 crore for during 2022-23 under the scheme. SAMRIDH scheme his is designed to enhance the startup accelerator ‘ecosystem in the country. It is launched by Ministry of Electronics, Information, and Technology (MeitY) which helps startups with development, growth, and product innovation. It is designed to provide funding support to startups along with helping them bring skill sets together that will help them grow successfully. ‘The initiative aims to accelerate around 300 tech startups through about 40 cohorts by providing them with investor connect, customer connect, and other opportunities for global expansion in the upcoming 3 years. ‘Through this scheme a platform will be provided to startups so that they can enhance their product and 40 MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 secure investment in order to scale their business. The existing and upcoming accelerators will be provided support for extending their services. The government provides a funding upto Rs.40 lakh to startups under this scheme according to their current valuation and growth stage through accelerators. MeitY Startup Hub (MSH) act as implementing agency for the scheme. It will take equity in startups for the government's contribution via SAFE/Promissory Note, just like an accelerator. ‘The accelerators are invited to apply online to become partners with MeitY and provide a startup accelerator programme of 6 months every year. Multiplier Grant Scheme (MSG) This is initiated by Department of Electronics and Information Technology (DeitY). The scheme aims to empower collaborative research and development (R&D) among industry and institutions/academics for the development of products and packages. The aim is to close the gap between R&D and proof-of-concept as well as globalisation and commercialisation. It helps to boost the growth of indigenous goods and services and makes it happen faster. Government grants would be limited to a maximum sum of Rs.2 crore per project, and the duration of each project could be considerably less than two years. This will go up to Rs.4 crore and include three years of industry association Market-oriented R&D would be prioritised in academic and government R&D institutions. ‘Additionally, this would increase the importance of education and training in meeting market demands. The industry's ability to mobilise technological know-how and capabilities would be enhanced ‘The outcome is: ‘The sector would be able to respond quickly to market demands in terms of cost-competitive indigenous new products. Incentives in the form of royalty sharing could help universities and government R&D labs recruit and retain talented staf. A surge in the number of entrepreneurs may result from close collaboration between industry, academia, and R&D labs. ‘The following broad eligibility criteria The Institute of Cost Accountants of IndiaMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 Industrial, industry consortiums and academic institution(s) or R&D agencies doing industry-specitfic research should come up with the proposal for collaborative research. In conjunction with industry, these R&D labs will submit a project proposal to DeitY under the MGS programme. EQIT innovation in modules, goods, packages, or services should be the focus of the application. The MGS may also be used to evaluate projects that incorporate prototypes and packaging for commercialisation. Under the scheme, the application should be focused ‘on the industry's principal business. In the recommended field, the chosen institute or project investigator should have the requisite abilities, and experience. The R&D capabilities of institutions engaging in joint research under MGS will be assessed by such scientists. In terms of the investigators, the following elements must be considered: 1, The number of professional courses offered (B.Tech, M.Tech, PhD) 2. Previous research work/projects done 3. Number of papers published 4. Any industry partnership 5. The institution’s existence for at least 5 years The outcome of the proposed invention should be technically and financially viable. Market research data for the modules, goods, packages, and services to be created should be included in all submissions. The industry should have the necessary 1. Staff for technology absorption 2. Infrastructure for production in-house or detailed definite plans to procure it from elsewhere. If necessary, a subcommittee of the Working Group (WG) may be formed to determine the industry's position. Implementation process Under the MGS plan, academic institutions or R&D organisations should submit project ideas. For this objective, academic institutions or R&D firms may work with industry or industrial consortiums. The idea for joint research should come from industry or industry consortiums. The Institute of Cost Accountants of India Q Proposals could be requested up to three times each year, depending on funding availability. A WG will be formed by the Department to analyse and assess the proposals. They could offer recommendations to the Department for budgetary assistance. They may invite additional Domain Experts based on the concepts under consideration. Regularly, Project Review & Steering Group (PRSG) will monitor and review the project's technical and financial progress. Grant release may be recommended by the PRSG. In addition, the PRSG may recommend continuation, extension, or short-closure, as well as a project. In the PRSG, the industrial partner should be properly represented, NewGen IEDC An initiative launched by National Science and Technology Entrepreneurship Development Board under the Department of Science and Technology, named the NewGen Innovation and Entrepreneurship Development Centre. Its aim is to inculcate the spirit of entrepreneurship and innovation through mentorship, support, and guidance. This is a five-year programme that would be provided in educational institutions. The aim is to support up to 20 new projects. The selected institute will receive a financial grant of up to Rs.25 lakh and a recurring expenditure of up to Rs.10 lakh, Under this scheme, students will be encouraged to take up innovation projects with the possibility of commercialisation. Sub-Mission on Agricultural Mechanisation (SMAM) An initiative launched by Ministry of Agriculture and Farmers Welfare in 2014-15 with the aim to expand the reach of farm mechanisation to small and ‘marginal farmers in such areas where the availability of farm power is low enough to boost productivity Under the scheme, both the central government and the states will contribute 75% and 25%, respectively. The scheme aims to promote customer hiring centres to offset the adverse economic impact arising due to small landholding and the high cost of individual ownership. It aims to create awareness among stakeholders through capacity-building activities and demonstrations, and provide financial help to small and marginal farmers for hiring implements and machinery in low mechanised regions. In particular, 4a the purpose is to popularise technology for primary processing, low-cost scientific storage/transport, value addition, and crop by-product management through capacity building and demonstrations by farmers and end-users. Conclusion The strategies adopted through various initiatives drives down to bring in progressive approach to entrepreneurship. Various stakeholders have to work cohesively for the purpose to bring in economic growth. References: 1. Website of the Ministry of Commerce and Industry a2 MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 2. Website of the Ministry of Electronics, Information, and Technology (MeitY) 3. Website of the Department of Electronics and Information Technology (DeitY). 4 Website of Department of Science and Technology Website of Ministry of Agriculture and Farmers WelfareMSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022 A Brief on TReDS © Source of the Article: Source of the Article: AIDE MEMOIRE ON LENDING TO MICRO, SMALL & MEDIUM ENTERPRISES SECTOR (1st Edition) published by the erstwhile Banking, Financial Services and Insurance Department of ‘The Institute of Cost Accountants of India Introduction Micro, small and medium enterprises (MSMEs), despite their important role in the economic fabric of the country, continue to face constraints in obtaining adequate finance, particularly in terms of their ability to convert their trade receivables into liquid funds, In order to address this pan-India issue through setting up of an institutional mechanism for financing trade receivables, the Reserve Bank of India had published a concept paper on “Micro, Small & Medium Enterprises (MSME) Factoring-Trade Receivables Exchange” in March 2014. Based on the public comments received on the concept paper and the subsequent draft guidelines issued for setting up and operating the system, and interactions held with relevant stakeholders, the following guidelines have been issued for setting up and operating the Trade Receivables System in the country. These Guidelines are issued by Reserve Bank of India under section 10(2) read with Section 18 of Payment & Settlement Systems Act, 2007 (Act 51 of 2007). The Trade Receivables Scheme The scheme for setting up and operating the institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate and other buyers, including Government Departments and Public Sector Undertakings (PSUs), through multiple financiers will be known as Trade Receivables Discounting System (TReDS). The TReDS will facilitate the discounting of both invoices as well as bills of exchange. Further, as the underlying entities are the same (MSMEs and corporate and other buyers, including Government Departments and PSUs), the TReDS could deal with both receivables factoring as well as reverse factoring so that higher transaction volumes come into the system and facilitate better pricing. The transactions processed under TReDS will be “Without Recourse” to the MSMEs. The Institute of Cost Accountants of India Definitions For the purpose of the Scheme, notwithstanding any other definition used in any other context, scheme, law or document, the following definitions are used: Factoring unit -A standard nomenclature used in the ‘TReDS for an invoice or a bill on the system. Factoring units may be created either by the MSME seller (in the case of factoring) or by corporate and other buyers, including Government Departments and PSUs, (in case of reverse factoring) as the case may be. Financier Refers to banks, NBFC Factors and other financial institutions as permitted by the Reserve Bank of India participating in the TReDS and accepting the factoring unit for financing purpose. Participants MSME sellers, corporate and other buyers, including the Government Departments and PSUs, and financiers, (banks, NBFC factors and other financial institutions as permitted by the Reserve Bank of India) will be direct participants in the TReEDS. The TReEDS will provide the platform to bring these participants together for facilitating uploading, accepting, discounting, trading and settlement of the invoices / bills of MSMEs. The bankers of sellers and buyers may be provided access to the system, where necessary, for obtaining information on the portfolio of discounted invoices / bills of respective clients. The TReEDS may tie up with necessary technology providers, system integrators and entities providing dematerialization services for providing Its services. Process flow and procedure The objective of the TReDS is to facilitate financing of invoices / bills of MSMEs drawn on corporate and other buyers, including the Government Departments and PSUs, by way of discounting by financiers. To enable this, the TReDS has to put in place suitable mechanism whereby the invoice / bill is converted into “factoring unit” as indicated in Annexure-l In the first phase, the TReEDS would facilitate the discounting of these factoring units by the financiers 8