A fourth of MSMEs lost market share to big corporations during COVID-19: Crisil

Rating agency Crisil's research wing analysed MSMEs from 69 sectors and 147 clusters having a revenue of Rs 47 lakh crore or a fourth of India's GDP.

Published: 27th June 2022 05:01 PM  |   Last Updated: 27th June 2022 05:01 PM   |  A+A-


Image used for representational purposes


MUMBAI: A fourth of Indian micro, small and medium enterprises have lost 3 per cent or more of their respective market share to big corporations during the COVID pandemic, a report said on Monday.

Rating agency Crisil's research wing analysed MSMEs from 69 sectors and 147 clusters having a revenue of Rs 47 lakh crore or a fourth of India's GDP to arrive at the details on how the small businesses fared during the pandemic. "More than a quarter of India's Micro, Small and Medium Enterprises (MSMEs) lost market share of over 3 per cent due to the COVID-19 pandemic," the report said.

It said that half of these companies which witnessed a loss of market share also saw a contraction in their operating profit. It can be noted that the impact of the pandemic on the smaller businesses has been a subject of interest because of their vulnerabilities due to size. "...large ones leveraged their global presence to procure raw materials, so could eat up a huge chunk of the SME pie," its director Pushan Sharma said.

Sharma said that supply chain disruptions impacted small pesticides manufacturers more, while edible oil SMEs (Small and Medium Enterprises) lost market share due to an increase in hygiene quotient as the pandemic meant less buyers for oil sold in loose.

Pesticides and edible oil SMEs suffered margin contraction of 1 per cent and 2 per cent, respectively, due to partial pass-through of the increase in raw material costs, which jumped by 60 per cent, Sharma added. MSMEs in 'essential' segments like pharmaceutical/agricultural millers hardly lost any market share, it said.

On the other side, companies in sectors such as steel pig iron gained share where only SMEs could capitalise on revival in infrastructure demand, as large plants captively consumed their output, it said, adding that tobacco units also gained market share.

Sectors such as transport operators, edible oil, gems and jewellery are the most vulnerable to operating profit losses owing to wafer thin margin of less than 3 per cent and limited input cost pass-through of under 60 per cent, the report said.

"Amid the pandemic and ongoing geopolitical crisis, sectors such as textiles and pharmaceuticals have offered a ray of hope for exports. Cotton yarn exports have benefited from the US ban on Xinjiang, China-made items, apart from the China+1 policy," its associate director Elizabeth Master said.

While the industry operating profit margins are expected to touch the pre-pandemic level this fiscal, MSMEs in more than half of 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 per cent increase in revenue and operating profit margin of 19-20 per cent, the report said.


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